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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 26, 1997
SUBJECT TO COMPLETION AND AMENDMENT
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
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THE ELDER-BEERMAN STORES CORP.
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(Exact Name of Registrant as Specified in Its Charter)
Ohio 31-0271980
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
3155 El-Bee Road, Dayton, Ohio 45439
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (937) 296-2700
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Securities to be registered pursuant to Section 12(b) of the Act:
None
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(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
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(Title of Class)
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TABLE OF CONTENTS
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PAGE
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BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Plan and Strategy for the Company . . . . . . . . . . . . . . . . . . . . . . . . 2
Seasonality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Selected Historical Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . 7
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . 11
Ownership of Existing Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Pro Forma Ownership of New Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . 11
DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Existing Directors and Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Executive Officers and Directors as of the Effective Date . . . . . . . . . . . . . . . . . . 13
Certain Corporate Governance Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Board Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Cash Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Existing Compensatory Plans and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Key Employee Retention Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Reorganization Bonus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Calculation of Certain Severance and Bonus Benefits Paid to Senior Executives . . . . . . 17
New Compensatory Programs and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Equity and Performance Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Employment Agreements and the Severance Pay Plan . . . . . . . . . . . . . . . . . . . . . 20
Compensation Committee Interlocks and Insider Participation . . . . . . . . . . . . . . . . . 21
Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 21
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 22
Absence of Public Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
RECENT SALES OF UNREGISTERED SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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<TABLE>
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DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED . . . . . . . . . . . . . . . . . . . . . 24
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Transfer Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
New Class A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
New Class B Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
New Class C Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
New Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Future Issuances of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Share Purchase Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Existing Indemnification Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Treatment of Indemnification Obligations Under the Plan . . . . . . . . . . . . . . . . . . . 30
New Indemnification Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL . . . . . . . . . . . . 31
FINANCIAL STATEMENTS AND EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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BUSINESS
This Registration Statement contains certain forward-looking
statements that are based on the beliefs of the Company's management, as well
as assumptions made by, and information currently available to, the Company's
management. The Company's future results, performance, or achievements could
differ materially from those expressed in, or implied by, any such
forward-looking statements for various reasons, including, among other factors,
competition, consumer demand and confidence, the availability and mix of
store-level inventory, weather that affects consumer traffic and general
economic conditions.
GENERAL
The Elder-Beerman Stores Corp. ("Elder-Beerman" or the "Company";
except where the context otherwise requires, references to the "Company" refer
to Elder-Beerman and its subsidiaries, as described below) operates department
stores that sell a wide range of moderate to better brand merchandise,
including women's, men's, and children's apparel and accessories, cosmetics,
home furnishings, and other consumer goods. In addition, the Company owns a
specialty shoe store chain and a private label credit card program through its
wholly-owned subsidiaries, The Bee-Gee Shoe Corp. ("Bee-Gee") and The El-Bee
Chargit Corp. ("Chargit"), respectively. Elder-Beerman operates approximately
50 stores, principally in smaller Midwestern markets in Ohio, Indiana,
Illinois, Michigan, Wisconsin, Kentucky, and West Virginia, and Bee-Gee
operates 61 stores (51 shoe outlets and 10 Shoebilee! stores), principally in
smaller Midwestern markets in Ohio, Indiana, Illinois, Michigan, Pennsylvania,
Virginia and West Virginia. See "Properties." The Company's operations are
diversified by size of store, merchandising character, and character of the
community served. The Company seeks to satisfy the merchandising needs of its
geographic markets, serving customers of all ages with varied interests and
incomes.
The Company's historical competitive advantage is its niche in medium
and small size cities, and in many cases, Elder-Beerman is the dominant
supplier of moderate to better brands of soft goods in such markets. In many
of these cities, there is only one shopping mall, and the Company is a main
department store anchor along with J.C. Penney, Sears, or a discount retailer
such as Kmart. These other anchors generally complement the Company's goods
with noncompeting merchandise. The Company's strong metropolitan rivals have
tended to bypass smaller Midwestern cities, leaving Elder-Beerman as the
dominant department store in these smaller markets.
BACKGROUND
Elder-Beerman and its predecessors have been operating department
stores since 1883. Historically, the Company's underlying strategy had been to
manage the bottom-line through an aggressive approach to (a) containing
operating costs, (b) enhancing gross profit percentages within its "moderate to
better" brand merchandise, and (c) expanding its presence from a single store
city retailer into a regional retailer. This strategy enabled the Company to
experience steady sales growth and consistent earnings results beginning in the
mid-1960s and continuing into the early 1990s. During 1992 and through 1994,
the Company undertook a new and high volume merchandising strategy. During
1995, it became apparent that this strategy had a negative impact on the
Company's financial position, and the Company entered into negotiations with
its lenders for a plan to provide additional liquidity. Such negotiations
ultimately were unsuccessful. In addition, as the need for working capital to
fund increased inventory purchases for the holiday season drew closer,
Elder-Beerman's suppliers began to show concerns about further extensions of
trade credit to the Company in the wake of other bankruptcies in the retail
industry. The Company was faced with an absence of working capital financing
and the prospect of being unable to secure inventory for the 1995 Christmas
season.
BANKRUPTCY
On October 17, 1995 (the "Petition Date"), Elder-Beerman and its
subsidiaries, Chargit, Bee-Gee, Margo's LaMode, Inc. ("Margo's"), McCook
Wholesale Corp. ("McCook"), E-B Community Urban Redevelopment Corp. ("E-B"),
and EBA, Inc. ("EBA") (collectively, the "Old Elder-Beerman Companies"), filed
voluntary petitions for relief (the "Reorganization Cases") under chapter 11 of
the United States Bankruptcy Code, as amended (the "Bankruptcy Code"), with the
United States Bankruptcy Court for the Southern District of Ohio, Western
Division (the "Bankruptcy Court"). The Old Elder-Beerman Companies filed their
proposed joint plan of reorganization with the Bankruptcy Court on August 6,
1997, their amended joint plan of reorganization on October 16, 1997, their
second amended joint plan of reorganization on November 7, 1997 and their third
amended joint plan of reorganization on November 18, 1997 (the "Plan"). The
Plan is expected to be confirmed on December 15, 1997 (the "Confirmation
Date"), and to become effective on __________ (the "Effective Date").
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The Plan would result in an approximately $___________ reduction in
the total indebtedness of the Company. More specifically, the Plan provides
for, among other things: (i) the cancellation of certain indebtedness in
exchange for cash, conveyances of collateral and/or new equity interests; (ii)
the discharge of certain prepetition intercompany claims; (iii) the settlement
of certain contingent claims and mutual releases among the Old Elder-Beerman
Companies and other persons or entities (including certain affiliated persons
or entities); (iv) the assumption or rejection of executory contracts and
unexpired leases to which any Old Elder-Beerman Company was a party; (v) the
merger of Elder-Beerman's subsidiaries, other than Bee-Gee and Chargit, with
and into Elder-Beerman, with Elder-Beerman being the surviving entity; and (vi)
the selection of the Company's board of directors.
Additionally, under the terms of the Plan, holders of allowed general
unsecured claims against the Old Elder-Beerman Companies other than Margo's
(collectively, the "General Unsecured Creditors"), including The Elder-Beerman
Stores Corp. Profit Sharing and Stock Ownership Plan (the "ESOP"), will
receive a pro rata share of a cash distribution amount and a pro rata share of
approximately 99% of the shares of the Company's common stock, without par
value, (the "Common Stock") distributed pursuant to the Plan. The ESOP will
receive, on account of its claims, which were estimated to total approximately
$13 million, 5.25% of the distributions made to the General Unsecured
Creditors. Furthermore, on the Effective Date, unless Beerman-Peal Holdings,
Inc. ("Beerman-Peal") rejects the Plan, Beerman-Peal will receive, in full
satisfaction of certain of its allowed interests: (a) 124,036 shares of Common
Stock, (b) warrants to be issued by the Company to purchase up to 2% of the
outstanding Common Stock, which will have a strike price set to reflect a total
equity value for the reorganized Company of approximately $160 million (the
"New Series A Warrants"), and (c) warrants to be issued by the Company to
purchase up to 3% of the outstanding Common Stock, which will have a strike
price set to reflect a total equity value for the reorganized Company of
approximately $185 million (the "New Series B Warrants"). If Beerman-Peal
votes to reject the Plan, no property will be distributed to or retained by
Beerman-Peal on account of such allowed interests, and such interests will be
terminated as of the Effective Date. All securities issued pursuant to the
Plan will be issued by Elder-Beerman. Substantially all of the Common Stock
and other securities of Elder-Beerman will be owned by prepetition creditors
and prepetition equity holders of the Old Elder-Beerman Companies.
Distributions of Common Stock pursuant to the Plan are subject to dilution from
issuance of the amount of stock and stock options to be awarded to employees
under the Company's Equity and Performance Incentive Plan (the "Incentive
Plan"). See "Executive Compensation -- New Compensatory Programs and
Agreements -- Equity and Performance Incentive Plan." Holders of allowed
general unsecured claims against Margo's will receive a pro rata share of
approximately $2.5 million.
BUSINESS
The Company sells a wide range of merchandise, including women's,
men's, and children's apparel and accessories, cosmetics, home furnishings, and
other consumer goods. In addition, as discussed above the Company owns a
specialty shoe store chain and a private label credit card program through its
wholly-owned subsidiaries, Bee-Gee and Chargit, respectively. The Company's
historical competitive advantage is its niche in medium and small size cities,
and in many cases, Elder-Beerman is the dominant supplier of moderate to better
brands of soft goods in such markets. In many of these cities, there is only
one shopping mall, and the Company is a main department store anchor along with
J.C. Penney, Sears, or a discount retailer such as Kmart. These other anchors
generally complement the Company's more upscale goods with noncompeting
merchandise. The Company's strong metropolitan rivals have tended to bypass
smaller Midwestern cities, leaving Elder-Beerman as the dominant department
store in these smaller markets.
BUSINESS PLAN AND STRATEGY FOR THE COMPANY
The Company expects its business strategy will continue to be to
improve profitability by focusing on a more productive core department store
business, primarily in Dayton, Ohio and smaller communities in the Midwest, by
seeking to be the dominant destination retailer for fashion apparel,
accessories, cosmetics, shoes, and home accessories for the entire family,
while continuing its tradition of providing strong customer service in key
product areas. In addition, the Company and Bee-Gee aggressively use
technology and business process changes to reduce operating costs and improve
operating performance through productivity gains.
The Company's long-term business plan (the "Business Plan") is
designed to accomplish these objectives by (a) focusing on its traditional
strengths as the major retailer in its markets; (b) emphasizing major supplier
partnerships to improve sales and margins while improving supply chain
integration and efficiencies; (c) competing with traditional department store
competitors through emphasis on customer service, timely and broad product
assortments, and competitive pricing and promotions in appropriate markets and
product areas; (d) competing with moderate department stores and discounters
through merchandise breadth and advantages in branded and gift areas; (e)
focusing price/product competition
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in key basic merchandising areas; and (f) leveraging technology to create a
selling culture with "customer-focused" stores, to develop and execute customer
and market specific marketing programs, and to distribute, price, and promote
goods by market.
Merchandising Strategy. The Company carries a broad assortment of
goods to provide fashion, selection, and variety usually found in better
leading department stores that feature better merchandise brands. Although all
stores stock identical core assortments, specific types of goods are
distributed to stores based on the particular characteristic of the local
market. The Company emphasizes "signature" areas critical to its image in its
niche market, as a primary destination for fashion apparel and gifts. The
Company also seeks to increase penetration of its private label credit card
program through a combination of efforts intended to increase the use of cards
by existing Elder-Beerman credit card customers, either through incremental
sales or shifting sales from other credit cards and other retailers, and
attracting new cardholders. In addition, through continued efforts to develop
a partnership with its most significant vendors, the Company is (a) pursuing
automated replenishment of basic stock to increase sales and reduce basic
inventories and (b) using technology and focused merchandising and distribution
to reduce material handling costs and increase speed in moving stock from the
vendor to the selling floor. The Company is implementing certain technological
advances and an enhanced sales training program to aid in the restructuring of
its competitive pricing strategies in key areas toward a more "value price"
image.
Expansion Strategy. The Company is implementing a controlled
expansion of new stores with market characteristics consistent with current
stores. The Company believes that sufficient new locations are available in
strategic markets within the Company's current area of operations to support
such an expansion. In addition, the Company believes that opportunities exist
to expand approximately 10 existing stores where current space constraints
prevent adequate presentation of certain core merchandise departments.
Information Systems Strategy. The Company is enhancing its management
information systems, through capital investment and training programs, to (a)
improve the data integrity of financial and merchandise systems; (b) reduce
administrative costs through automation and elimination of paperwork and
redundant controls; (c) utilize Electronic Data Interchange and other industry
standards to increase "floor ready" merchandise receipts; (d) eliminate
paperwork through automatic invoice processing; and (e) improve merchandise
analysis and decision making.
Store Operations Strategy. The Company is enhancing its customer
service image and creating a customer-oriented store environment by (a)
eliminating nonselling activities from stores; (b) using training and
recruiting practices to instill a culture of customer helpfulness and
responsiveness; (c) developing tools and training to enhance selling skills and
awareness; (d) implementing selling productivity measurement and compensation
systems directed at encouraging selling activities and results; and (e)
reducing store expenses through increased use of technology and improved
controls.
Human Resource Strategy. The Company is implementing a senior
management and executive compensation program in order to attract, retain, and
provide incentives to the best associates in its markets. The Company seeks
associates with exceptional knowledge, skills, education, and experience
required for their positions and compensates them with a focus on rewarding
productivity. Continued development of associates is accomplished through a
comprehensive core training program and special courses to address leadership,
supervisory management, and creative problem-solving. Overall, the Company
strives to create an environment that focuses on fostering team work, expanding
quality communication, satisfying customers, and enhancing profits.
SEASONALITY
The department store business is seasonal, with a high proportion of
sales and operating income generated in November and December. Working capital
requirements fluctuate during the year, increasing somewhat in mid-summer in
anticipation of the fall merchandising season and increasing substantially
prior to the holiday season when the Company must carry significantly higher
inventory levels. Consumer spending in the peak retail season may be affected
by many factors outside the Company's control including competition, consumer
demand and confidence, weather that affects consumer traffic and general
economic conditions. A failure to generate substantial holiday season sales
could have a material adverse effect on the Company.
COMPETITION
The retail industry, in general, and the department store and shoe
store businesses, in particular, are intensely competitive. Generally, the
Elder-Beerman department stores and Bee-Gee family shoe stores are in
competition not only
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with other department stores and family shoe stores, respectively, in the
geographic areas in which they operate, but also with numerous other types of
retail outlets, including specialty stores, general merchandise stores,
off-price and discount stores, and manufacturer outlets. Some of the retailers
with which the Company competes have substantially greater financial resources
than the Company and may have other competitive advantages over the Company.
EMPLOYEES
On September 30, 1997, the Company had approximately 7,800 regular and
part-time employees, 7,300 of which are employed by Elder-Beerman's department
stores. Because of the seasonal nature of the retail business, the number of
employees rises to a peak in the holiday season. The Company's management
considers its relations with employees to be satisfactory.
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FINANCIAL INFORMATION
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table sets forth various selected financial information
for the Company as of and for the fiscal years ended February 1, 1997, February
3, 1996, January 28, 1995, January 29, 1994, and January 30, 1993 and the
39-week periods ended November 1, 1997 and November 2, 1996. Such selected
consolidated financial information should be read in conjunction with the
audited and unaudited historical consolidated financial statements of the
Company, including the notes thereto, and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" that appear elsewhere in this
Registration Statement.
<TABLE>
<CAPTION>
39 WEEKS ENDED FISCAL YEAR ENDED
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NOV 1, 1997 NOV 2, 1996 FEB 1, 1997 FEB 3, 1996(a) JAN 28, 1995 JAN 29, 1994 JAN 30, 1993
----------- ----------- ----------- ----------- ------------ ------------ ------------
DOLLARS IN THOUSANDS DOLLARS IN THOUSANDS
(except per share data) (except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA
Total Revenues $ 405,980 $ 398,685 $ 597,008 $ 608,931 $ 647,326 $ 633,936 $ 598,318
Income/(Loss) Before
Reorganization Items
and Income Tax Expense
(Benefit) 593 (635) 11,579 (33,631) (4,590) 23,194 18,519
Reorganization Items 12,850 12,339 23,648 19,711 -- -- --
Income/(Loss) Before
Discontinued Operations
(b) (c) (12,257) (12,974) (12,429) (51,010) (2,064) 14,884 11,552
Net Income/(Loss) $ (12,257) $ (12,974) $ (12,429) $ (63,286) $ (13,355) $ 15,865 $ 9,592
Earnings/(Loss) Per
Common Share:
Continuing
Operations $ (1.88) $ (1.99) $ (1.90) $ (7.83) $ (0.32) $ 2.26 $ 1.77
Preferred Stock
Dividend -- -- -- -- (0.14) 0.15 (0.30)
Discontinued
Operations -- -- -- (1.89) (1.73) (0.14) (0.11)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Earnings/
(Loss) $ (1.88) $ (1.99) $ (1.90) $ (9.72) $ (2.19) $ 2.27 $ 1.36
=========== =========== =========== =========== =========== =========== ===========
Cash Dividends Per Share
Paid:
Common $ -- $ -- $ -- $ -- $ 0.22 $ 0.20 $ 0.11
Preferred $ -- $ -- $ -- $ -- $ 1.39 $ 1.39 $ 1.34
</TABLE>
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<TABLE>
<CAPTION>
39 WEEKS ENDED FISCAL YEAR ENDED
-------------------------- ------------------------------------------------------------------------
NOV 1, 1997 NOV 2, 1996 FEB 1, 1997 FEB 3, 1996(a) JAN 28, 1995 JAN 29, 1994 JAN 30, 1993
----------- ----------- ----------- ----------- ------------ ------------ ------------
DOLLARS IN THOUSANDS DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total Assets $ 421,998 $ 413,298 $ 365,141 $ 367,069 $ 267,822 $ 285,996 $ 261,781
Short Term Debt 89,410 87,982 57,931 50,100 6,221 -- 42,619
Liabilities Subject to
Compromise 232,454 224,205 231,675 229,409 -- -- --
Long-Term Obligations 5,744 5,689 5,669 3,100 109,487 108,010 63,833
OTHER DATA
Sales Increase/(Decrease)
From Prior Period 2.0% (4.0%) (3.5%) (6.5%) 1.8% 5.6% 9.3%
Dept. Store Comp. Sales
Inc./(Dec.) From Prior
Period (d) 3.9% (2.7%) (1.2%) (8.4%) (3.8%) 0.6% 7.0%
</TABLE>
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NOTES TO SELECTED HISTORICAL FINANCIAL INFORMATION:
(a) Fiscal Year ended February 3, 1996 included 53 weeks as compared to 52
weeks for each of the other fiscal years shown.
(b) The financial information for Margo's is included in discontinued
operations for all period.
(c) The financial information for Bee-Gee is included as part of
continuing operations for all periods except for the initial reserve
for discontinued operations that was recorded in fiscal 1994 and the
subsequent reversal recorded in fiscal 1995.
(d) Comparable store sales include only those department stores that
operated during the applicable full fiscal year.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company for the 39-week periods ending November 1, 1997 and
November 2, 1996, and for the 52-weeks ending February 1, 1997 ("Fiscal 1996"),
53- weeks ending February 3, 1996 ("Fiscal 1995"), and 52-weeks ending January
28, 1995 ("Fiscal 1994"). The Company's fiscal year ends on the Saturday
closest to January 31. The discussion and analysis which follows are based
upon and should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto included elsewhere in this Registration
Statement.
RESULTS OF OPERATIONS
39-Weeks Ending November 1, 1997 Compared to the 39-Weeks Ending
November 2, 1996
Net sales for the 39-weeks ending November 1, 1997 increased by 2.0% to
$386.2 million from $378.7 million for the 39-weeks ending November 2, 1996.
The increase is due to a 3.9% comparative store sales increase for the
department store division. The Company closed the outlet section of the
downtown Dayton, Ohio department store, the Fairborn, Ohio furniture store, and
the outlet section of the Hamilton, Ohio department store, which contributed a
combined total of approximately $3.5 million in sales, for the 39-weeks ending
November 2, 1996 that were absent in the 39-weeks ending November 1, 1997. The
Company's business is subject to seasonal fluctuations. Approximately
one-third of the Company's annual sales occur in the fourth quarter (i.e.,
November - January), as well as a majority of the Company's profits.
Financing revenue from the Company's private label credit card for the
39-weeks ending November 1, 1997 decreased by 1.0% to $19.8 million from $20.0
million for the 39-weeks ending November 2, 1996. The decline is due to a 4.0%
decrease in sales attributed to the Company's private credit card, and a
resulting decline in the outstanding customer accounts receivable. The decline
in finance charges due to outstanding customer accounts receivable has been
largely offset by an increase in late fees charged.
Cost of goods sold, occupancy, and buying expenses increased to 73.3% of
net sales for the 39-weeks ending November 1, 1997 from 72.2% of net sales for
the 39-weeks ending November 2, 1996. This increase is due to $5.9 million in
excess mark-downs in cost of goods sold, due to store closings in the 39-weeks
ending November 1, 1997. This increase is partially offset by an increase in
the initial rate of mark-up on goods sold.
Selling, general, and administrative expenses decreased by $4.5 million to
$113.5 million for the 39-weeks ending November 1, 1997 from $118.0 million for
the 39-weeks ending November 2, 1996. This improvement is primarily due to a
reduction in payroll and recharacterization of certain operating leases, offset
partially by an increase in sales promotion expense. In addition, for the
key-employee retention bonus program $1.5 million has been expensed for the 39-
weeks ending November 1, 1997 compared to $4.0 million for the 39-weeks ending
November 2, 1996.
Provision for doubtful accounts remains the same at 1.1% of net sales for
both the 39-weeks ending November 2, 1997 and the 39-weeks ending November 2,
1996, which is consistent with the sales attributed to the Company's private
credit card.
Interest expense increased to $4.6 million for the 39-weeks ending November
2, 1997 from $3.8 million for the 39- weeks ending November 1, 1996. The
Company has certain interest rate swap agreements and is required to make
adjustments to market value. For the 39-weeks ending November 1, 1997, the
swap adjustment to market resulted in an expense of $0.6 million compared to
income of $0.8 million in the prior period.
Reorganization items increased by $0.6 million to $12.9 million for the
39-weeks ending November 1, 1997 from $12.3 million for the 39-weeks ending
November 2, 1996. The increase is primarily due to a $2.0 million increase in
professional fees partially offset by a $1.6 million reduction in financing
cost expense.
Income taxes were zero for both periods as no tax benefit was recorded due
to valuation allowances.
Fiscal 1996 Compared to Fiscal 1995
Net sales for Fiscal 1996 decreased 3.5% to $569.6 million from $590.0
million for Fiscal 1995. Fiscal 1995 contains 53 weeks and contained
approximately $4.6 million in net sales for the extra week. The department
store division comparative store sales for Fiscal 1996 and the first 52-weeks
of Fiscal 1995 decreased approximately 0.4%. In Fiscal 1995
7
<PAGE> 11
two department stores were closed and two new department stores were opened.
In addition, the Bee-Gee shoe division closed 11 El-Bee shoe outlet stores in
Fiscal 1996.
Financing revenue for Fiscal 1996 increased by $8.6 million to $27.5
million from $18.9 million in Fiscal 1995. In Fiscal 1995, prior to the
Petition Date, the Company maintained a financing facility through the sale
("securitization") of customer accounts receivable. With the filing of
bankruptcy the securitization facility was canceled. In fiscal 1995 gross
financing revenue was reduced by $5.9 million of securitization expense.
Cost of goods sold, occupancy, and buying decreased from 77.5% of net sales
in Fiscal 1995 to 72.0% of net sales in Fiscal 1996. This improvement is
attributable to a significant increase in the initial rate of mark-up on goods
sold coupled with a significant decrease in the mark-down rate for Fiscal 1996
compared to Fiscal 1995. In Fiscal 1995, increased markdowns were taken to
clear excess inventories. In Fiscal 1996, the LIFO inventory valuation
adjustment reduced cost of goods sold by $1.9 million compared to an increase
in cost of goods sold of $0.8 million in Fiscal 1995.
Selling, general, and administrative expenses, including key employee
performance bonus plan expense, hiring and recruiting expenses for new
executives, and other income, decreased by $7.8 million to $162.2 million, or
28.5% of net sales, in Fiscal 1996, compared to $170.0 million, or 28.8% of net
sales, in Fiscal 1995. In Fiscal 1996 through expense reduction programs, the
Company was able to reduce expenses in a significant number of expense
categories, particularly in the areas of data processing and sales promotion,
which was partially offset by implementation in Fiscal 1996 of a key employee
retention bonus program and hiring and recruiting expenses. Other income for
Fiscal 1996 relates to mark-to-market adjustments in interest rate swaps.
Provision for doubtful accounts increased $0.8 million to $6.7 million, or
1.2% of net sales, in Fiscal 1996, compared to $5.9 million, or 1.0% of net
sales, in Fiscal 1995. This increase is primarily the result of an increase in
customer personal bankruptcy filings.
Interest expense decreased $3.1 million to $6.5 million, or 1.1% of net
sales, in Fiscal 1996, compared to $9.6 million, or 1.6% of net sales, in
Fiscal 1995. After the Petition Date, the primary method of financing was
through a Debtor-in-Possession ("DIP") short-term financing agreement. The
required financing through the DIP after the Petition Date was significantly
less than the long-term and short-term debt outstanding prior to the Petition
Date, resulting in substantially less interest expense for Fiscal 1996;
however, this benefit was partially offset with higher interest rates
associated with the DIP financing.
Reorganization expense increased $3.9 million to $23.6 million in Fiscal
1996 compared to $19.7 million in Fiscal 1995. Professional fees in Fiscal
1996 were $5.0 million higher than Fiscal 1995 because the bankruptcy filing
occurred in October 1995. Other major differences include an expense of $7.5
million for equipment lease settlements in Fiscal 1996 that was not in Fiscal
1995, restructuring expenses that were $4.4 million less in Fiscal 1996, and an
expense in Fiscal 1995 of $5.0 million for the market value adjustment of
interest rate swaps.
Income tax expense (benefit) for Fiscal 1996 was an expense of $0.4
million, compared to a benefit of $2.3 million in Fiscal 1995. The tax
provision for Fiscal 1996 is for state and local taxes only, no federal tax
benefit is recorded due to a valuation allowance. Fiscal 1995's tax benefit
includes the carryback of net operating losses for a refund of prior tax paid
net of state and local taxes paid, and was also subject to a valuation
allowance.
Discontinued operations for Fiscal 1996 was zero compared to $12.3 million
for Fiscal 1995. Fiscal 1995's expense relates to an additional reserve for
the disposing of the Margo's subsidiary, and reversal of the reserve for
discontinued operations set up for Bee-Gee in Fiscal 1994, as the Company had
decided to retain Bee-Gee as a continuing operation in Fiscal 1995. The
Margo's disposal was completed in January 1996 (i.e., Fiscal 1995).
Fiscal 1995 Compared to Fiscal 1994
Net sales for Fiscal 1995 decreased by 6.5% to $590.0 million from $631.1
million in Fiscal 1994. The decrease occurred primarily from October 1995
through January 1996, when sales for the department stores decreased 9.7%
compared to the same period the previous year. This was due to a slow-down in
the receipt of goods from vendors as a result of the Company filing for
bankruptcy protection in October 1995. Also, El-Bee shoe outlet sales declined
5.0% for the year, primarily as a result of closing 44 unprofitable stores.
The department store division opened two new stores in Fiscal 1994 and two new
stores in Fiscal 1995 (prior to filing for bankruptcy protection), and closed
three stores in Fiscal 1994 and
8
<PAGE> 12
closed two stores in Fiscal 1995. Also, Fiscal 1995 contains 53 weeks and
contained approximately $4.6 million in net sales for the extra week.
Financing revenue from the Company's private label credit card for Fiscal
1995 increased by $2.7 million to $18.9 million, from $16.2 million in Fiscal
1994. This 16.6% increase in revenue is primarily due to an increase in the
average monthly outstanding balance of customer accounts receivable, due to a
change in mid-1994 decreasing the minimum monthly payment required to 5% of
their account balance from 10%.
Cost of goods sold, occupancy, and buying expense as a percent of net sales
increased to 77.5% in Fiscal 1995 from 74.0% in Fiscal 1994. This increase is
primarily the result of increased mark-downs taken to clear excess inventories
and the write-off of obsolete computer systems.
Selling, general, and administrative expenses decreased by $1.8 million to
$170.0 million, or 28.8% of net sales, in Fiscal 1995 compared to $171.8
million, or 27.2% of net sales, in Fiscal 1994. The expense reduction was
caused primarily by a reduction in store related payrolls as a result in the
sales decline, and no employee pension expense because the Company was not
profitable.
Provision for doubtful accounts increased by $2.4 million to $5.9 million,
or 1.0% of net sales, in Fiscal 1995 compared to $3.5 million, or 0.5% of net
sales in Fiscal 1994. This increase is primarily the result of an increase in
regular write-offs and customer personal bankruptcy filings.
Interest expense in Fiscal 1995 deceased by $0.3 million compared to Fiscal
1994. The decrease was due to decreased borrowings after the Petition Date.
However, this benefit of reduced debt was partially offset with higher interest
rates associated with the DIP financing.
Reorganization expense was $19.7 million in Fiscal 1995. Items included as
part of this expense are professional fees, restructuring expense primarily due
to store closings, the write-off of pre-bankruptcy loan costs, fee amortization
expense for DIP loans, and an expense for the market value adjustment of
interest rate swaps.
Income tax expense (benefit) for Fiscal 1995 was a benefit of $2.3
million, which includes the carryback of net operating losses for a refund of
prior tax paid, net of state and local taxes paid, and was subject to a
valuation allowance. Fiscal 1994's tax benefit of $2.5 million was
disproportionate to the effective tax rate principally because of tax credits
and other adjustments.
Discontinued operations reflects the estimates of the costs to be incurred
in disposing of the Margo's subsidiary for Fiscal 1995 and Fiscal 1994, as well
as a reserve for Bee-Gee Shoes in Fiscal 1994 which was reversed in Fiscal
1995. The costs include losses incurred in liquidating all Margo's assets, as
well as terminated lease costs.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the filing for bankruptcy protection in October 1995, the
Company's primary sources of funds were cash flow from operations and
borrowings under various debt agreements. In conjunction with the filing of
bankruptcy protection, the Company obtained a DIP Credit Agreement (the "DIP
Agreement"). As amended, the DIP Agreement provides for revolving loans to be
made up to the lesser of (a) $175 million or (b) a borrowing base formula of
the sum of up to 95% of cash of the Company's on deposit in a cash collateral
account, plus 85% of eligible receivables plus the lesser of certain
percentages of eligible merchandise inventory depending on the type and $65
million, subject to adjustment. Also, up to $20 million of the revolving line
of credit may be issued in the form of letters of credit determined as provided
under the DIP Agreement. As of October 29, 1997 the Company's borrowing under
the DIP Agreement, including letters of credit, was $98.8 million out of a
total available to borrow of $168.8 million.
After the Effective Date, the Company's principle sources of funds are
expected to be cash flow from operations, borrowings under the New Revolving
Credit Facility and New Receivable Securitization Facility ("New Credit
Facilities"). The Company's primary ongoing cash requirements will be to fund
debt service, make capital expenditures, and finance working capital. The
Company believes that it will generate sufficient cash flow from operations, as
supplemented by its available borrowings under the New Credit Facilities, to
meet anticipated working capital and capital expenditure requirements as well
as debt service requirements under the New Credit Facilities.
9
<PAGE> 13
The proposed New Revolving Credit Facility with Citicorp USA, Inc., as the
Agent, and Citicorp Securities, Inc., as the Arranger, provides for revolving
credit loans of up to $125.0 million for seasonal working capital purposes
(including a $20.0 million letter of credit subfacility). The borrowing base
used in determining the aggregate availability for loans and other extensions
of credit under the New Revolving Credit Facility will be equal to (a) up to
95% of cash and (b) eligible finished-goods inventory as follows:
January-April, up to 60%; May-July, up to 50%; August-October, up to 60%; and
November-December, up to 65%, less such reserves as the Arranger deems
appropriate.
The proposed New Receivable Securitization Facility established with
Citibank, N.A. provides that a master trust established by the Company will
issue up to $125 million of asset-backed certificates in three separate classes
to finance purchase of revolving consumer credit card receivables generated by
the Company's department store operations. All of these certificates will
represent undivided interests in the assets of the master trust. The master
trust will hold all revolving credit card receivables arising from
private-label credit cards of the Company.
The Company's capital expenditures for Fiscal 1996 were $4.8 million, which
were primarily attributable to stores. The Company presently anticipates that
capital expenditures aggregating approximately $22.4 million will be made in
Fiscal 1997, of which $6.2 million relates primarily to data processing and the
remaining $16.2 million will be attributable to store maintenance, remodeling,
and expansions. The Company is reviewing its exposure to the computer software
problems associated with the year 2000, and believes that the costs associated
with correcting the remaining issues will not be material.
PROPERTIES
The following table sets forth certain information with respect to
Elder-Beerman's department store operations and Bee-Gee's shoe store
operations, based on operating data as of February 1, 1997, the end of
Elder-Beerman's and Bee-Gee's most recently completed fiscal year:
<TABLE>
<CAPTION>
SALES FOR FISCAL YEAR
NUMBER GROSS SQUARE FOOTAGE ENDED FEBRUARY 1, 1997
UNIT OF STORES (IN THOUSANDS) (IN MILLIONS)
- ------------------------ --------- -------------------- ----------------------
<S> <C> <C> <C>
Elder-Beerman department 52 4,557.1 $ 535,581.3
store operations
Bee-Gee shoe store 68 277.5 $ 33,975.5
operations
</TABLE>
Elder-Beerman currently operates approximately 50 stores, principally in
smaller Midwestern markets in Ohio, Indiana, Illinois, Michigan, Wisconsin,
Kentucky, and West Virginia, and Bee-Gee operates 61 stores (51 shoe outlets
and 10 Shoebilee! stores), principally in smaller Midwestern markets in Ohio,
Indiana, Illinois, Michigan, Pennsylvania, Virginia and West Virginia.
Substantially all of the Company's stores are leased properties. The Company
owns, subject to a mortgage, the 302,570 square foot office/warehouse facility
located in Dayton, Ohio, which serves as its principal executive offices. The
Company also has a 20% limited partnership interest in a partnership that owns
a 300,000 square foot distribution center located in Fairborn, Ohio.
10
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF EXISTING EQUITY SECURITIES
The following table sets forth information regarding beneficial ownership
of the Company's equity securities as of November 1, 1997 by (i) each person
who owns beneficially more than 5% of Common Stock of the Company to the extent
known to management, (ii) each executive officer and director of the Company,
and (iii) all directors and executive officers, as a group. Unless otherwise
indicated, the named persons exercise sole voting and investment power over the
shares that are shown as beneficially owned by them.
<TABLE>
<CAPTION>
Number Percent
Beneficial Owner Title of Class of Shares of Class
- ------------------------------------- --------------- --------- --------
<S> <C> <C> <C>
Beerman-Peal Holdings, Inc. Common Stock 6,510,733 100%
11 West Monument Building
Dayton, Ohio 45402
The Elder-Beerman Stores Corp. Profit Series B 662,474 100%
Sharing and Stock Ownership Plan Convertible
3155 El-Bee Road Preferred Stock
Dayton, Ohio 45439
Max Gutmann -- -- --
Frederick J. Mershad -- -- --
Herbert O. Glaser -- -- --
John A. Muskovich -- -- --
James M. Zamberlan -- -- --
Steven D. Lipton -- -- --
Perry J. Schiller -- -- --
Maxwell B. McArthur -- -- --
Leonard B. Peal -- -- --
Raymond Clayman -- -- --
Dr. Robert J. Kegerreis -- -- --
</TABLE>
PRO FORMA OWNERSHIP OF NEW EQUITY SECURITIES
The following table sets forth information regarding the expected
beneficial ownership of the Company's Common Stock as of the Effective Date by
(i) each person who owns beneficially more than 5% of Common Stock of the
Company to the extent known to management, (ii) each executive officer and
director of the Company, and (iii) all directors and executive officers, as a
group. Unless otherwise indicated, the named persons exercise sole voting and
investment power over the shares that are shown as beneficially owned by them.
11
<PAGE> 15
<TABLE>
<CAPTION>
Number Percent
Beneficial Owner* Title of Class of Shares of Class
- ---------------------------------------- -------------- --------- --------
<S> <C> <C> <C>
Frederick J. Mershad Common Stock 47,087 *
John A. Muskovich Common Stock 30,606 *
James M. Zamberlan -- -- --
Steven D. Lipton -- -- --
Perry J. Schiller -- -- --
Scott J. Davido -- -- --
All directors and executive officers as a Common Stock 77,693
group (6 persons)
</TABLE>
- ----------
* Because the Common Stock will not be issued until the Effective Date and
issuance is based on the allowed claims in the Reorganization Cases and
other variables contained in the Plan, Elder-Beerman is unable to
determine, prior to such time, the information required to be disclosed
herein other than as set forth above, including, without limitation,
whether any person will own 5% or more of the Common Stock and the
percentage of outstanding Common Stock that will be held by any person as
of the Effective Date. Elder-Beerman will make such information publicly
available through an appropriate filing with the Securities and Exchange
Commission (the "SEC") once such information becomes available.
DIRECTORS AND EXECUTIVE OFFICERS
EXISTING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding those persons
currently serving as the executive officers and directors of the Company who
will continue to serve in their respective capacities until the Effective Date.
Certain biographical information regarding each of the Company's current
directors and executive officers is described below the table.
<TABLE>
<CAPTION>
Name Age Position
- -------------------- --- ----------------------------------------------
<S> <C> <C>
Max Gutmann 75 Chairman of the Board
Frederick J. Mershad 54 President, Chief Executive Officer, Director
John A. Muskovich 50 Executive Vice President - Administration
James M. Zamberlan 51 Executive Vice President - Stores
Steven D. Lipton 46 Senior Vice President of Planning and Control
Perry J. Schiller 39 Vice President and Treasurer
Raymond Clayman 63 Vice President, General Counsel and Secretary
Herbert O. Glaser 70 Director
Robert J. Kegerreis 76 Director
</TABLE>
Max Gutmann served as Chairman of the Board of the Company since October
1995 and served as President and Chief Executive Officer from October 1996 to
December 1996. Prior to October 1995, Mr. Gutmann had been retired from his
position as Chairman of the Board and Chief Executive Officer of the Company
since April 1992. Mr. Gutmann first became a Director of the Company in 1963
and currently serves as a Director for several of the Company's subsidiaries,
including Chargit, Bee-Gee, EBA, E-B, and McCook. He also currently serves as
President and Chief Executive Officer of Bee-Gee. Mr. Gutmann serves as
Director Emeritus of Gottschalks, Inc., a regional department and specialty
store chain.
Frederick J. Mershad has served as President and Chief Executive Officer of
Elder-Beerman since January 1997. Prior to this time, Mr. Mershad served as
President and Chief Executive Officer of the Proffitt's division of Proffitt's,
Inc. ("Proffitt's") from February 1995 to December 1996; Executive Vice
President, Merchandising Stores for Proffitt's from May 1994 to January 1995;
Senior Vice President, General Merchandise Manager, Home Store for Rich's
Department Store, Inc. from August 1993 to May 1994; and Executive Vice
President, Merchandising and Marketing of the McRae's Department Stores
division of Proffitt's from June 1990 to August 1993.
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<PAGE> 16
John A. Muskovich has served as Executive Vice President of Administration
of Elder-Beerman since February 1996. Prior to this time, Mr. Muskovich served
in the Business Administration Group for Kmart Corp. from September 1995 to
February 1996; President of the Federated Claims Services Group with Federated
Department Stores, Inc. ("Federated") from February 1992 to August 1995; Vice
President of Benefits of Federated from 1994 to 1995; and Vice President,
Corporate Controller of Federated from 1988 to 1992.
James M. Zamberlan has served as Executive Vice President, Stores of
Elder-Beerman since July 1997. Prior to this time, Mr. Zamberlan served as
Executive Vice President of Stores for Bradlee's, Inc. from September 1995 to
January 1997 and also served as Senior Vice President of Stores for the Lazarus
Division of Federated Department Stores, Inc. from November 1989 to August
1995.
Steven D. Lipton has served as Senior Vice President, Controller of
Elder-Beerman since March 1996. Prior to this time, Mr. Lipton served as
Operating Vice President of Payroll for Federated Financial & Credit Services
from September 1994 to January 1996 and served as Vice President and Controller
of the Lazarus Division of Federated from February 1990 to August 1994.
Perry J. Schiller has served as Senior Vice President and Treasurer of
Elder-Beerman since November 1995. Prior to this time, Mr. Schiller served as
the Director of Internal Audit for Elder-Beerman from October 1993 to November
1995 and served as a Senior Manager of Financial Audit for Deloitte & Touche
LLP from May 1988 to October 1993.
Raymond Clayman has served as Vice-President, General Counsel and Secretary
of the Company since October 1995. Prior to this time, Mr. Clayman practiced
law in the private sector. Mr. Clayman has also served as a Director of the
Company since 1985, and he currently serves as Assistant Secretary for several
of the Company's subsidiaries, including Chargit, E-B, EBA, McCook, and
Bee-Gee.
Herbert O. Glaser has served as a Director of the Company since 1985 and as
Vice Chairman of the Company since July 1997. Mr. Glaser also served as
President of the Company from May 1996 to January 1997, Chief Merchandising
Officer from July 1995 to January 1997, as Chairman Emeritus from August 1993
to January 1994, as Chairman and Chief Operating Officer from June 1991 to
August 1993. He currently serves as a Director and Executive Vice President of
Bee-Gee.
Robert J. Kegerreis has served as a Director of the Company since 1992.
Dr. Kegerreis is currently a management consultant and served as President of
Wright State University from July 1973 to June 1985. Dr. Kegerreis also
currently serves on the board of directors for Robbins & Myers, Inc., a
manufacturer of fluid management products.
EXECUTIVE OFFICERS AND DIRECTORS AS OF THE EFFECTIVE DATE
The following table sets forth information regarding those persons who are
expected to serve as executive officers and directors effective as of the
Effective Date. Certain biographical information of each of these directors
and executive officers (other than those who are described above) is described
below the table.
<TABLE>
<CAPTION>
Name* Age Position
- --------------------- --- -------------------------------------------------------------------------
<S> <C> <C>
Frederick J. Mershad 54 Chairman of the Board and Chief Executive Officer
John A. Muskovich 50 President, Chief Operating Officer, Chief Financial Officer, and Director
James M. Zamberlan 51 Executive Vice President, Stores
Steven D. Lipton 46 Senior Vice President, Controller
Perry J. Schiller 39 Senior Vice President and Treasurer
Scott J. Davido, Esq. 36 Senior Vice President, General Counsel, and Secretary
</TABLE>
- ----------
* The Company also expects to elect additional directors; however, as of the
date hereof, the Company has not yet identified the individuals who will be
elected to these positions.
13
<PAGE> 17
Certain biographical information of each of the directors and executive
officers named above (other than those who are described above) is described
below.
Scott J. Davido, Esq. is a partner with Jones, Day, Reavis & Pogue, a law
firm. Mr. Davido has been employed by this law firm since September 1987.
CERTAIN CORPORATE GOVERNANCE MATTERS
Under the Ohio General Corporation Law ("OGCL"), the business and affairs of
Elder-Beerman will be managed under the direction of the Board of Directors
of Elder-Beerman (the "Board of Directors").
The Amended Articles of Incorporation (the "Amended Articles") and the
Amended Regulations, which are expected to be adopted effective as of the
Effective Date, provide that the size of the Board of Directors will be
established from time to time only (a) by an affirmative vote of a majority of
the total number of directors that the Company would have if there were no
vacancies on the Board of Directors or (b) by the affirmative vote of the
holders of at least 72% of the voting stock, voting together as a single class,
except as may be provided in any designation containing the express terms of
preferred stock to be issued pursuant to resolution of the Board of Directors
(a "Preferred Stock Designation"); provided, however, that the number of
directors shall not be less than nine nor more than 11, except as may be
provided in any Preferred Stock Designation. When so fixed, such number shall
continue to be the authorized number of directors until changed by the
shareholders or directors.
The Amended Articles and the Amended Regulations also provide that the
directors of Elder-Beerman, other than those who may be expressly elected by
virtue of the terms of any Preferred Stock Designation, are classified with
respect to the time for which they severally hold office into three classes, as
nearly equal in size as possible and consisting of not less than three
directors in each class, with the directors in each class serving for
three-year terms and until their successors are elected, except that the
initial terms of the initial directors of Elder-Beerman after the Effective
Date expire at the 1999, 2000, or 2001 annual meeting of the shareholders of
Elder-Beerman, depending upon the particular class in which each such director
is placed. Except as may be otherwise provided in any Preferred Stock
Designation, at each annual meeting of shareholders of the Company, the
successors of the class of directors whose terms expire at that meeting shall
be elected by plurality vote of all votes cast at such meeting to hold office
for a term expiring at the annual meeting of shareholders held in the third
year following the year of their election. Except as provided otherwise in any
Preferred Stock Designation, directors may be elected by the shareholders (a)
at an annual meeting of shareholders or (b) if no annual meeting is held or if
an annual meeting is held but directors are not elected, at a special meeting
of shareholders called for that purpose. Neither the holding of a special
meeting of shareholders nor the election of directors at a special meeting of
shareholders will, by itself, shorten the term of any incumbent director.
Except as may be provided in any Preferred Stock Designation, any vacancy that
occurs on the Board of Directors, including any vacancy that results from an
increase in the number of directors and any vacancy that results from death,
resignation, disqualification, removal, or other cause, may be filled only (i)
by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum of the Board of Directors, or by a sole
remaining director, or (ii) by the affirmative vote of the shareholders after a
vote to increase the number of directors at a meeting called for that purpose.
Any director elected to fill a vacancy created by the death, resignation,
disqualification, or removal of an incumbent director will hold office for the
remainder of the term of the class of directors in which the vacancy was
created.
Pursuant to the Amended Regulations, no annual meeting of shareholders was
held in 1997 or will be held in 1998. The first annual meeting of the
shareholders of Elder-Beerman following the Effective Date will be held in May
1999, following the completion of Elder-Beerman's 1998 fiscal year, at such
time and on such business day as the Board of Directors determines. Pursuant
to the Amended Regulations the Board of Directors could postpone the date of
this first annual meeting for up to 30 days. Any amendment to such
postponement provision requires approval by shareholders holding at least 72%
of the voting power of Elder-Beerman.
The Amended Regulations provide that nominations for election of directors,
except as may be otherwise provided in any Preferred Stock Designation, shall
be made at an annual meeting of shareholders by or at the direction of the
Board of Directors, or any committee thereof, or by any shareholder entitled to
vote in the election of directors at such meeting. The Amended Regulations
require that a shareholder's notice of intent to nominate candidates for
election as directors must be delivered to or mailed and received at the
principal executive offices of Elder-Beerman not less than 60 days, nor more
than 90 days, prior to the annual meeting of shareholders; provided, however,
that if public announcement of the date of the
14
<PAGE> 18
annual meeting is not made at least 105 calendar days prior to the date of the
annual meeting, notice by the shareholder to be timely must be received not
later than the close of business on the tenth calendar day following the day on
which such announcement of the date of the meeting was so communicated. The
Amended Regulations further require that the notice by the shareholder set
forth certain information concerning such shareholder and the shareholder's
nominees, including their names and addresses, proof that such shareholder is
entitled to vote at such annual meeting, the class and number of shares of
Elder-Beerman owned or beneficially owned by such shareholder and the
shareholder's nominees, any agreements between the relevant parties pursuant to
which the nomination is to be made, such other information as would be required
to be included in a proxy statement soliciting proxies for the election of the
nominees of such shareholder, and the consent of each nominee to serve as a
director of Elder-Beerman, if so elected. The chairman of the meeting may
refuse to acknowledge the nomination of any person not made in compliance with
these requirements.
BOARD COMMITTEES
The Amended Code of Regulations of Elder-Beerman (the "Amended
Regulations") provide that the Board of Directors may establish an executive
committee or any other committees as it may from time to time determine are
necessary. Elder-Beerman contemplates that the Board of Directors may
establish an Executive Committee and will establish an Audit Committee and a
Compensation Committee as of or promptly after the Effective Date. The
composition of such Committees has not been determined, but Elder-Beerman
expects that the members of each of the Audit Committee and the Compensation
Committee will be non-employee directors. Under the Amended Regulations, a
committee will possess and may exercise all of the power and authority granted
to it by the Board of Directors consistent with the OGCL, provided that such
committees may not fill vacancies among the directors or any committee thereof.
If the Board of Directors establishes an Executive Committee, such
committee will possess and may exercise, subject to the control and direction
of the Board of Directors, all the powers of the Board of Directors in the
management and control of the business of Elder-Beerman, regardless of whether
such powers are specifically conferred by the Amended Regulations.
The Audit Committee is expected to review: (a) the professional services to
be provided by Elder-Beerman's independent auditors and the independence of
such firm from management of Elder-Beerman; (b) the scope of the audit by
Elder-Beerman's independent auditors; (c) the annual financial statements of
Elder-Beerman; (d) Elder-Beerman's systems of internal accounting controls; and
(e) such other matters with respect to the accounting, auditing, and financial
reporting practices and procedures of Elder-Beerman as it may find appropriate
or as may be brought to its attention. The Audit Committee is expected to meet
from time to time with members of Elder-Beerman's internal audit staff.
The Compensation Committee is expected to: (a) review executive salaries,
(b) administer the bonus, incentive compensation, and stock option plans of
Elder-Beerman, and (c) approve the salaries and other benefits of the executive
officers of Elder-Beerman. See "Executive Compensation -- New Compensatory
Programs and Agreements." In addition, the Compensation Committee is expected
to advise and consult with Elder-Beerman's management regarding pension and
other benefit plans and compensation policies and practices of Elder-Beerman.
EXECUTIVE COMPENSATION
The compensation discussion that follows has been prepared based on the
actual compensation paid and benefits provided during the fiscal years ended
January 28, 1995, February 3, 1996, and February 1, 1997 by the Company to
certain executive officers as of February 1, 1997. The existing employment,
compensation, and benefit arrangements of the Company that are expected to
continue after the Effective Date are described below. Compensation and
benefit arrangements of the Company that will be terminated as of the Effective
Date are not described below.
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<PAGE> 19
CASH COMPENSATION TABLE
The following table sets forth the compensation paid or payable by the
Company, on a combined basis to Mr. Gutmann, Mr. Mershad, and the four most
highly compensated executive officers of the Company as of February 1, 1997.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
------------------
SALARY BONUS
NAME AND PRINCIPAL POSITION ($) ($)
- ---------------------------------------------- ------- -------
<S> <C> <C>
MAX GUTMANN (1) . . . . . . . . . . . . . . . 368,846 160,000
Chairman of the Board
FREDERICK J. MERSHAD (2) . . . . . . . . . . 19,231 633,632
President and Chief Executive Officer
HERBERT O. GLASER (3) . . . . . . . . . . . . 325,789 134,000
Vice Chairman
JOHN A. MUSKOVICH . . . . . . . . . . . . . . 192,239 67,908
Executive Vice President -
Administration
MAXWELL B. MCARTHUR (4) . . . . . . . . . . . 161,545 48,800
Executive Vice President Stores
LEONARD B. PEAL (5) . . . . . . . . . . . . . 160,450 8,000
Executive Vice President - Cost/Leased
</TABLE>
- ----------
(1) Mr. Gutmann served as Chairman and Chief Executive Officer during
fiscal year 1996, but was replaced as Chief Executive Officer by Mr.
Mershad during January 1997, the last month of the fiscal year.
(2) Mr. Mershad began serving as President and Chief Executive Officer of
Elder-Beerman during January 1997, the last month of the 1996 fiscal
year. In accordance with his employment contract, Mr. Mershad
received a signing bonus of $633,632 as reimbursement for forfeiting
his performance bonus, restricted stock grants, and stock option
grants that he would have received from his prior employer.
(3) Effective August 1997, Mr. Glaser is no longer employed by the
Company.
(4) Effective May 31, 1997, Mr. McArthur is no longer employed by the
Company.
(5) Effective February 28, 1997, Mr. Peal is no longer employed by the
Company.
EXISTING COMPENSATORY PLANS AND AGREEMENTS
Information as to the Company's current compensatory plans and agreements
that will remain in effect following the Effective Date is set forth below.
See "-- New Compensatory Programs and Agreements" for a description of the new
plans and agreements that will be adopted as of or following the Effective Date.
KEY EMPLOYEE RETENTION PROGRAM
On December 14, 1995, the Bankruptcy Court entered an order authorizing the
Company's key employee retention program (the "KERP Order"). This program
includes four principal components:
(a) The program authorized the Company to enter into termination
agreements with approximately 20 of their senior management employees.
The benefits available in any termination agreement were in addition
to severance benefits to which the employee was entitled, provided
that such employee could not receive more than 18 months' salary in
termination/severance benefits;
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<PAGE> 20
(b) The program established a master severance plan for certain key
employees. Approximately 450 key employees are covered by this master
severance plan. The benefits payable under this plan, which are not
to exceed $9 million in the aggregate, are in substitution for the
benefits that covered employees would otherwise receive under the
alternative base severance pay program. Employees are eligible to
receive the greater of the benefits under these two plans;
(c) The program established a bonus program consisting of bonuses paid
annually and at mid-year, if the Company met predetermined financial
goals. The Company paid out approximately $3.3 million in bonuses for
the 1996-97 fiscal year. The Company estimates that it will pay a
total of approximately $2.0 million in bonuses for the 1997-98 fiscal
year. In addition to these bonuses, which were based on a percentage
of the applicable employee's salary, the Company's management was
given authority to award additional amounts to covered employees in
its discretion; and
(d) The program includes a base severance pay plan for rank-and-file
employees equal to one week of severance pay for each full year of
employment.
REORGANIZATION BONUS
Pursuant to an order entered by the Bankruptcy Court on November 15, 1996,
as amended (the "Reorganization Bonus Order"), Messrs. Gutmann, Glaser, and
Muskovich will receive the equivalent of two-years of their respective salaries
as a lump sum reorganization bonus upon the substantial consummation of a
consensual plan of reorganization. These bonuses are to be paid through a
distribution of cash and Common Stock in the same proportion as the
distributions made to unsecured creditors under the Plan.
CALCULATION OF CERTAIN SEVERANCE AND BONUS BENEFITS PAID TO SENIOR
EXECUTIVES
On July 10, 1997, the Bankruptcy Court entered a Stipulation and Order
concerning the calculation of the severance pay and reorganization bonuses
payable to Messrs. Gutmann and Glaser pursuant to the KERP Order and the
Reorganization Bonus Order. This Stipulation and Order provides that to the
extent that Messrs. Gutmann or Glaser are otherwise entitled to such benefits,
all such benefits shall be payable to Messrs. Gutmann and Glaser on the basis
that their respective annual salaries are $400,000 and $335,000, respectively,
notwithstanding any downward adjustments made or to be made to those salaries.
Effective as of August 1, 1997, Elder-Beerman terminated the employment of Mr.
Glaser. In accordance with the terms of the KERP Order, Elder-Beerman paid Mr.
Glaser severance pay equal to one year's salary in connection with his
termination. In addition, Elder-Beerman expects to pay to Max Gutmann
severance pay equal to one year's salary in connection with any future
termination of his employment. As part of the releases provided under the
Plan, the Company will release any potential claims, demands, rights, or causes
of action it may have against Messrs. Gutmann and Glaser to recover the
payment of these severance benefits.
NEW COMPENSATORY PROGRAMS AND AGREEMENTS
GENERAL
One of the key elements of the Company's Business Plan is an executive
compensation program designed to attract, retain, and provide incentives to
directors, officers, and key employees for the Company and to provide such
persons appropriate incentives and rewards for superior performance. See
"Business -- Business -- Business Plan and Strategy for the Company."
Accordingly, the Company will institute a new senior management and executive
compensation program (the "New Benefit Program") that includes changes in (a)
base salaries, (b) annual incentives, (c) long-term incentives, (d)
perquisites, and (e) employment and change-of-control agreements. The New
Benefit Program is intended to attract and retain key employees over the long
term, encourage employee stock ownership, and provide incentives for career
advancement with the Company. Approval of the Plan will be deemed to
constitute approval of the New Benefit Program by holders of certain claims
and interests who are to receive Common Stock pursuant to the Plan. The Equity
and Performance Incentive Plan (described below) will come into existence as of
the Confirmation Date. Generally, however, employee agreements and employee
benefit plans implementing the New Benefit Program will not become effective
unless and until the Effective Date occurs. The following discussion
summarizes the principal terms of the New Benefit Program.
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<PAGE> 21
EQUITY AND PERFORMANCE INCENTIVE PLAN
The Company's new Equity and Performance Incentive Plan (the "Equity and
Performance Incentive Plan") will include both annual and long-term (i.e.,
three or more years) incentives. Under the Equity and Performance Incentive
Plan, the Company first expects to motivate and reward designated key employees
for the achievement of annual corporate, departmental, and/or individual goals
and objectives through new annual incentives. The new annual incentives will
compensate key employees chosen by the Board of Directors' Compensation
Committee based on three performance levels -- threshold, target, and optimum.
These performance levels will be predetermined on both an individual level for
each key employee, based on a percentage of the key employee's base salary, and
on a company wide level. If the Company achieves the threshold level under the
company-wide performance criteria, key employees will be eligible to receive a
cash bonus payment based on the threshold incentive percentage. Key employees
may receive additional bonus payments if they meet their goals in other
performance categories such as department, region, store, and individual.
The Equity and Performance Incentive Plan will also allow key employees
entitled to receive an annual incentive bonus to defer voluntarily up to 50% of
their annual incentive bonus and instead receive Deferred Shares (as
hereinafter defined). These Deferred Shares will be 100% vested at all times
and may be exercised on the earliest of (a) the third anniversary of the date
awarded, (b) the date the employee's employment is terminated for reasons other
than death, (c) the employee's death, or (d) an unforeseeable financial
emergency of the employee. To provide key employees with the incentive to
defer, the Equity and Performance Incentive Plan also will grant Restricted
Shares (as described below) equal in value to 25% of the amount deferred.
These Restricted Shares will become 100% vested on the third anniversary of the
date of grant if such employee remains in the continuous employ of the Company.
In the event of the retirement, death, or disability of a key employee
prior to the determination of any annual incentive, and in the event the Board
of Directors determines that the key employee's goals have been met, such
employee or employee's beneficiary will be eligible to receive a pro rata
portion of the award. However, if such employee's employment terminates for
any reason other than retirement, death, or disability, the employee will
forfeit his or her right to any award not paid to the key employee prior to
such termination of employment. If a key employee is employed on the date a
change in control occurs, his annual incentive bonus for such year will not be
less than such award for the immediately preceding year.
The Equity and Performance Incentive Plan also permits equity-related
grants as long-term incentives that are intended to motivate and reward certain
employees for the achievement of long-term corporate goals and to balance
annual goals with strategic plans. These long-term incentives also offer
capital accumulation potential for employees and align employees' interests
with shareholder interests. Only certain senior executives, as determined by
the Board of Directors, will be eligible to receive grants under the long-term
incentive portion of the Equity and Performance Incentive Plan. The shares
awarded as long-term incentives may not exceed the equivalent of 2,250,000
shares plus any shares relating to awards that expire or are forfeited or
canceled (the "Long-Term Incentive Reserve"). The Equity and Performance Plan
will have an evergreen provision that provides that, in any acquisition,
merger, or secondary offering, the Long-Term Incentive Reserve shall remain
constant.
The Equity and Performance Incentive Plan will permit grants in a variety
of forms. First, the Board of Directors may authorize the granting of stock
options ("Option Rights") to designated employees and non-employee directors.
Option Rights will provide the right to purchase Common Stock at a
predetermined price per share (which, in the case of non-qualified stock
options, may not be less than 75% of the fair market value on the date of grant
and, in the case of incentive stock options as described in Section 422 of the
Internal Revenue Code, may not be less than fair market value on the date of
grant). The grant may provide for payment of the option price by one or more
methods. The grant may also provide for the automatic grant of additional
Option Rights, known as Related Option Rights, to an employee or non-employee
director upon the exercise of Option Rights using Common Stock or other defined
consideration as payment. Options granted to non-employee directors will
become exercisable one-third on each of the first three anniversaries of the
date of grant for so long as the individual remains a non-employee director.
Options granted to employees will become exercisable 20% on each of the first
five anniversaries of the date of grant for so long as the employee remains in
the continuous employ of the Company. No Option Rights may be exercised more
than ten years from the date of grant. All Option Rights provide for the
earlier exercisability of the Option Rights in the event of retirement, death,
or disability of the employee or non-employee director or a change in control
of the Company. Any grant of Option Rights may specify performance goals that
must be achieved as a condition to exercise such rights.
18
<PAGE> 22
Second, the Board of Directors may authorize the granting of appreciation
rights ("Appreciation Rights") to designated employees. Appreciation Rights
will represent the right to receive from the Company an amount, determined by
the Board of Directors and expressed as a percentage not exceeding 100%, of the
difference between the base price established for such rights and the market
value of the Common Stock on the date the rights are exercised. Appreciation
Rights can be tandem (i.e., granted with Option Rights to provide an
alternative to exercise of the Option Rights) or free-standing. Tandem
Appreciation Rights may only be exercised at a time when the related Option
Right is exercisable and the spread is positive, and requires that the related
Option Right be surrendered for cancellation. Free-standing Appreciation
Rights must have a base price per right that does not exceed a maximum
specified by the Board of Directors on the date of grant, may specify the
period of employment that is necessary before such Appreciation Rights become
exercisable, may provide for the exercise of the Appreciation Rights only in
the event of retirement, death, or disability of the employee or a change in
control of the Company and must be evidenced by an agreement executed on behalf
of the Company and accepted by the employee describing such Appreciation Rights
and other terms and provisions. Such grant may also include that payment may
be made by one or more methods of payment and may specify performance goals
that must be achieved as a condition to exercise such rights.
Third, the Board of Directors may authorize the granting of restricted
shares ("Restricted Shares") to designated employees and non-employee
directors. Restricted Shares will constitute an immediate transfer of
ownership to the recipient in consideration of the performance of services.
The recipient has dividend and voting rights on such shares. Restricted Shares
must be subject to a "substantial risk of forfeiture" of the Restricted Shares,
within the meaning of Section 83 of the Internal Revenue Code. To enforce
these forfeiture provisions, the transferability of Restricted Shares will be
prohibited or restricted in the manner prescribed by the Board of Directors on
the date of grant for the period during which such forfeiture provisions are to
continue. Any grant of Restricted Shares (a) may specify performance goals
which, if achieved, will result in termination or early termination of the
restrictions applicable to such shares, (b) 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,
and (c) must be evidenced by an agreement executed on behalf of the Company and
accepted by the employee.
Fourth, the Board of Directors may authorize the granting of deferred
shares ("Deferred Shares") to designated employees. Deferred Shares will
constitute an agreement to issue shares to the recipient in the future in
consideration of the performance of services, but subject to the fulfillment of
such conditions as the Board of Directors may specify. The Board of Directors
must fix a deferral period of at least one year at the time of grant, and may
provide for the earlier termination of the deferral period in the event of
retirement, hardship, death, or disability of the employee or a change in
control of the Company. During the deferred period, the employee shall have no
right to transfer any rights under his or her award and will have no ownership
or voting rights in the Deferred Shares, but the Board of Directors may, at or
after the grant date, authorize the payment of dividend equivalents on such
shares on either a current, deferred, or contingent basis, either in cash or in
additional Common Stock. Each grant of Deferred Shares will be evidenced by an
agreement executed on behalf of the Company and accepted by the employee.
Finally, the Board of Directors may authorize the granting of performance
shares ("Performance Shares") and performance units ("Performance Units") to
designated employees upon achievement of specified performance objectives. A
Performance Share will be the equivalent of one share of Common Stock and a
Performance Unit is denominated in dollars. The employee will be given one or
more performance goals to meet within a specified period, not less than one
year (the "Performance Period"). The specified Performance Period may be
subject to earlier termination in the event of retirement, death, or disability
of the employee or a change in control of the Company. A minimum level of
acceptable achievement also will be established. If, by the end of the
Performance Period, the employee has achieved the specified performance goals,
the employee will be deemed to have fully earned the Performance Shares or
Performance Units. If the designated employee has not achieved the performance
goals, but has attained or exceeded the predetermined minimum level of
acceptable achievement, the employee will be deemed to have partly earned the
Performance Shares or Performance Units in accordance with a predetermined
formula. To the extent earned, the Performance Shares or Performance Units
will be paid to the employee at the time and in the manner determined by the
Board of Directors as set forth in each grant. The Board of Directors may, at
or after the date of grant of Performance Shares, provide for the payment of
dividend equivalents to the holder thereof on either a current or deferred or
contingent basis, either in cash or in additional Common Stock. Each grant of
Performance Shares or Performance Units will be evidenced by an agreement
executed on behalf of the Company and accepted by the employee.
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<PAGE> 23
The Equity and Performance Incentive Plan will be administered by the Board
of Directors, which may from time to time delegate all or any part of its
authority under the Equity and Performance Incentive Plan to an agent or a
committee or subcommittee of the Board of Directors.
The Equity and Performance Incentive Plan will offer a large, up-front
grant of an aggregate of 788,020 Option Rights and an aggregate of 86,793
Restricted Shares that is intended to cover the first three years following the
Effective Date. All initial grants of Options Rights to designated employees
will vest 20% per year over five years as long as the employee remains in the
continuous employ of the Company. All initial grants of Option Rights to
non-employee directors will vest one-third per year over three years as long as
they remain directors. All initial grants of Restricted Shares will vest
one-third per year over three years as long as the employee remains in the
continuous employ of the Company or as long as the director remains a director,
as appropriate. For the top two executives, 80% of the targeted gain
opportunity will be allocated to nonqualified Option Rights and 20% to
Restricted Share awards. The other executives will receive 100% of their grant
in nonqualified Option Rights.
EMPLOYMENT AGREEMENTS AND THE SEVERANCE PAY PLAN
The Company also will provide employment agreements that include severance
pay for certain key executives in order to assist in recruiting and to promote
long-term security during uncertain times. These executives will serve the
Company under their respective agreements starting on the Effective Date and
ending on the second or third anniversary, as applicable, of the Effective Date
with an automatic yearly extension thereafter, unless the employer or the
executive has given written notice of termination not less than 120 days prior
to the yearly renewal date. The employment agreements will set forth (a) the
executive's compensation and benefits; (b) the employer's right to terminate
the executive for cause or otherwise; (c) the amounts to be paid by the
employer in the event of the executive's termination, death, or disability
while rendering services; (d) the executive's duty of strict confidence and to
refrain from conflicts of interest; (e) the executive's obligations not to
compete for the term of the agreement plus one year unless the executive
terminated his employment for good reason or the employer terminates the
executive other than for cause; and (f) the executive's right to receive
severance payments if he or she (i) is terminated within two years of a change
in control without cause, (ii) voluntarily terminates for defined good reasons
within two years of a change of control, (iii) terminates his or her employment
for any reason, or without reason, during the thirty-day period immediately
following the first anniversary of a change in control, or (iv) is terminated
in connection with but prior to a change in control and termination occurs
following the commencement of any discussions with any third party that
ultimately results in a change in control. Specifically, under the employment
agreements, the amount of any severance payment by the Company will be the
greater of 2.99 times the Internal Revenue Code "base amount" as described in
Section 280G of the Internal Revenue Code or two times his most recent base
salary and bonus. Severance payments made under the employment agreements will
reduce any amounts that would be payable under any other severance plan or
program, including the master severance plan for certain key employees. A tax
gross-up also will be paid if the severance pay exceeds the limit imposed by
the Internal Revenue Code. In addition, the executive will continue to be
eligible for health benefits, perquisites, and fringe benefits generally made
available to senior executives for two years following his or her termination,
unless the executive waives such coverage, fails to pay any amount required to
maintain such coverage, or obtains new employment providing substantially
similar benefits.
The Company will enter into employment agreements similar to those
described above with Frederick J. Mershad, Chairman and Chief Executive
Officer, and John A. Muskovich, President, Chief Operating Officer, and Chief
Financial Officer. Such employment agreements will be effective as of the
Effective Date and will end on the third anniversary of the Effective Date.
These employment agreements will be automatically renewed every year on the
anniversary date of the employment agreement for an additional one year period,
unless such executive provides the Company or the Company provides the
executive with 180 days prior notice terminating this yearly renewal. In
general, the employment agreements provide that if such executive officer is
terminated for any reason other than for cause or following a change in
control, he will receive payments equal to the remaining base salary that would
have been distributed to him by the Company under the remaining term of his
employment agreement and the incentive compensation earned by the executive for
the most recent fiscal year. In the event such executive (a) is terminated
within two years of a change in control without cause, (b) voluntarily
terminates within two years of a change in control, or (c) is terminated in
connection with but prior to a change in control and termination occurs
following the commencement of any discussions with any third party that
ultimately results in a change in control, he will receive a severance payment
equal to the greater of 2.99 times the Internal Revenue Code "base amount" as
described in Section 280G of the Internal Revenue Code or two times his most
recent base salary and bonus and the executive will continue to be eligible for
health benefits, perquisites, and fringe benefits generally made available to
senior executives following his termination, unless the executive obtains new
employment providing substantially similar
20
<PAGE> 24
benefits. A tax gross-up also will be paid if the severance pay exceeds the
limits imposed by the Internal Revenue Code. Mr. Mershad's employment
agreement shall supersede his current employment agreement with Elder-Beerman.
Under the Severance Pay Plan for Key Employees (the "Severance Plan for Key
Employees"), upon a change of control, designated key employees who are not
covered by the contracts disclosed above will be entitled to severance pay if
the key employee (a) is terminated within 18 months of a change in control
without cause, (b) voluntarily terminates for defined good reasons within 18
months of a change of control, or (c) is terminated not more than 90 days prior
to a change in control and termination occurs following the commencement of any
discussions with any third party that ultimately results in a change in
control. Each key employee so terminated, who is a Senior Vice President,
Vice President, or is otherwise designated by the Board of Directors to receive
severance pay at the same multiple as a Senior Vice President shall receive a
lump sum severance payment in an amount equal to 1 1/2 times the employee's
base salary plus his incentive pay. Each of the remaining designated key
employees shall receive a lump sum payment in an amount equal to the key
employee's base salary plus incentive pay. In addition, each terminated key
employee will continue to be eligible for health and life insurance benefits
for one year following such termination unless such employee waives such
coverage, fails to pay any amount required to maintain such coverage, or
becomes eligible for other group health coverage. However, any severance
payment is conditioned upon the employee's agreeing in writing to keep in
strict confidence any trade secrets or confidential business information and to
return, in good condition, all property belonging to the employer. The
employee must also agree to release the employer for certain claims, demands,
damages, and actions that the employee may have on account of the termination.
The Company also will require any successor to assume and agree to perform the
obligations under both the employment agreements and the Severance Pay Plan for
Key Employees.
In addition, multiple arrangements (including plans and individual
employment and termination agreements) will be in effect providing for
severance pay, including the severance arrangements established pursuant to the
KERP Order that continued in effect beyond the Effective Date. The termination
of an employee who is covered under more than one severance arrangement may
trigger severance payments under only one severance arrangement or under more
than one severance arrangement. However, the Company intends for the severance
arrangements to coordinate so that an employee eligible to receive payments
under more than one severance arrangement receives no more than the largest
amount payable to him under any one severance arrangement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has never had a Compensation Committee or other committee of
the Board of Directors performing similar functions. Previously, decisions
concerning compensation of executive officers of the Company were made by the
Company's Chief Executive Officer. The Board of Directors will establish a
Compensation Committee effective as of the Effective Date. See "Directors and
Executive Officers -- Board Committees."
DIRECTOR COMPENSATION
Commencing in calendar 1998, each director of Elder-Beerman who is not an
employee of Elder-Beerman or any of its subsidiaries will be paid an annual
base retainer fee of $15,000, with the choice to take such retainer as cash or
in the form of a discounted stock option. Non-employee directors also will be
paid $1,500 for each meeting of the Board of Directors attended and $500 for
any committee meeting of the Board of Directors attended. Each such director
is also expected to receive an initial grant of (a) 1,300 shares of restricted
stock and (b) 4,000 options to purchase shares of Common Stock. Members of the
Board of Directors who are also employees of any of Elder-Beerman or any of its
subsidiaries will receive no additional compensation for service on the Board
of Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company, Bee-Gee, and Margo's lease or leased real estate from entities
(the "Related Entities") that are affiliated with Beerman-Peal, which, prior to
the Effective Date, owned 100% of the Company. The Related Entities are owned
by various Beerman stockholders, officers, directors, and family members
thereof. None of these persons will individually own or beneficially own more
than 5% of the Common Stock of the Company or be a director or officer of the
Company after the Effective Date.
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<PAGE> 25
In fiscal 1996, the Company leased ten of its stores and its distribution
center from Related Entities and paid aggregate rent to the Related Entities of
$3,703,055, and Bee-Gee leased four of its stores and its corporate offices
from Related Entities and paid aggregate rent to the Related Entities of
$282,393. In fiscal 1995, the Company leased ten of its stores and its
distribution center from Related Entities and paid aggregate rent to the
Related Entities of $3,938,490, Bee-Gee leased six of its stores and its
corporate offices from Related Entities and paid aggregate rent to the Related
Entities of $400,844, and Margo's leased its corporate offices and distribution
center from Related Entities and paid aggregate rent to the Related Entities of
$97,917. In 1994, the Company leased ten of its stores and its distribution
center from Related Entities and paid aggregate rent to the Related Entities of
$3,050,795, Bee-Gee leased six of its stores and its corporate offices from
Related Entities and paid aggregate rent to the Related Entities of $265,478,
and Margo's leased its corporate offices and distribution center from Related
Entities and paid aggregate rent to the Related Entities of $80,417.
Raymond Clayman, currently a director of the Company, has served as a
principal in the Law Offices of Raymond Clayman, which has provided legal
services to the Company for the fiscal years ended February 3, 1996 and January
28, 1995 and for which the Company has paid legal fees of approximately
$288,400 and $300,700, respectively.
LEGAL PROCEEDINGS
Beerman-Peal and certain of its affiliated entities (the "Beerman
Entities") have asserted various Claims (with "Claim" being defined as such
term is defined in section 101(5) of the Bankruptcy Code) against the Old
Elder-Beerman Companies in the Reorganization Cases. Many of these Claims
relate to Elder-Beerman and Bee-Gee store properties that certain Beerman
Entities currently lease or formerly leased to the Old Elder-Beerman Companies.
The Old Elder-Beerman Companies have asserted certain claims, rights, and
causes of action against certain of the Beerman Entities. In addition, based
on certain actions of certain of Elder-Beerman's former directors, the Old
Elder-Beerman Companies believe that they may have breach of fiduciary duty and
equitable subordination claims against certain Beerman Entities.
Finally, a Plan exhibit entitled the New Tax Indemnification Agreement,
describes several federal tax matters related to deconsolidation of the
consolidated taxpayer group of companies including the Old Elder-Beerman
Companies, of which Beerman-Peal is the common parent, which will result upon
consummation of the Plan on the Effective Date. These tax matters include
issues in connection with the filing of future tax returns, the conduct of
future tax audits, and the preservation and orderly utilization of
Elder-Beerman's tax attributes in accordance with applicable tax laws and
regulations.
If the Beerman Entities do not vote to reject the Plan, the Old
Elder-Beerman Companies and the Beerman Entities would agree to resolve the
various remaining unresolved claims that they assert against each other upon
the terms and subject to the conditions of the New Tax Indemnification
Agreement and another Plan exhibit entitled the Comprehensive Settlement
Agreement. The obligations set forth in the New Tax Indemnification Agreement
provide additional consideration for certain of the releases set forth in the
Comprehensive Settlement Agreement.
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ABSENCE OF PUBLIC MARKET
The Company's Common Stock is not currently listed or admitted to unlisted
trading privileges on a national securities exchange or included for quotation
through an inter-dealer quotation system of a registered national securities
association. The Company also is not aware of any dealer or "market maker" in
the Common Stock and, consequently, the trading market for such securities is
limited.
The Company has filed an application with The Nasdaq Stock Market to list
the Common Stock on the Nasdaq National Market.
HOLDERS
Because the Common Stock will not be issued until the Effective Date and
issuance is based on the allowed claims in the Reorganization Cases and other
receivables contained in the Plan, Elder-Beerman is unable to determine, prior
to such
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time, the number of record holders of Common Stock as of the Effective Date.
There will be no record holders of Preferred Stock as of the Effective Date.
All outstanding shares of Common Stock, and all shares of Common Stock issued
upon the exercise of New Warrants, will be eligible for resale unless the
holder thereof is deemed to be an "underwriter" with respect to such
securities, an "affiliate" of the issuer of such securities or a "dealer."
Section 1145(b) of the Bankruptcy Code defines four types of "underwriters":
(a) persons who purchase a claim against, an interest in, or a claim for
administrative expense against the debtor with a view to distributing
any security received in exchange for such a claim or interest
("accumulators");
(b) persons who offer to sell securities offered under a plan for the
holders of such securities ("distributors");
(c) persons who offer to buy securities from the holders of such
securities, if the offer to buy is (i) with a view to distributing
such securities and (ii) made under a distribution agreement; and
(d) a person who is an "issuer" with respect to the securities, as the
term "issuer" is defined in Section 2(11) of the Securities Act of
1933, as amended (the "Securities Act").
Under section 2(11) of the Securities Act, an "issuer" includes any "affiliate"
of the issuer, which means any person directly or indirectly through one or
more intermediaries controlling, controlled by, or under common control with
the issuer. Under section 2(12) of the Securities Act, a "dealer" is any
person who engages either for all or part of his or her time, directly or
indirectly, as agent, broker, or principal, in the business of offering,
buying, selling, or otherwise dealing or trading in securities issued by
another person. Whether any particular person would be deemed to be an
"underwriter" or an "affiliate" with respect to any security to be issued
pursuant to the Plan or to be a "dealer" would depend upon various facts and
circumstances applicable to that person. Accordingly, the Company expresses no
view as to whether any person would be an "underwriter" or an "affiliate" with
respect to any security to be issued pursuant to the Plan or to be a "dealer."
In connection with prior bankruptcy cases, the staff of the SEC has taken
the position that resales by accumulators and distributors of securities
distributed under a plan of reorganization are exempt from the registration
under the Securities Act if effected in "ordinary trading transactions." The
staff of the SEC has indicated in this context that a transaction may be
considered an "ordinary trading transaction" if it is made on an exchange or in
the over-the-counter market and does not involve any of the following factors:
(a) (i) concerted action by the recipients of securities issued under a
plan in connection with the sale of such securities or (ii) concerted
action by distributors on behalf of one or more such recipients in
connection with such sales;
(b) the use of informational documents concerning the offering of the
securities prepared or used to assist in the resale of such
securities, other than a bankruptcy court-approved disclosure
statement and supplements thereto, and documents filed with the SEC
pursuant to the Exchange Act of 1934, as amended (the "Exchange Act");
or
(c) the payment of special compensation to brokers and dealers in
connection with the sale of such securities designed as a special
incentive to the resale of such securities (other than the
compensation that would be paid pursuant to arm's-length negotiations
between a seller and a broker or dealer, each acting unilaterally, not
greater than the compensation that would be paid for a routine
similar-sized sale of similar securities of a similar issuer).
The Company has not, however, sought the views of the SEC on this matter and,
therefore, no assurance can be given regarding the proper application of the
"ordinary trading transaction" exemption described above. Any person intending
to rely on such exemption is urged to consult his or her own counsel as to the
applicability thereof to his or her circumstances.
In addition, Securities Act Rule 144 provides an exemption from
registration under the Securities Act for certain limited public resales of
unrestricted securities by "affiliates" of the issuer of such securities. Rule
144 allows a holder of unrestricted securities that is an affiliate of the
issuer of such securities to sell, without registration, within any three month
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period a number of shares of such unrestricted securities that does not exceed
the greater of 1% of the number of outstanding securities in question or the
average weekly trading volume in the securities in question during the four
calendar weeks preceding the date on which notice of such sale was filed
pursuant to Rule 144, subject to the satisfaction of certain other requirements
of Rule 144 regarding the manner of sale, notice requirements, and the
availability of current public information regarding the issuer. The Company
believes that, pursuant to section 1145(c) of the Bankruptcy Code, the Common
Stock and the New Warrants to be issued pursuant to the Plan and the Common
Stock issuable upon the exercise of New Warrants will be unrestricted
securities for purposes of Rule 144.
GIVEN THE COMPLEX NATURE OF THE QUESTION OF WHETHER A PARTICULAR PERSON MAY
BE AN UNDERWRITER, THE COMPANY MAKES NO REPRESENTATIONS CONCERNING THE RIGHT OF
ANY PERSON TO TRADE IN THE COMMON STOCK AND NEW WARRANTS TO BE DISTRIBUTED
PURSUANT TO THE PLAN OR THE NEW COMMON STOCK ISSUABLE UPON THE EXERCISE OF THE
NEW WARRANTS. THE COMPANY RECOMMENDS THAT HOLDERS OF CLAIMS AND INTERESTS
CONSULT THEIR OWN COUNSEL CONCERNING WHETHER THEY MAY FREELY TRADE SUCH
SECURITIES.
DIVIDENDS
As of the Effective Date, each share of new Common Stock will be entitled
to participate equally in any dividend declared by the Board of Directors and
paid by the Company. But the Company does not anticipate paying any dividends
on the new Common Stock in the foreseeable future. In addition, covenants in
certain debt instruments to which the Company will be a party will restrict the
ability of the Company to pay dividends, and may prohibit the payment of
dividends and certain other payments. In particular, the Company anticipates
that the agreement for its new revolving credit facility will include a
customary covenant prohibiting the Company from paying any dividends or making
any other distributions to shareholders.
RECENT SALES OF UNREGISTERED SECURITIES
The Company does not have any recent sales of unregistered securities.
The new Common Stock and the New Warrants will be issued pursuant to the
Plan on the Effective Date in satisfaction of certain allowed claims against,
or interests in, the Company. Based upon the exemptions provided by section
1145 of the Bankruptcy Code, the Company believes that none of such securities
will be required to be registered under the Securities Act in connection with
their issuance and distribution pursuant to the Plan.
DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
COMMON STOCK
As of the Effective Date, the Company will be authorized to issue 25
million shares of Common Stock, without par value.
Subject to such rights of the holders of any series of preferred stock as
may be fixed by the Company's Board of Directors or by law when and if any
series is created and issued, the holders of Common Stock will be entitled to
one vote for each share held of record on all matters submitted to a vote of
stockholders. Subject to preferential rights that may be applicable to any
preferred stock of the Company, holders of Common Stock will be entitled to
receive ratably such dividends as may be declared by the Company's Board of
Directors out of funds legally available therefor. However, the Company does
not presently anticipate that dividends will be paid on Common Stock in the
foreseeable future. In the event of a liquidation, dissolution, or winding up
of the Company, holders of Common Stock will be entitled to share ratably in
all assets remaining after payment of liabilities and the liquidation
preference of any preferred stock of the Company. Holders of Common Stock of
the Company have no preemptive, subscription, redemption, or conversions
rights.
All of the outstanding shares of Common Stock issued pursuant to the Plan
will, upon such issuance, be fully paid and nonassessable. Subject to the
terms and conditions set forth in Elder-Beerman's Share Purchase Rights
Agreement, each share of Common Stock issued pursuant to the Plan will be
accompanied by a New Share Purchase Right. See "-- Share
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Purchase Rights Agreement" below. The Company has filed an application with
The Nasdaq Stock Market to list the stock on the Nasdaq National Market.
In addition to the provisions relating to the Board of Directors described
above, the Amended Articles and Amended Regulations will provide, in general,
that: (a) shareholder action can be taken at an annual or special meeting of
shareholders; (b) except as directed below, special meetings of shareholders
may be called for any proper purpose or purposes, including the election of
directors, by (i) the Chairman of the Board, (ii) the President, (iii) a
majority of the Board of Directors, (iv) any person or persons holding at least
50% of all shares outstanding and entitled to vote at such meeting, or (v)
holders of shares that are entitled to call a special meeting of the
shareholders by virtue of any Preferred Stock Designation for the purposes
provided in the terms of such Preferred Stock Designation; (c) written notice
of every meeting of the shareholders stating the time, place, and purposes for
which the meeting is called must be given by or at the direction of the
President, a Vice President, the Secretary, or an Assistant Secretary to each
shareholder of record; and (d) the Board of Directors may postpone, for up to
thirty days, any previously scheduled annual or special meeting of
shareholders. The Amended Regulations also require that shareholders desiring
to bring any business before any annual meeting of shareholders deliver written
notice thereof to the Secretary of Elder-Beerman not less than 60, nor more
than 90 calendar days, prior to the meeting of shareholders; provided, however,
that if the date of the annual meeting is not publicly announced by
Elder-Beerman more than 105 calendar days prior to the meeting, notice by the
shareholder to be timely must be delivered to the Secretary of Elder-Beerman
not later than the close of business on the tenth day following the day on
which such announcement of the date of the annual meeting was so communicated.
The Amended Regulations will further require that the notice by the shareholder
set forth a description in reasonable detail of the business to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting and certain information concerning the shareholder proposing
such business and the beneficial owner, if any, on whose behalf the proposal is
made, including their names and addresses, the class and number of shares of
Elder-Beerman that are owned beneficially and of record by each of them, and
any material interest of either of them in the business proposed to be brought
before the annual meeting. Upon the written request of the holders of not
less than 50% of Elder-Beerman's voting stock to the Chairman, the President,
or the Secretary, such officer is required to call a annual meeting of
shareholders for the purposes specified in such written request and fix a
record date for the determination of shareholders entitled to notice of and
vote at such annual meeting (which record date may not be later than 60 days
after the date of receipt of notice of such meeting).
Under applicable provisions of Ohio law, shareholder approval is required
to adopt amendments to a company's articles of incorporation, except that a
company's board of directors may adopt certain amendments relating to unissued
or treasury shares, changes in the number of authorized shares necessitated by
a conversion, option program, redemption, or provisions that were, at one time,
necessary for a merger or consolidation. Under Ohio law, an Ohio corporation's
code of regulations may be amended only by action of its shareholders. The
Amended Articles and Amended Regulations will provide that the provisions
relating to the time and place of shareholder meetings, who may call a special
meeting of shareholders, the order of business at shareholder meetings, the
number, nomination, classification election, and term of directors on the Board
of Directors, allowing directors to fill vacancies on the Board of Directors,
the removal of directors by shareholders, the elimination of cumulative voting
in the election of directors, allowing the corporation to reacquire capital
stock of the corporation, and forbidding preemptive rights with respect to
unissued shares and treasury stock may not be amended, altered, superseded, or
repealed in any respect without the affirmative vote of the holders of at least
72% of the voting stock of Elder-Beerman, voting together as a single class;
provided, however, that these provisions shall not alter the voting entitlement
of shares that, by virtue of any Preferred Stock Designation, are expressly
entitled to vote on any amendment to the Amended Articles or Amended
Regulations.
In addition to the matters discussed above, the OGCL contains certain
provisions that may have the effect of delaying, deterring, or preventing a
change in control of Elder-Beerman. All information set forth below regarding
the OGCL is necessarily general in nature and reference should be made to the
OGCL for more specific, detailed information.
Section 1701.831 of the OGCL (the "Control Share Act") regarding
shareholder review of control share acquisitions applies to Elder-Beerman.
Under the Control Share Act, any "control share acquisition" of an Ohio
corporation having fifty or more shareholders (an "Ohio Public Company") shall
be made only with the prior authorization of the shareholders of the Ohio
Public Company in accordance with the provisions of the Control Share Act. A
"control share acquisition" is defined as the acquisition, directly or
indirectly, by any person of shares of an Ohio Public Company that, when added
to all other shares of the corporation in respect of which such person may
exercise or direct the exercise of voting power, would entitle such person,
immediately after such acquisition, directly or indirectly, alone or with
others, to exercise or direct the exercise of the voting power of the
corporation in the election of directors within any of the following
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ranges of voting power: (a) one fifth or more, but less than one third; (b)
one third or more, but less than a majority; or (c) a majority or more.
The Control Share Act requires that the acquiring person deliver an
"acquiring person's statement" to the Ohio Public Company. The Ohio Public
Company must then hold a special meeting of its shareholders to vote upon the
proposed acquisition within 50 days after receipt of such acquiring person's
statement, unless the acquiring person agrees to a later date. The Control
Share Act further specifies that the shareholders of the Ohio Public Company
must approve the proposed control share acquisition by certain percentages at a
special meeting of shareholders at which a quorum is present. In order to
comply with the Control Share Act, the acquiring person may only acquire the
stock of the Ohio Public Company upon the affirmative vote of: (a) a majority
of the voting power of the Ohio Public Company that is represented in person or
by proxy at the special meeting and (b) a majority of the voting power of the
Ohio Public Company that is represented in person or by proxy at the special
meeting, excluding those shares of the corporation deemed to be "interested
shares." "Interested shares" are defined to mean shares in respect of which
the voting power is controlled by any of the following persons: (i) an
acquiring person; (ii) any officer of the Ohio Public Company; and (iii) any
employee who is also a director of the Ohio Public Company. "Interested
shares" also includes shares of the Ohio Public Company that are acquired,
directly or indirectly, by any person after the date of the first public
disclosure of the proposed acquisition and prior to the date of the special
meeting, if either (A) the aggregate consideration paid by such person, and any
person acting in concert with him, for such shares of the Ohio Public Company
exceeds $250,000 or (B) the number of shares acquired by such person, and any
person acting in concert with him, exceeds one-half of one percent of the
outstanding shares of the Ohio Public Company.
Elder-Beerman is also subject to Chapter 1704 of the OGCL, which generally
prohibits a wide range of business combinations and other transactions
(including mergers, consolidations, asset sales, loans, disproportionate
distributions of property, and disproportionate issuances or transfers of
shares or rights to acquire shares) between an Ohio Public Company and a person
that owns, alone or with other related parties, shares representing at least
10% of the voting power of the Ohio Public Company (an "Interested
Shareholder"). Such prohibitions continue for a period of three years after
such person becomes an Interested Shareholder, unless, prior to the date that
the Interested Shareholder became such, the board of directors approve either
the transaction or the acquisition of the Ohio Public Company's shares that
resulted in the person becoming an Interested Shareholder. Following the
three-year moratorium period, the Ohio Public Company may engage in covered
transactions with an Interested Shareholder only if, among other things, (a)
the transaction receives the approval of the holders of two-thirds of all the
voting shares or the approval of the holders of a majority of the voting shares
held by persons other than an Interested Shareholder or (b) the remaining
shareholders receive an amount for their shares equal to the higher of the
highest amount paid in the past by the Interested Shareholder for the Ohio
Public Company's shares or the amount that would be due the shareholders if the
Ohio Public Company were to dissolve.
Under Ohio's Control Bid Statute, no person may make a control bid for the
Common Stock of Elder-Beerman pursuant to a tender offer or a request or
invitation for tenders until such person has filed with the Ohio Division of
Securities (the "Division") and Elder-Beerman a control bid information
statement. A "control bid" is defined by Section 1707.01 of the OGCL as the
purchase or offer to purchase any equity security of an issuer located in Ohio,
which has more than 10% of its record equity security holders who are residents
of Ohio, from a resident of Ohio where, after such purchase, the offeror would
own, directly or indirectly, more than 10% of any class of the issued and
outstanding equity securities of such issuer. Within three calendar days of
the filing of the control bid information statement, the Division may summarily
suspend the continuation of the control bid if the Division determines that the
information given in the information statement does not provide full disclosure
to offerees of all material information relating to the control bid. A hearing
will be scheduled within 10 days of any such suspension. In addition, no
offeror may make a control bid that is not made to all holders residing in
Ohio, or that is not made to such holders on the same terms as the control bid
made to holders residing outside of the state of Ohio. Further, no offeror may
acquire from any resident of Ohio any equity security within two years
following the last acquisition of any security of the same class pursuant to a
control bid by such offeror unless the resident is afforded, at the time of the
later acquisition, a reasonable opportunity to dispose of the security to the
offeror upon substantially the same terms of those provided in the earlier
control bid.
For the purpose of preventing manipulative practices by a person who makes
a proposal, or publicly discloses the intention or possibility of making a
proposal, to acquire control of Elder-Beerman, Section 1707.043 of the OGCL
states that any profit realized, directly or indirectly, from the disposition
of any equity securities of Elder-Beerman by a person who, within 18 months
before the disposition, directly or indirectly, alone or in concert with
others, made a proposal, or publicly
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disclosed the intention or possibility of making a proposal, to acquire control
of Elder-Beerman, inures to Elder-Beerman and is recoverable by Elder-Beerman
by an action brought within two years after the date of the disposition of such
securities.
Finally, the OGCL provides for the right of Elder-Beerman's Board of
Directors to consider the interests of various constituencies, including
employees, customers, suppliers, and creditors of Elder-Beerman, as well as the
communities in which Elder-Beerman is located, in addition to the interest of
Elder-Beerman and its shareholders, in discharging its duties in determining
what is in the best interests of Elder-Beerman.
The foregoing provisions of the Amended Articles; the provisions of the
Amended Regulations relating to advance notice of shareholder nominations; and
the provisions of the Share Purchase Rights Agreement described under "-- Share
Purchase Rights Agreement," together with applicable state law, may discourage
or make more difficult the acquisition of control of Elder-Beerman by means of
a tender offer, open market purchase, proxy fight, or otherwise. These
provisions are intended to discourage, or may have the effect of discouraging,
certain types of coercive takeover practices and inadequate takeover bids and
to encourage persons seeking to acquire control of Elder-Beerman first to
negotiate with Elder-Beerman. The management of the Company believes that the
foregoing measures, many of which are substantially similar to the
takeover-related measures in effect for many other publicly-held companies,
provide benefits, by enhancing Elder-Beerman's potential ability to negotiate
with the proponent of an unsolicited proposal to acquire or restructure
Elder-Beerman, which outweigh the disadvantages of discouraging such proposals
because, among other things, negotiation of such proposals could result in an
improvement of their terms. In addition, management of the Company believes
that such takeover-related measures aid in protecting shareholders from
takeover bids that the directors of such companies have determined to be
inadequate. While there necessarily can be no assurance in this regard, the
management of the Company also believes that the foregoing measures are not
likely to have a material impact on market prices for Common Stock and the New
Warrants in circumstances other than those described above in light of, among
other factors, the existence of generally comparable measures in effect for
other publicly-held companies and management's belief that market prices will
be influenced most significantly by Elder-Beerman's actual results of
operations, general market and economic conditions, and other traditional
determinants of stock market prices rather than takeover-related measures and
other corporate governance provisions.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Norwest Banks
Minnesota, N.A.
PREFERRED STOCK
GENERAL
As of the Effective Date of the Plan, Elder-Beerman was authorized to issue
5 million shares of New Preferred Stock, without par value (the "New Preferred
Stock"). The Board of Directors has the authority to issue preferred stock
from time to time in one or more classes or series and to fix the price,
rights, preferences, privileges, and restrictions thereof, including dividend
rights, dividend rates, conversion rights, terms or redemption, redemption
prices, liquidation preferences, and the number of shares constituting a series
or the designation of such series, without any further vote or action by
Elder-Beerman's shareholders. The New Preferred Stock may be issued in
distinctly designated series, may be convertible into Common Stock and may rank
prior to the Common Stock as to dividend rights, liquidation preferences, or
both. Also the express terms of shares of a different series of any particular
class of preferred stock shall be identical except for such variations as may
be permitted by law. Without limiting the foregoing, Elder-Beerman is
authorized to issue three initial classes of New Preferred Stock that will be
designated New Class A Preferred Stock, New Class B Preferred Stock, and New
Class C Preferred Stock, with voting rights as set forth below.
NEW CLASS A PREFERRED STOCK
Each holder of New Class A Preferred Stock is entitled to 100 votes per
share and, except as otherwise required by law, shall vote together with the
Common Stock as a single class on all matters properly submitted to a vote at a
meeting of the shareholders.
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NEW CLASS B PREFERRED STOCK
Each holder of New Class B Preferred Stock is entitled to one vote per
share and, except as otherwise required by law, shall vote together with the
Common Stock as a single class on all matters properly submitted to a vote at a
meeting of shareholders.
NEW CLASS C PREFERRED STOCK
Holders of New Class C Preferred Stock have no voting rights.
NEW WARRANTS
The New Warrants were issued in two series (the "New Warrants"). The New
Series A Warrants and New Series B Warrants were issued under the New Form
Warrant Agreement to be dated as of the Effective Date between Elder-Beerman
and the holders of the New Warrants. Each New Warrant, when exercised, will
entitle the holder thereof to acquire: (a) in the case of the New Series A
Warrants, approximately 250,000 shares of Common Stock at an exercise price of
$12.80 per share (representing 2% of the outstanding Common Stock at a total
equity value of $160 million) or (b) in the case of the New Series B Warrants,
approximately 375,000 shares of Common Stock at an exercise price of $14.80 per
share (representing 3% of the outstanding Common Stock at a total equity value
of $185 million). The New Warrants will expire on the fifth anniversary of the
Effective Date.
FUTURE ISSUANCES OF STOCK
In addition to the Common Stock to be issued pursuant to the Plan,
Elder-Beerman is authorized to issue additional shares of capital stock from
time to time following the Effective Date to the extent permitted under the
Amended Articles, the Amended Regulations, the Plan, and applicable law.
SHARE PURCHASE RIGHTS AGREEMENT
As of the Effective Date, Elder-Beerman will enter into a Rights Agreement
(the "Rights Agreement") with a "Rights Agent," which agreement is expected to
be approved by the Bankruptcy Court upon confirmation of the Plan. Under the
Rights Agreement, the Board of Directors will declare a dividend on the Common
Stock of one right (a "Right") to purchase one one-hundredth of a share of
Series A Preferred Stock, without par value (the "Preferred Shares"), of
Elder-Beerman at a price per one one-hundredth of a Preferred Share, subject to
adjustment (the "Purchase Price"), which will be approved by the Bankruptcy
Court. Under the Rights Agreement, the Rights will be evidenced by the Common
Stock share certificates until the earlier (the "Distribution Date") of: (a)
the close of business on the first date (the "Share Acquisition Date") of
public announcement that a person (other than a person that has maintained
beneficial ownership of at least 20% of the outstanding shares of Common Stock
since the Effective Date, Elder-Beerman, a subsidiary or employee benefit or
stock ownership plan of Elder-Beerman or any of its affiliates or associates),
together with its affiliates and associates, has acquired beneficial ownership
of 20% or more of the outstanding shares of Common Stock (any such person or
group being hereinafter called an "Acquiring Person") or (b) the close of
business on the tenth business day (or such later date as may be specified by
the Board of Directors) following the commencement of a tender offer or
exchange offer by any person (other than Elder-Beerman, a subsidiary or
employee benefit or stock ownership plan of Elder-Beerman, or any of its
affiliates or associates), the consummation of which would result in beneficial
ownership by such person of 20% or more of the outstanding shares of Common
Stock.
Rights will be exercisable to purchase Preferred Shares only after the
Distribution Date occurs and prior to the occurrence of a Flip-in Event, as
described below. A Distribution Date resulting from the commencement of a
tender offer or exchange offer described in clause (b) above could precede the
occurrence of a Flip-in Event and thus result in the Rights being exercisable
to purchase Preferred Shares. A Distribution Date resulting from any
occurrence described in clause (a) above would necessarily follow the
occurrence of a Flip-in Event and thus result in the Rights being exercisable
to purchase Common Stock or other securities as described below.
Under the Rights Agreement, in the event (a "Flip-in Event") that (a) any
person or group, together with its affiliates and associates, becomes an
Acquiring Person, (b) any Acquiring Person or any affiliate or associate
thereof merges into or combines with Elder-Beerman and Elder-Beerman is the
surviving corporation, (c) any Acquiring Person or any affiliate
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or associate thereof effects certain other transactions with Elder-Beerman, or
(d) during such time as there is an Acquiring Person, Elder-Beerman effects
certain transactions, in each case as described in the Rights Agreement, then,
in each such case, proper provision will be made so that from and after the
later of the Distribution Date and the date of the occurrence of such Flip-in
Event each holder of a Right, other than Rights that are or were owned
beneficially by an Acquiring Person (which, from and after the date of a
Flip-in Event, will be void), will have the right to receive, upon exercise
thereof at the then-current exercise price of the Right, that number of shares
of Common Stock (or, under certain circumstances, an economically equivalent
security or securities of the Elder-Beerman) that at the time of such Flip-in
Event have a market value of two times the exercise price of the Right.
In the event (a "Flip-over Event") that, at any time after a person has
become an Acquiring Person, (a) Elder-Beerman merges with or into any person
and Elder-Beerman is not the surviving corporation, (b) any person merges with
or into Elder-Beerman and Elder-Beerman is the surviving corporation, but all
or part of the Common Stock is changed or exchanged for stock or other
securities of any other person or cash or any other property, or (c) 50% or
more of Elder-Beerman's assets or earning power, including securities creating
obligations of Elder-Beerman, are sold, in each case as described in the Rights
Agreement, then, and in each such case, proper provision will be made so that
each holder of a Right, other than Rights which have become void, will
thereafter have the right to receive, upon the exercise thereof at the
then-current exercise price of the Right, that number of shares of common stock
(or, under certain circumstances, an economically equivalent security or
securities) of such other person that at the time of such Flip-over Event have
a market value of two times the exercise price of the Right.
From and after the later of the Share Acquisition Date and the Distribution
Date, Rights (other than any Rights that have become void) will be exercisable
to purchase shares of Common Stock as described above, upon payment of the
aggregate exercise price in cash. In addition, at any time after the later of
the Share Acquisition Date and the Distribution Date and prior to the
acquisition by any person or group of affiliated or associated persons of 50%
or more of the outstanding shares of Common Stock, Elder-Beerman may exchange
the Rights (other than any rights that have become void), in whole or in part,
at an exchange ratio of one share of Common Stock per Right (subject to
adjustment).
For all purposes of the Rights Agreement, any person that, as of the
Effective Date, has beneficial ownership of 20% or more of the then-outstanding
shares of Common Stock, or that becomes the beneficial owner of 20% or more of
the then-outstanding shares of Common Stock solely as a result of a reduction
in the number of shares of Common Stock outstanding, will not be deemed to have
become an Acquiring Person unless and until such time as (a) such person, or
any affiliate or associate of such person, thereafter becomes the beneficial
owner of additional shares of Common Stock representing 1% or more of the
then-outstanding Common Stock or (b) any other person that is the beneficial
owner of shares of Common Stock representing 1% or more of the then-outstanding
Common Stock thereafter becomes an affiliate or associate of such person.
Elder-Beerman will be able, at its option, to redeem the Rights in whole,
but not in part, at a price of $.01 per Right, subject to adjustment (the
"Redemption Price"), at any time prior to the close of business on the date of
the first occurrence of a Flip-in Event or Flip-over Event. Immediately upon
any redemption of the Rights, the right to exercise the Rights will terminate
and the only right of the holders of Rights will be to receive the Redemption
Price.
The Company will be able to amend the Rights Agreement without the approval
of any holders of Right certificates, including amendments that increase or
decrease the Purchase Price, that add other events requiring adjustment to the
Purchase Price payable and the number of the Preferred Shares or other
securities issuable upon the exercise of the Rights or that modify procedures
relating to the redemption of the Rights, except that no amendment may be made
that decreases the stated Redemption Price to an amount less than $.01 per
Right. The Rights Agreement will expire on (a) the first anniversary of the
Effective Date or (b) such later date as the Board of Directors, by resolution
adopted prior to the first anniversary of the Effective Date, may establish,
but not later than the tenth anniversary of the Effective Date. In accordance
with the foregoing, the Board of Directors (a) will have the right to
reconsider any of the terms of the Rights Agreement at any time and (b) may
take such action with respect to the Rights Agreement as the Board of Directors
deems appropriate.
29
<PAGE> 33
INDEMNIFICATION OF DIRECTORS AND OFFICERS
EXISTING INDEMNIFICATION OBLIGATIONS
The Company's Amended Regulations will provide for the indemnification of
the directors and officers of the Company, and persons serving at the request
of the Company's Board of Directors as a director, trustee, officer, employee,
or agent of another entity, for claims against them arising from and after the
Effective Date to the fullest extent permitted by Ohio law. Under Ohio law, a
director is not liable for monetary damages unless it is proven by clear and
convincing evidence that his action or failure to act was undertaken with
deliberate intent to cause injury to the corporation or with reckless disregard
for the best interests of the corporation. There is, however, no comparable
provision limiting the liability of officers or other agents of a corporation.
Under Ohio law, Ohio corporations are authorized to indemnify directors,
officers, and agents within prescribed limits and must indemnify them under
certain circumstances. Determinations regarding discretionary indemnification
are to be made by a majority vote of a quorum of disinterested directors or, if
a quorum is not available, by independent counsel, the shareholders, the court
of common pleas, or the court in which the proceeding was brought. Ohio law
does not provide statutory authorization for a corporation to indemnify
directors and officers for settlements, fines, or judgments in the context of
derivative suits. However, it provides that directors (but not officers) are
entitled to mandatory advancement of expenses, including attorneys' fees,
incurred in defending any action, including derivative actions, brought against
the director, provided the director agrees to cooperate with the corporation
concerning the matter and to repay the amount advanced if it is proved by clear
and convincing evidence that his act or failure to act was done with deliberate
intent to cause injury to the corporation or with reckless disregard for the
corporation's best interests.
Ohio law does not authorize payment of expenses or judgments to an officer
or other agent after a finding of negligence or misconduct in a derivative suit
absent a court order. Indemnification is required, however, to the extent such
person succeeds on the merits. In all other cases, if a director or officer
acted in good faith and in a manner he reasonably believed to be in (or not
opposed to) the best interests of the company, indemnification is discretionary
except as otherwise provided by a company's articles of incorporation, code of
regulations, or by contract except with respect to the advancement of expenses
of directors.
In addition to the statutory right to indemnify, Ohio law provides express
authority for Ohio corporations to procure not only insurance policies, but
also to furnish protection similar to insurance, including trust funds, letters
of credit, and self-insurance, or to provide similar protection such as
indemnity against loss of insurance.
TREATMENT OF INDEMNIFICATION OBLIGATIONS UNDER THE PLAN
The obligations of the Company to indemnify any person serving as one of
its directors, officers, or employees as of or following the Petition Date, by
reason of such person's prior or future service in such a capacity, or as a
director, officer, or employee of another corporation, partnership, or other
legal entity, to the extent provided in the applicable articles of
incorporation, code of regulations, or similar constituent documents or by
statutory law or written agreement of or with the Company, were deemed and
treated as executory contracts and were assumed by the Company or applicable
subsidiary of the Company pursuant to the plan and section 365 of the
Bankruptcy Code as of the Effective Date. Accordingly, such indemnification
obligations will survive and are unaffected by entry of the confirmation order,
irrespective of whether such indemnification is owed for an act or event
occurring before or after the Petition Date. The obligations of the Company or
applicable subsidiary of the Company to indemnify any person who, as of the
Petition Date, was no longer serving as a director or officer of such entity,
which indemnity obligation arose by reason of such person's prior service in
any such capacity, or as a director, officer, or employee of another
corporation, partnership, or other legal entity, whether provided in the
applicable articles of incorporation, code of regulations, or similar
constituent documents or by statutory law (including Texas law with respect to
Margo's and Ohio law with respect to the other Old Elder-Beerman Companies),
written agreement, policies, or procedures of or with such entity, will
terminate and be discharged pursuant to section 502(e) of the Bankruptcy Code
or otherwise, as of the Effective Date; provided, however, that, to the extent
that such indemnification obligations no longer give rise to contingent Claims
that can be disallowed pursuant to section 502(e) of the Bankruptcy Code, such
indemnification obligations were deemed and treated as executory contracts that
were rejected by the applicable entity pursuant to the Plan and section 365 of
the Bankruptcy Code, as of the Effective Date, and any Claims arising from such
indemnification obligations (including any rejection damage claims) were
subject to the bar date provisions of the Plan.
30
<PAGE> 34
NEW INDEMNIFICATION AGREEMENTS
The Company will enter into indemnification agreements, effective as of the
Effective Date, with each of its directors and officers and each of the
directors and officers of the Company's subsidiaries. The indemnification
agreements provide for, among other things, (a) the indemnification of the
indemnitee by the Company for conduct in the capacities described above, (b)
the advancement of attorneys' fees and other expenses, and (c) the
establishment, upon approval by the Board of Directors at its option, of trusts
or other funding mechanisms to fund the Company's indemnification obligations
thereunder.
FINANCIAL STATEMENTS
The Company's audited consolidated financial statements for the years ended
February 1, 1997, February 3, 1996, and January 28, 1995, respectively, and the
Company's unaudited condensed consolidated financial statements for the 39-week
periods ended November 1, 1997 and November 2, 1996, respectively, are set
forth at the end of this Registration Statement and begin on page F-1.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the Company's
independent public accountants during the last two fiscal years.
31
<PAGE> 35
FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS
The following financial statements of the Company are included at the
indicated page in this Registration Statement:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Consolidated Balance Sheets (unaudited) as of November 1, 1997 and November 2, 1996 . . . . . . . . . . . . F-2
Condensed Consolidated Statements of Operations (unaudited) for the 39-weeks ended November 1, 1997 and
November 2, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Condensed Consolidated Statements of Cash Flows (unaudited) for the 39-weeks ended November 1, 1997 and
November 2, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Notes to Condensed Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9
Consolidated Balance Sheets as of February 1, 1997 and February 3, 1996 . . . . . . . . . . . . . . . . . . . . . . F-10
Consolidated Statements of Operations for the fiscal years ended February 1, 1997, February 3, 1996 and
January 28, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12
Consolidated Statements of Shareholders' Equity for the fiscal years ended February 1, 1997, February 3, 1996
and January 28, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
Consolidated Statements of Cash Flows for the fiscal years Ended February 1, 1997, February 3, 1996 and
January 28, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-15
</TABLE>
32
<PAGE> 36
EXHIBITS
A. Exhibit Index
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
2 Third Amended Joint Plan of Reorganization of The Elder-Beerman
Stores Corp. and its Subsidiaries dated November 17, 1997**
3(a) Form of Amended Articles of Incorporation**
3(b) Form of Amended Code of Regulations**
4(a) Form of Stock Certificate for Common Stock
4(b) Form of Registration Rights Agreement**
4(c) Form of Rights Agreement**
4(d) Form of Warrant Agreement**
10(a) Form of New Receivables Securitization Facility
10(b) Form of New Revolving Credit Facility
10(c) Form of Employment Agreement for Senior Vice Presidents**
10(d) Form of Employment Agreement for Executive Vice Presidents**
10(e) Form of Severance Pay Plan for Key Employees of the Company**
10(f) Form of Director Indemnification Agreement**
10(g) Form of Officer Indemnification Agreement**
10(h) Form of Director and Officer Indemnification Agreement**
10(i) Form of The Elder-Beerman Stores Corp. Equity and Performance
Incentive Plan**
10(j) Form of Restricted Stock Agreement for Non-Employee Director**
10(k) Form of Restricted Stock Agreement**
10(l) Form of Deferred Shares Agreement**
10(m) Form of Nonqualified Stock Option Agreement for Non-Employee
Director**
10(n) Form of Nonqualified Stock Option Agreement**
10(o) Form of Employee Stock Purchase Plan**
10(p) Form of Comprehensive Settlement Agreement**
10(q) Form of Tax Indemnification Agreement**
10(r) Form of Tax Sharing Agreement**
21 Subsidiaries of the Company**
27 Financial Data Schedule**
</TABLE>
----------
* Previously filed
** Filed herewith
33
<PAGE> 37
B. Financial Statement Schedules
None.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Company has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE ELDER-BEERMAN STORES CORP.
Date: November 26, 1997 By: /s/ STEVEN D. LIPTON
---------------------------------------
Steven D. Lipton, Senior Vice President
of Planning and Control
34
<PAGE> 38
INDEX TO HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Condensed Consolidated Balance Sheets (unaudited) as of November 1, 1997 and November 2, 1996 . . . . . . . . . . . F-2
Condensed Consolidated Statements of Operations (unaudited) for the 39-weeks ended November 1, 1997 and
November 2, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Condensed Consolidated Statements of Cash Flows (unaudited) for the 39-weeks ended November 1, 1997 and
November 2, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Notes to Condensed Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9
Consolidated Balance Sheets as of February 1, 1997 and February 3, 1996 . . . . . . . . . . . . . . . . . . . . . . F-10
Consolidated Statements of Operations for the fiscal years ended February 1, 1997, February 3, 1996 and
January 28, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12
Consolidated Statements of Shareholders' Equity for the fiscal years ended February 1, 1997, February 3,
1996 and January 28, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
Consolidated Statements of Cash Flows for the fiscal years Ended February 1, 1997, February 3, 1996 and
January 28, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-15
</TABLE>
F-1
<PAGE> 39
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
(Debtors in Possession)
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nov. 1, Nov. 2,
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 8,882 $ 7,483
Customer accounts receivable 134,306 140,637
Merchandise inventories 188,604 180,217
Refundable income taxes 10,359
Other current assets 25,302 11,302
--------- ---------
Total current assets 357,094 349,998
Property, net 57,639 51,541
Other assets 7,265 11,759
--------- ---------
64,904 63,300
--------- ---------
Total assets $ 421,998 $ 413,298
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIENCY IN ASSETS)
Current liabilities:
Current portion of long-term obligations $ 89,410 $ 87,982
Accounts payable 59,398 44,989
Accrued liabilities 26,562 30,048
Liabilities of discontinued operations 9,917 10,053
--------- ---------
Total current liabilities 185,287 173,072
Long-term obligations 5,744 5,689
Deferred Lease Incentives 4,632 4,741
Liabilities subject to compromise 232,454 224,205
Commitments and contingencies
Shareholders' equity (deficiency in assets):
Series B convertible preferred stock 7 7
Common stock 6,511 6,511
Additional paid-in capital 23,283 23,283
Deficit (35,920) (24,210)
--------- ---------
(6,119) 5,591
--------- ---------
Total liabilities and
shareholders' equity (deficiency
in assets) $ 421,998 $ 413,298
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
F-2
<PAGE> 40
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
(Debtors in Possession)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Thirty-nine Weeks Ended
--------------------------
Nov. 1, Nov. 2,
1997 1996
--------- ---------
<S> <C> <C>
Revenues:
Net sales $ 386,179 $ 378,682
Financing 19,801 20,003
--------- ---------
Total revenues 405,980 398,685
Costs and expenses:
Costs of merchandise sold, occupancy
and buying expenses 283,127 273,397
Selling, general and administrative 113,456 117,999
Provision for doubtful accounts 4,187 4,147
Interest expense 4,617 3,777
--------- ---------
Total costs and expenses 405,387 399,320
Income before reorganization items
and income taxes 593 (635)
Reorganization items 12,850 12,339
--------- ---------
Loss before income taxes (12,257) (12,974)
Income taxes
--------- ---------
Net (loss) $ (12,257) $ (12,974)
========= =========
Net (Loss) per common share $ (1.88) $ (1.99)
========= =========
Average common shares outstanding (thousands) 6,511 6,511
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
F-3
<PAGE> 41
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
(Debtors in Possession)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Thirty-nine Weeks Ended
------------------------
Nov. 1, Nov. 2,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net(loss) $(12,257) $(12,974)
Adjustments to reconcile net loss to net
cash used in operating activities:
Provision for doubtful accounts 4,187 4,147
Provision for depreciation & amortization 8,961 9,629
Net loss on disposal of assets 481 1,675
Changes in noncash assets and liabilities:
Accounts receivable 9,321 (408)
Merchandise inventories (61,754) (60,893)
Other current assets (3,649) (916)
Income tax refunds 128
Other long-term assets 768 79
Discontinued operations (196) (2,290)
Accounts payable 41,301 18,914
Accrued liabilities (3,996) 804
-------- --------
Net cash used in operating activities (16,705) (42,233)
-------- --------
Cash flows from investing activities:
Capital expenditures (12,498) (3,070)
Proceeds from sale of fixed assets 1,200
Proceeds from disposal of investments 300
-------- --------
Net cash used in investing activities (12,498) (1,570)
-------- --------
Cash flows from financing activities:
Net borrowings under DIP Facility 31,479 37,830
Payments on long-term obligations (160) (155)
Debt acquisition costs (325) (1,052)
-------- --------
Net cash provided by financing activities 30,994 36,623
-------- --------
Increase (decrease) in cash and equivalents 1,791 (7,180)
Cash and equivalents at beginning of year 7,091 14,663
-------- --------
Cash and equivalents at end of thirty-nine weeks $ 8,882 $ 7,483
======== ========
Supplemental Cash Flow Information:
Interest paid $ 5,244 $ 4,957
Income taxes paid 150
Supplemental Non-Cash Investing
and Financing Activities:
Property acquired from lease incentives $ $ 339
</TABLE>
See notes to condensed consolidated financial statements.
F-4
<PAGE> 42
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
(Debtors in Possession)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except share data)
A - FINANCIAL STATEMENTS
The interim financial statements are unaudited. In the opinion of management,
all adjustments (which consist only of normal recurring adjustments) necessary
to present fairly the financial position and results of operations for the
interim periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted or condensed. It is suggested that the condensed consolidated
financial statements be read in conjunction with the financial statements and
notes thereto for the year ended February 1, 1997. The results of operations for
the period ended November 1, 1997, may not necessarily be indicative of the
operating results for the full year.
B - CHAPTER 11 PROCEEDINGS
On October 17, 1995 ("the Filing Date"), The Elder-Beerman Stores Corp.
("Elder-Beerman") and each of its wholly-owned subsidiaries; The El-Bee Chargit
Corp., The Bee-Gee Shoe Corp., Margo's La Mode, Inc., McCook Wholesale Corp.,
E-B Community Urban Redevelopment Corporation and EBA, Inc., (collectively the
"Corporation"), filed petitions for relief under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") with the United States Bankruptcy Court
(the "Bankruptcy Court") For the Southern District of Ohio, Western Division.
Pursuant to an order of the Bankruptcy Court, the individual Chapter 11 cases
were consolidated for procedural purposes only and are being jointly
administered by the Bankruptcy Court. The Corporation is currently operating as
debtor in possession, subject to the approval of the Bankruptcy Court for
certain of its proposed actions. Additionally, certain creditors of the
Corporation have formed two official committees pursuant to the Bankruptcy Code.
Such committees (as well as other parties in interest) have the right to review
and object to transactions outside of the ordinary course of the Corporation's
business and are expected to participate in the approval of the plan of
reorganization.
Under Chapter 11, actions in respect of certain claims against the Corporation
in existence prior to the filing of the petitions for relief under the
Bankruptcy Code are stayed while the Corporation continues business operations
as debtors in possession. In addition, under the Bankruptcy Code, the
Corporation may reject executory contracts, including lease obligations. Parties
affected by these rejections may file claims with the Bankruptcy Court in
accordance with the reorganization process. Substantially all liabilities as of
the petition date are subject to settlement under the plan of reorganization to
be voted upon by the creditors and approved by the Bankruptcy Court. The
Corporation expects to file the plan in fiscal 1997.
The Corporation is in default under the terms of substantially all prepetition
loan and note agreements and certain equipment and store leases. The amounts
outstanding in respect to these agreements are subject to settlement under the
reorganization proceedings. Generally, as a result of the bankruptcy, the
contractual terms of prepetition debt obligations are suspended. The Corporation
did not accrue or pay interest on debt subsequent to the Filing Date, except as
permitted. The financial statements do not include accrued interest on
prepetition unsecured debt of $27,605 and $14,110 at November 1, 1997 and
November 2, 1996, respectively. In the accompanying consolidated balance sheets,
liabilities subject to settlement under the Chapter 11 proceedings are
classified as liabilities subject to compromise and are comprised of the
following:
F-5
<PAGE> 43
<TABLE>
<CAPTION>
Nov. 1, Nov. 2,
1997 1996
-------- --------
<S> <C> <C>
Accounts payable and accrued liabilities $ 93,884 $ 84,785
Unsecured debt 131,900 131,900
Secured debt 2,455 2,455
Capital lease obligations 2,222 3,072
Accrued interest 1,993 1,993
-------- --------
Total $232,454 $224,205
======== ========
</TABLE>
These amounts represent management's best estimate of all known or potential
claims. Such claims remain subject to future adjustments with respect to
disputed claims depending on negotiations with creditors and actions of the
Bankruptcy Court in the Chapter 11 case. Consequently, the amount included in
the Consolidated Balance Sheet as "Liabilities Subject to Compromise" may be
subject to adjustment.
Certain prepetition liabilities have been paid after obtaining the approval of
the Bankruptcy Court, including certain wages and benefits of employees,
insurance costs, department leases, reclamation claims, and contractors' costs.
Under the provisions of the Bankruptcy Code the Corporation has the right to
reject leases. Lessors may file claims for damages incurred from such
rejections, which would be treated as prepetition liabilities. Claims filed in
respect to leases for real property may not exceed the greater of an amount
equal to (a) one year's rental payments or (b) payments for a period equal to
15% of the remaining term of the lease, but not in excess of three years rent.
The Corporation is actively engaged in the process of reviewing its executory
contracts and final decisions with respect to assuming or rejecting contracts;
approval by the Bankruptcy Court is still pending.
Outstanding prepetition accounts payable have been reported net of prepetition
accounts receivable and deposits from various vendors and their representatives.
Additional prepetition liabilities may arise as a result of claims filed by
parties affected by the Corporation's bankruptcy filing. These claims will be
analyzed and either settled or disputed in the bankruptcy proceedings.
Ultimately the adjustment of the total liabilities of the Corporation remains
subject to Bankruptcy Court approved plan of reorganization, and accordingly,
the total amount of such liabilities is not presently determinable. Pursuant to
an order of the Bankruptcy Court, the Corporation presently has the exclusive
right to file a plan of reorganization through March 16, 1998.
C - GOING CONCERN
The Corporation's consolidated financial statements have been prepared on a
going concern basis, which contemplates continuity of operations, realization of
assets and the liquidation of liabilities and commitments in the normal course
of business. The bankruptcy filings raise substantial doubt about its ability to
continue as a going concern. The appropriateness of using the going concern
basis is dependent upon, among other things, confirmation of a plan of
reorganization, future profitable operations, and the ability to generate
sufficient cash from operations and financing sources to meet obligations. In
this regard, management developed and is executing a plan which includes
improving gross margins and reducing costs and possibly closing certain retail
store locations. While under protection of Chapter 11, the Corporation may sell
or otherwise dispose of assets, liquidate or settle liabilities, for amounts
other than those reflected in the accompanying consolidated financial
statements. Further, a plan of reorganization could materially change the
amounts reported in the accompanying consolidated financial statements. The
accompanying
F-6
<PAGE> 44
consolidated financial statements do not include any adjustments relating to the
recoverability of the value of recorded asset amounts or the amounts and
classification of liabilities that might be necessary as a result of the plan of
reorganization.
D - ACCOUNTING POLICIES
On an interim basis, all costs subject to recurring year-end adjustments have
been estimated and allocated ratably to the quarters. No income taxes have been
provided as a valuation allowance has been established for the entire amount of
deferred tax assets resulting from the Company's net losses.
E - REORGANIZATION ITEMS
Reorganization costs consist of the following:
Thirty-nine Weeks Ended
-----------------------
Nov. 1, Nov. 2,
1997 1996
-------- --------
Professional fees $ 8,713 $ 6,684
Restructuring 3,683 3,546
Financing costs 454 2,109
------- -------
Total $12,850 $12,339
======= =======
Subsequent to the Chapter 11 filings, the Corporation began restructuring its
business and decided, amount other things, to close stores and and terminate
employees. Severance payments and other store closing costs are in restructuring
costs. Financing costs include the amortization of fees associated with the DIP
Facility.
F - LONG-TERM OBLIGATIONS
In connection with the Chapter 11 filing, on October 17, 1995, Elder-Beerman and
Chargit entered into a Postpetition Loan and Security Agreement (the DIP
Facility) with Citibank N.A. Substantially all assets are pledged as collateral
for the DIP Facility.
In October 1995, the Bankruptcy Court signed an order approving the DIP
Facility, which had a maturity of January 31, 1997. On September 30, 1996, the
DIP Facility was extended to October 31, 1997. Further extension was approved on
August 31, 1997 through January 31, 1998.
F-7
<PAGE> 45
G - DISCONTINUED OPERATIONS
In fiscal 1994, the Corporation adopted formal plans to dispose of its
subsidiaries Margo's La Mode, Inc. ("Margo's") and The Bee-Gee Shoe Corp. ("Bee
Gee"). During fiscal 1995, the Corporation was unsuccessful in its attempt to
sell Margo's and decided to liquidate the subsidiary.
In fiscal, 1996, management determined the value of Bee Gee would be more
effectively realized by retaining Bee Gee as a part of the Corporation's ongoing
operations. Accordingly, the consolidated balance sheets, statements of
operations and cash flows reflect Bee Gee as a part of continuing operations.
H - COMMITMENTS AND CONTINGENCIES
Litigation - The Corporation is a party to various legal actions and
administrative proceedings and subject to various claims arising in the ordinary
course of business. Management believes the outcome of any of the litigation
matters that will have a material effect on the Corporation's results of
operations, cash flows or financial position have been appropriately accrued.
As discussed in Note A, on October 17, 1995, the Corporation and its
subsidiaries filed voluntary petitions in the Bankruptcy Court under Chapter 11
of the Bankruptcy Code. All material civil litigation commenced against the
Corporation and those referenced subsidiaries prior to that date has been stayed
under the Bankruptcy Code.
Other Claims - The Elder-Beerman Stores Corp. Profit-Sharing and Stock Ownership
Plan Committee has made claims relevant to Fiscal Year 1998, 1997 and 1996 for
corporate contributions and payment of certain expenses. The Corporation
believes that such contributions are discretionary and the expenses are not
liabilities of the Corporation.
Letter of Credit - At November 1, 1997, the Corporation had outstanding
commercial and standby letters of credit totaling $9,077 under the DIP Facility
and with other banks, relating to trade financing and insurance activities.
Insurance - The Corporation is self-insured for employee medical and workers'
compensation subject to limitation for which insurance has been purchased.
Management believes that those claims reported and not paid and claims incurred,
but not yet reported, are appropriately accrued.
F-8
<PAGE> 46
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
The Elder-Beerman Stores Corp.:
We have audited the accompanying consolidated balance sheets of The
Elder-Beerman Stores Corp. and subsidiaries (Debtors in Possession) (the
"Corporation") as of February 1, 1997 and February 3, 1996 and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three fiscal years in the period ended February 1, 1997. These
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Corporation as of February 1,
1997 and February 3, 1996 and the results of their operations and their cash
flows for each of the three fiscal years in the period ended February 1, 1997,
in conformity with generally accepted accounting principles.
As discussed in Notes A and B, the Corporation has filed for reorganization
under Chapter 11 of the Federal Bankruptcy Code. The accompanying financial
statements do not purport to reflect or provide for the consequences of the
bankruptcy proceedings. In particular, such financial statements do not purport
to show (a) as to assets, their realizable value on a liquidation basis or their
availability to satisfy liabilities; (b) as to prepetition liabilities, the
amounts that may be allowed for claims or contingencies, or the status and
priority thereof; (c) as to shareholder accounts, the effect of any changes that
may be made in the capitalization of the Corporation; or (d) as to operations,
the effect of any changes that may be made in its business.
The accompanying consolidated financial statements have been prepared assuming
that the Corporation will continue as a going concern. As discussed in Note B,
the bankruptcy filings raise substantial doubt about its ability to continue as
a going concern. The continuation of its business as a going concern is
contingent upon, among other things, future profitable operations, the ability
to generate sufficient cash from operations and financing sources to meet
obligations, and the development and confirmation of a plan of reorganization.
Management's plans concerning these matters are also discussed in Note B. The
consolidated financial statements do not include any adjustments that might
result from the outcome of the uncertainties referred to herein and in the
preceding paragraph.
DELOITTE & TOUCHE LLP
April 18, 1997
Dayton, Ohio
F-9
<PAGE> 47
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
(DEBTORS IN POSSESSION)
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
ASSETS (DOLLARS IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 7,091 $ 14,665
Customer accounts receivable (less allowance for doubtful
accounts: fiscal 1996 - $3,800; fiscal 1995 - $3,200) 147,814 144,376
Merchandise inventories 126,850 119,305
Refundable income taxes 10,336 10,354
Assets of discontinued operations 3 581
Other current assets 10,572 4,922
-------- --------
Total current assets 302,666 294,203
-------- --------
PROPERTY:
Land and improvements 1,177 1,177
Buildings and leasehold improvements 54,361 61,225
Furniture, fixtures and equipment 76,047 72,535
-------- --------
Total cost 131,585 134,937
Less accumulated depreciation and amortization 77,782 74,816
-------- --------
Property, net 53,803 60,121
-------- --------
OTHER ASSETS 8,672 12,745
-------- --------
TOTAL $365,141 $367,069
======== ========
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE> 48
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
--------- ---------
(DOLLARS IN THOUSANDS,
LIABILITIES AND SHAREHOLDERS' EQUITY EXCEPT SHARE DATA)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term obligations $ 57,931 $ 50,100
Accounts payable 18,877 18,177
Accrued liabilities:
Compensation and related items 8,696 5,126
Other taxes 6,421 5,840
Rent 2,009 2,061
Other 12,458 18,417
Liabilities of discontinued operations 10,216 11,100
--------- ---------
Total current liabilities 116,608 110,821
--------- ---------
LONG-TERM OBLIGATIONS - Less current portion 5,669 3,100
DEFERRED LEASE INCENTIVES 5,051 5,172
LIABILITIES SUBJECT TO COMPROMISE 231,675 229,409
COMMITMENTS AND CONTINGENCIES (Note Q)
SHAREHOLDERS' EQUITY:
Series B convertible preferred stock, $.01 par value, 1,250,000 shares
authorized, 662,474 issued and outstanding (aggregate liquidation
preference $12,700) 7 7
Common stock, $1 stated value, 10,000,000 shares
authorized, 6,510,733 shares issued and outstanding 6,511 6,511
Additional paid-in capital 23,283 23,283
Deficit (23,663) (11,234)
--------- ---------
Total shareholders' equity 6,138 18,567
--------- ---------
TOTAL $ 365,141 $ 367,069
========= =========
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE> 49
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
(DEBTORS IN POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
(DOLLARS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C> <C>
REVENUES:
Net sales $ 569,557 $ 590,018 $ 631,100
Financing 27,451 18,913 16,226
--------- --------- ---------
Total revenues 597,008 608,931 647,326
--------- --------- ---------
COSTS AND EXPENSES:
Cost of merchandise sold, occupancy and buying expenses 410,067 457,122 466,785
Selling, general and administrative expenses 156,892 169,919 171,774
Key employees performance bonus plan expense 4,994 -- --
Hiring and recruiting expenses for new executives 1,435 86 --
Provision for doubtful accounts 6,680 5,878 3,459
Interest expense 6,467 9,557 9,898
Other income (1,106) -- --
--------- --------- ---------
Total costs and expenses 585,429 642,562 651,916
--------- --------- ---------
INCOME (LOSS) BEFORE REORGANIZATION ITEMS
AND INCOME TAX EXPENSE (BENEFIT) 11,579 (33,631) (4,590)
REORGANIZATION ITEMS (23,648) (19,711) --
--------- --------- ---------
LOSS BEFORE INCOME TAX EXPENSE (BENEFIT)
AND DISCONTINUED OPERATIONS (12,069) (53,342) (4,590)
INCOME TAX EXPENSE (BENEFIT) 360 (2,332) (2,526)
--------- --------- ---------
LOSS BEFORE DISCONTINUED OPERATIONS (12,429) (51,010) (2,064)
DISCONTINUED OPERATIONS -- (12,276) (11,291)
--------- --------- ---------
NET LOSS $ (12,429) $ (63,286) $ (13,355)
========= ========= =========
EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations $ (1.90) $ (7.83) $ (0.32)
Preferred stock dividend (0.14)
Discontinued operations (1.89) (1.73)
--------- --------- ---------
$ (1.90) $ (9.72) $ (2.19)
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-12
<PAGE> 50
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
(DEBTORS IN POSSESSION)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL
PREFERRED ADDITIONAL RETAINED SHARE-
STOCK COMMON PAID-IN EARNINGS HOLDERS'
SERIES B STOCK CAPITAL (DEFICIT) EQUITY
<S> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY AT
JANUARY 29, 1994 $ 7 $ 6,511 $ 11,358 $ 74,745 $ 92,621
CASH DIVIDENDS:
Common stock ($.22 per share) (1,432) (1,432)
Preferred stock - Class B ($1.39 per share) (921) (921)
PROPERTY DIVIDEND (6,985) (6,985)
CONTRIBUTION TO CAPITAL 11,925 11,925
NET LOSS (13,355) (13,355)
---------- ---------- ---------- ---------- ----------
SHAREHOLDERS' EQUITY AT
JANUARY 28, 1995 7 6,511 23,283 52,052 81,853
NET LOSS (63,286) (63,286)
---------- ---------- ---------- ---------- ----------
SHAREHOLDERS' EQUITY AT
FEBRUARY 3, 1996 7 6,511 23,283 (11,234) 18,567
NET LOSS (12,429) (12,429)
---------- ---------- ---------- ---------- ----------
SHAREHOLDERS' EQUITY AT
FEBRUARY 1, 1997 $ 7 $ 6,511 $ 23,283 $ (23,663) $ 6,138
========== ========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-13
<PAGE> 51
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
(DEBTORS IN POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (12,429) $ (63,286) $ (13,355)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Provision for doubtful accounts 6,680 5,878 3,459
Deferred income taxes -- 5,270 1,861
Provision for depreciation and amortization 13,139 15,768 11,716
Loss on disposal of assets 1,737 6,640 421
Loss on equipment settlements 7,457 -- --
Changes in noncash assets and liabilities:
Customer accounts receivable (10,118) (9,621) (24,409)
Merchandise inventories (7,545) 23,980 10,213
Other current assets (5,331) (2,841) 279
Other long-term assets 916 (1,202) --
Discontinued operations -- 583 8,317
Accounts payable (2,709) 66,850 (2,502)
Accrued liabilities (2,478) 8,063 (4,445)
Deferred lease incentives 365 1,048 (4,099)
----------- ----------- -----------
Net cash provided by (used in) operating activities (10,316) 57,130 (12,544)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of customer accounts receivable, net 15,000
Capital expenditures (4,759) (11,401) (12,753)
Proceeds from surrender of insurance policies 271 3,000 --
Proceeds from sale of property 1,200 -- --
Proceeds from sale of investment 300 -- --
Acquisition of securitized receivables -- (115,000) --
----------- ----------- -----------
Net cash provided by (used in) investing activities (2,988) (123,401) 2,247
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of senior notes 50,000
Net borrowings (payments) on bankers' acceptance and revolving lines of credit -- 29,500 (39,900)
Payments on long-term obligations (991) (1,200) (8,944)
Debt acquisition costs (1,052) (3,875) (741)
Contribution to capital 11,925
Cash dividends paid (2,353)
Net borrowings under DIP Facility 7,773 50,000 --
----------- ----------- -----------
Net cash provided by (used in) financing activities 5,730 74,425 9,987
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS (7,574) 8,154 (310)
-----------
CASH AND EQUIVALENTS - Beginning of year 14,665 6,511 6,821
----------- ----------- -----------
CASH AND EQUIVALENTS - End of year $ 7,091 $ 14,665 $ 6,511
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 6,929 $ 11,053 $ 10,388
Income taxes paid 335 300 5,823
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property acquired from lease incentives $ 366 $ 1,956 $ 584
Property acquired from lease settlements 3,142 -- --
Property dividend -- -- 6,985
</TABLE>
See notes to consolidated financial statements.
F-14
<PAGE> 52
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
(DEBTORS IN POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
A. CHAPTER 11 PROCEEDINGS
On October 17, 1995 ("the Filing Date"), The Elder-Beerman Stores Corp.
("Elder-Beerman") and each of its wholly-owned subsidiaries, The El-Bee
Chargit Corp., The Bee-Gee Shoe Corp., Margo's La Mode, Inc., McCook
Wholesale Corp., E-B Community Urban Redevelopment Corporation and EBA,
Inc., (collectively the "Corporation"), filed petitions for relief under
Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code")
with the United States Bankruptcy Court (the "Bankruptcy Court") for the
Southern District of Ohio, Western Division. Pursuant to an order of the
Bankruptcy Court, the individual Chapter 11 cases were consolidated for
procedural purposes only and are being jointly administered by the
Bankruptcy Court. The Corporation is currently operating as debtor in
possession, subject to the approval of the Bankruptcy Court for certain of
its proposed actions. Additionally, certain creditors of the Corporation
have formed two official committees pursuant to the Bankruptcy Code. Such
committees (as well as other parties in interest) have the right to review
and object to transactions outside of the ordinary course of the
Corporation's business and are expected to participate in the approval of
the plan of reorganization.
Under Chapter 11, actions in respect of certain claims against the
Corporation in existence prior to the filing of the petitions for relief
under the Bankruptcy Code are stayed while the Corporation continues
business operations as debtors in possession. In addition, under the
Bankruptcy Code, the Corporation may reject executory contracts, including
lease obligations. Parties affected by these rejections may file claims
with the Bankruptcy Court in accordance with the reorganization process.
Substantially all liabilities as of the petition date are subject to
settlement under the plan of reorganization to be voted upon by the
creditors and approved by the Bankruptcy Court. The Corporation expects to
file the plan in fiscal 1997.
At February 1, 1997, the Corporation is in default under the terms of
substantially all prepetition loan and note agreements and certain
equipment and store leases. The amounts outstanding in respect to these
agreements are subject to settlement under the reorganization proceedings.
Generally, as a result of the bankruptcy, the contractual terms of
prepetition debt obligations are suspended. The Corporation did not accrue
or pay interest on debt subsequent to the Filing Date, except as
permitted. The financial statements do not include accrued interest on
prepetition unsecured debt of $17,483 and $4,251 at February 1, 1997 and
February 3, 1996, respectively. In the accompanying consolidated balance
sheets, liabilities subject to settlement under the Chapter 11 proceedings
are classified as liabilities subject to compromise and are comprised of
the following:
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
<S> <C> <C>
Accounts payable and accrued liabilities $ 92,209 $ 86,597
Unsecured debt 131,900 131,900
Secured debt 2,455 5,250
Capital lease obligations 2,834 3,657
Accrued interest 2,277 2,005
-------- --------
Total $231,675 $229,409
======== ========
</TABLE>
F-15
<PAGE> 53
These amounts represent management's best estimate of all known or
potential claims. Such claims remain subject to future adjustments with
respect to disputed claims depending on negotiations with creditors and
actions of the Bankruptcy Court in the Chapter 11 case. Consequently, the
amount included in the Consolidated Balance Sheet as "Liabilities Subject
to Compromise" may be subject to adjustment.
Certain prepetition liabilities have been paid after obtaining the
approval of the Bankruptcy Court, including certain wages and benefits of
employees, insurance costs, department leases, reclamation claims, and
contractors' costs.
Under the provisions of the Bankruptcy Code the Corporation has the right
to reject leases. Lessors may file claims for damages incurred from such
rejections, which would be treated as prepetition liabilities. Claims
filed in respect to leases for real property may not exceed the greater of
an amount equal to (a) one year's rental payments or (b) payments for a
period equal to 15% of the remaining term of the lease, but not in excess
of three years rent. The Corporation is actively engaged in the process of
reviewing its executory contracts and final decisions with respect to
assuming or rejecting contracts; approval by the Bankruptcy Court is still
pending.
Outstanding prepetition accounts payable have been reported net of
prepetition accounts receivable and deposits from various vendors and
their representatives.
Additional prepetition liabilities may arise as a result of claims filed
by parties affected by the Corporation's bankruptcy filing. These claims
will be analyzed and either settled or disputed in the bankruptcy
proceedings. Ultimately the adjustment of the total liabilities of the
Corporation remains subject to a Bankruptcy Court approved plan of
reorganization, and accordingly, the total amount of such liabilities is
not presently determinable. Pursuant to an order of the Bankruptcy Court,
the Corporation presently has the exclusive right to file a plan of
reorganization through August 18, 1997.
B. GOING CONCERN
The Corporation's consolidated financial statements have been prepared on
a going concern basis, which contemplates continuity of operations,
realization of assets and the liquidation of liabilities and commitments
in the normal course of business. The bankruptcy filings raise substantial
doubt about its ability to continue as a going concern. The
appropriateness of using the going concern basis is dependent upon, among
other things, confirmation of a plan of reorganization, future profitable
operations, and the ability to generate sufficient cash from operations
and financing sources to meet obligations. In this regard, management
developed and is executing a plan which includes improving gross margins
and reducing costs and possibly closing certain retail store locations.
While under the protection of Chapter 11, the Corporation may sell or
otherwise dispose of assets, and liquidate or settle liabilities, for
amounts other than those reflected in the accompanying consolidated
financial statements. Further, a plan of reorganization could materially
change the amounts reported in the accompanying consolidated financial
statements. The accompanying consolidated financial statements do not
include any adjustments relating to the recoverability of the value of
recorded asset amounts or the amounts and classification of liabilities
that might be necessary as a result of the plan of reorganization.
F-16
<PAGE> 54
C. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - The Corporation operates principally in midwestern
states, through retail department stores and free-standing shoe stores.
The women's specialty stores (Margo's La Mode, Inc.) were liquidated in
1995 (see Note N). Beerman-Peal Holdings, Inc. owns all outstanding common
stock of the Corporation.
ESTIMATES - The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of The Elder-Beerman Stores Corp. and subsidiaries
(including The El-Bee Chargit Corp., a finance subsidiary). All
significant intercompany balances and transactions have been eliminated in
consolidation.
FISCAL YEAR - The Corporation's fiscal year ends on the Saturday nearest
January 31. Fiscal year 1996 consists of 52 weeks, fiscal year 1995
consists of 53 weeks and fiscal year 1994 consists of 52 weeks ended
February 1, 1997, February 3, 1996 and January 28, 1995, respectively.
CASH AND EQUIVALENTS - The Corporation considers all highly liquid
investments with maturities of three months or less at the date of
purchase to be cash equivalents.
CUSTOMER ACCOUNTS RECEIVABLE - Customer accounts receivable are classified
as current assets since the average collection period is generally less
than one year.
MERCHANDISE INVENTORIES - Retail inventory is determined principally by
the retail method applied on a last-in, first-out (LIFO) basis and is
stated at the lower of cost or market. If the first-in, first-out (FIFO)
basis had been used, inventories would be higher by $8,048 at February 1,
1997 and $7,252 at February 3, 1996.
PROPERTY is stated at cost less accumulated depreciation determined by the
straight-line method over the expected useful lives of the assets. Assets
held under capital leases and related obligations are recorded initially
at the lower of fair market value or the present value of the minimum
lease payments. The straight-line method is used to amortize such
capitalized costs over the lesser of the expected useful life of the asset
or the life of the lease.
OTHER ASSETS include the value assigned to lease agreements acquired in an
acquisition which is being amortized over the lease terms. The Corporation
continually evaluates, based upon income and/or cash flow projections and
other factors as appropriate, whether events and circumstances have
occurred that indicate that the remaining estimated useful life of the
asset warrants revision or that the remaining balance of this asset may
not be recoverable.
During fiscal year 1995, the Corporation adopted Statement of Financial
Accounting Standard (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." Upon the
adoption of FASB No. 121, the Corporation recognized an impairment loss of
$551 related to the value assigned to lease agreements associated with
closed stores, which is included in cost of merchandise sold, occupancy
and buying expenses.
REVENUES are recognized on merchandise inventory sold upon receipt by the
customer.
PRE-OPENING COSTS associated with opening new stores are charged to
expense over the first fiscal year of store operations.
F-17
<PAGE> 55
INCOME TAXES - The Corporation files a consolidated income tax return.
Deferred income taxes are provided for temporary differences between the
tax basis of an asset or liability and its reported amount in the
financial statements less any valuation allowance (see Note I).
EARNINGS (LOSS) PER COMMON SHARE are computed by dividing net income
(loss) less preferred stock dividends, if any, by the weighted average
number of common shares outstanding, and common stock equivalents, if
dilutive. The average number of common shares outstanding during fiscal
1996, 1995 and 1994 was 6,510,733.
The Corporation calculates earnings per share using methods prescribed by
Accounting Principles Board Opinion (APB) No. 15, "Earnings per Share." In
February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share,"
which replaces APB No. 15 and requires adoption for periods ending after
December 15, 1997. The Statement will require dual presentation of basic
and diluted earnings per share on the face of the statement of operations.
The Corporation believes that the basic and diluted earnings (loss) per
share calculated pursuant to SFAS No. 128 are not materially different
from primary earnings (loss) per share calculated under APB No. 15.
RECLASSIFICATIONS - Certain amounts in the fiscal 1995 and fiscal 1994
financial statements have been reclassified to conform with the 1996
presentation.
D. CUSTOMER ACCOUNTS RECEIVABLE
Customer accounts receivable, which represent finance subsidiary
receivables (Note E), are classified as shown in the following table.
Interest is charged at an annual rate of 18% to 21%, depending on state
law.
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
TYPE OF ACCOUNT 1997 1996
<S> <C> <C>
Optional and other $ 140,623 $ 134,793
Deferred payment 12,239 14,324
--------- ---------
Total 152,862 149,117
Less:
Allowance for doubtful accounts (3,800) (3,200)
Unearned interest (1,248) (1,541)
--------- ---------
Customer accounts receivable, net $ 147,814 $ 144,376
========= =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
<S> <C> <C> <C>
Allowance for doubtful accounts:
Balance, beginning of year $ 3,200 $ 1,700 $ 1,709
Provision 6,680 5,878 3,459
Charge offs, net of recoveries (6,080) (4,378) (3,468)
------- ------- -------
Balance, end of year $ 3,800 $ 3,200 $ 1,700
======= ======= =======
</TABLE>
Customer accounts receivable result from the Corporation's proprietary
credit card sales to customers residing principally in the midwestern
states. As such, the Corporation believes it is not dependent on a given
industry or business for its customer base and therefore has no
significant concentration of credit risk.
F-18
<PAGE> 56
Deferred payment accounts include the remaining unearned interest charge
to be received. Unearned interest is amortized to finance income using the
effective interest method.
E. FINANCE SUBSIDIARY
The El-Bee Chargit Corp. ("Chargit") purchases substantially all
Elder-Beerman and subsidiaries' proprietary credit card receivables; such
receivables are purchased at a 2% discount. Customer accounts receivable
held by the finance subsidiary are included in Note D; purchase discounts
are eliminated in consolidation.
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
BALANCE SHEETS 1997 1996
<S> <C> <C>
Assets:
Customer accounts receivable - net $ 147,814 $ 144,376
Unamortized purchase discount (3,057) (2,983)
Intercompany - prepetition 4,845 4,845
Other assets 2,295 2,882
--------- ---------
Total $ 151,897 $ 149,120
========= =========
Liabilities and shareholders' equity:
Liabilities $ 2,286 $ 3,811
Intercompany - postpetition 114,769 124,251
Liabilities subject to compromise 445 452
Shareholders' equity 34,397 20,606
--------- ---------
Total $ 151,897 $ 149,120
========= =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
STATEMENTS OF OPERATIONS 1997 1996 1995
<S> <C> <C> <C>
Revenues:
Financing (net of securitization expense of $5,933,
and $5,125 for fiscal 1995 and 1994, respectively) $ 27,451 $ 18,913 $ 16,226
Purchase discount 5,277 5,594 5,843
-------- -------- --------
Total revenues 32,728 24,507 22,069
-------- -------- --------
Expenses:
Selling, general and administrative 6,517 6,486 5,728
Provision for doubtful accounts 6,680 5,878 3,459
Other income (1,106) -- --
-------- -------- --------
Total expenses 12,091 12,364 9,187
-------- -------- --------
Income before reorganization items and income taxes 20,637 12,143 12,882
Reorganization items -- 5,288 --
-------- -------- --------
Income before income taxes $ 20,637 $ 6,855 $ 12,882
======== ======== ========
</TABLE>
F-19
<PAGE> 57
Prior to the Filing Date, the Corporation had a variable rate asset
securitization agreement with a commercial bank whereby it could sell up
to $115,000 of customer accounts receivable. The Corporation sold
approximately $115,000 of customer accounts receivable under this
agreement. These receivables were sold with a repurchase liability for
balances ultimately determined to be uncollectible. As a result of the
bankruptcy filing, the Corporation discontinued its accounts receivable
sale program and terminated its asset securitization agreement. Upon
termination of the accounts receivable sale program, the interest rate
swaps were unmatched and a $5,025 mark to market adjustment was recorded
as reorganization expense in fiscal 1995.
Through the Filing Date, the Corporation utilized interest rate swap
agreements to effectively establish long-term fixed rates on receivables
sold under the asset securitization agreement, thus reducing the impact of
interest rate changes on future income. These swap agreements involved the
receipt of variable rate amounts in exchange for fixed rate interest
payments over the life of the agreement. The differential between the
fixed and variable rates to be paid or received was accrued as interest
rates changed and recognized as an adjustment to finance income related to
the receivables sold. Notional amounts of effective swap agreements hedged
against receivables sold were $55,000 at October 17, 1995. At February 1,
1997, the Corporation has outstanding swap agreements with notional
amounts totaling $55,000. A portion of these swaps have been hedged
against the DIP Facility through October 31, 1997 (Note G).
During 1995, but prior to the Filing Date, the Corporation entered into
interest rate swaps under a master agreement with notional amounts of
$50,000 with an effective date subsequent to the Filing Date. The
Corporation violated and defaulted on the master agreement which includes
a penalty for default. As of the Filing Date, the estimated market value
of the interest rate swaps under the master agreement is recorded as a
liability subject to compromise and included in reorganization expense.
The Corporation is exposed to credit related losses in the event of
non-performance by the counterparties to the swap agreements. The
Corporation does not anticipate non-performance by any of its
counterparties. The Corporation is exposed to market related losses on the
unmatched portion of interest rate swaps. In fiscal 1996, the mark to
market adjustment of $1,106 is recorded as other income. The amounts the
Corporation ultimately will realize could differ materially in the near
term from the market values recorded at February 1, 1997.
F. OTHER LONG-TERM ASSETS
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
<S> <C> <C>
Value assigned to lease agreements $ 2,681 $ 2,900
Receivables from developers 2,380 3,883
Unamortized debt issuance costs 454 2,462
Other 3,157 3,500
------- -------
Total other long-term assets $ 8,672 $12,745
======= =======
</TABLE>
Receivables from developers represent receivables related to lease
incentives, in the form of construction reimbursements and advertising
allowances and are included in other long-term assets because payment of
certain construction reimbursements by the developer to the Corporation
will coincide with the Corporation's lease assumption and/or payments for
construction work performed.
F-20
<PAGE> 58
G. LONG-TERM OBLIGATIONS
In connection with the Chapter 11 filing, on October 17, 1995,
Elder-Beerman and Chargit entered into a Postpetition Loan and Security
Agreement (the DIP Facility) with Citibank N.A. Substantially all assets
are pledged as collateral for the DIP Facility.
In October 1995, the Bankruptcy Court signed an order approving the DIP
Facility, which had a maturity of January 31, 1997. On September 30, 1996,
the DIP Facility was extended to October 31, 1997. The DIP Facility
provides for borrowings and letters of credit in an aggregate amount of
$175,000 as of February 1, 1997, subject to a borrowing base formula based
primarily on eligible accounts receivable and merchandise inventories. The
DIP Facility contains financial covenants related to certain permitted
reorganization expenditures, working capital, capital expenditures and
attainment of earnings before interest, taxation, depreciation,
amortization and reorganization items. In addition, the agreement contains
certain other restrictive covenants including limitations on the
incurrence of additional liens and indebtedness, the amount of prepetition
claim payments, and a prohibition on payment of dividends.
Commitment and related fees of $1,052 and $3,179 paid during fiscal years
1996 and 1995, respectively, in connection with the origination of and
amendments to the DIP Facility are amortized as reorganization expense
over the term of the DIP Facility.
The DIP Facility includes borrowing sublimits relating to merchandise
inventories and letters of credit. Regarding merchandise inventories, the
Corporation may borrow on up to $65,000 of eligible merchandise
inventories. The sublimit for letters of credit is $20,000. Borrowings
bear interest at either prime plus .50% or LIBOR plus 1.50%. The prime and
LIBOR borrowing rates at February 1, 1997 were 8.25% and 5.4375%,
respectively. The rate on average daily outstanding letters of credit is
1.5% per annum. Additionally, the Corporation is required to pay a
commitment fee of .5% per annum of the average daily unused portion of the
total amount available under the DIP Facility. As of February 1, 1997, the
Corporation had $57,773 in outstanding borrowings and $6,960 of
outstanding letters of credit.
As a result of the Chapter 11 filing (see Note A), debt outstanding at the
Filing Date has been classified as "Liabilities Subject to Compromise". No
principal or interest payments on prepetition debt will be made without
Bankruptcy Court approval or until a reorganization plan defining the
repayment terms has been confirmed. In addition, the Corporation is in
default of substantially all of its prepetition debt agreements. The
Corporation's defaults will be settled as part of the reorganization plan.
F-21
<PAGE> 59
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
<S> <C> <C>
DIP Facility, due October 31, 1997, 6.9375% to 8.75% $ 57,773 $ 50,000
Revolving credit arrangement 3,600 3,600
Unsecured credit facility:
Eurodollar borrowings 40,000 40,000
Bankers' acceptances 13,300 13,300
Competitive bid advances 5,000 5,000
Unsecured senior notes payable, Series A-C 50,000 50,000
Unsecured senior notes payable 20,000 20,000
Mortgage note payable, 9.75% 2,727 2,795
Industrial development revenue bonds, variable rates based on
published index of tax-exempt bonds or prime, 3.66% 5,555 5,655
Capital lease obligations (Note H) 2,834 3,657
-------- --------
Total 200,789 194,007
Less:
Liabilities subject to compromise 137,189 140,807
DIP Facility 57,773 50,000
Current portion of long-term obligations, not subject
to compromise 158 100
-------- --------
Net long-term obligations $ 5,669 $ 3,100
======== ========
</TABLE>
Maturities of borrowings not classified as liabilities subject to
compromise are $57,931 in 1997, $163 in 1998, $170 in 1999, $177 in 2000,
$185 in 2001, and $4,974 thereafter.
As of October 17, 1995, the Corporation ceased accruing interest on
unsecured prepetition debt. All or a portion of such interest
(approximately $17,483 at February 1, 1997 and $4,251 at February 3, 1996)
may not be payable unless permitted by the bankruptcy court.
During fiscal 1996 and 1995, the Corporation utilized interest rate swap
agreements to reduce the impact of interest rate changes on portions of
its variable rate debt. Swaps with a notional amount of $45,000 have been
matched against the DIP Facility since the Filing Date. During 1996, the
weighted average rate paid, net of amortization of the recorded market
value liability, was 5.8% and the weighted average rate received was 5.6%.
The differential between the fixed rates paid and variable rates received
is recognized as an adjustment to interest expense.
Collateral for the industrial development revenue bonds and the mortgage
note payable is land, buildings, furniture, fixtures and equipment with a
net book value of $5,998 at February 1, 1997. Mechanics' liens have been
filed for improvements made to certain properties.
F-22
<PAGE> 60
H. LEASES
The Corporation leases retail store properties and certain equipment.
Generally, leases are net leases which require the payment of executory
expenses such as real estate taxes, insurance, maintenance and other
operating costs, in addition to minimum rentals. Leases for retail stores
generally contain renewal or purchase options, or both, and generally
provide for contingent rentals based on a percentage of sales. At February
1, 1997, the Corporation is in default under the terms of certain
equipment and retail property leases.
Minimum annual rentals, for leases having initial or remaining
noncancelable lease terms in excess of one year at February 1, 1997, are
as follows:
<TABLE>
<CAPTION>
CAPITAL
OPERATING LEASES LEASES
------------------------------------------- -------
RELATED
FISCAL YEAR OTHER PARTY TOTAL
<S> <C> <C> <C> <C>
1997 $ 15,349 $ 3,078 $ 18,427 $ 1,032
1998 13,669 3,073 16,742 768
1999 11,468 3,072 14,540 529
2000 9,539 3,028 12,567 469
2001 9,095 2,086 11,181 290
Thereafter 68,198 16,610 84,808 277
--------- -------- --------- -------
Minimum lease payments $ 127,318 $ 30,947 $ 158,265 3,365
========= ======== =========
Less imputed interest 531
-------
Present value of net minimum lease
payments $ 2,834
=======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
RENT EXPENSE 1997 1996 1995
<S> <C> <C> <C>
Operating leases:
Minimum $20,489 $23,228 $13,585
Contingent 2,136 2,766 2,599
------- ------- -------
Total rent expense $22,625 $25,994 $16,184
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
ASSETS HELD UNDER CAPITAL LEASES 1997 1996
<S> <C> <C>
Buildings $11,033 $11,033
Less accumulated depreciation and amortization 9,565 9,120
------- -------
Net $ 1,468 $ 1,913
======= =======
</TABLE>
Assets acquired under capital leases are included in the consolidated
balance sheets as property, while the related obligations are included in
liabilities subject to compromise (see Note A).
F-23
<PAGE> 61
I. INCOME TAXES
Income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
<S> <C> <C> <C>
Current:
Federal $ -- $ (10,400) $ (6,138)
State and local 360 504 442
---------- ---------- ----------
360 (9,896) (5,696)
---------- ---------- ----------
Deferred:
Net operating losses and tax credit carryforwards (13,560) (6,487) --
Interest 6,119 -- --
Deferred income 1,513 (270) 150
Inventory 2,398 (1,766) 223
Depreciation (3,726) (1,108) (447)
Restructuring 1,393 136 --
Discontinued operations (Note N) 158 (274) (4,286)
Other (790) (1,462) 1,935
Valuation allowance 6,495 20,787 --
---------- ---------- ----------
-- 9,556 (2,425)
---------- ---------- ----------
Income tax expense (benefit) $ 360 $ (340) $ (8,121)
========== ========== ==========
Income statement classification:
Continuing operations $ 360 $ (2,332) $ (2,526)
Discontinued operations -- 1,992 (5,595)
---------- ---------- ----------
Total $ 360 $ (340) $ (8,121)
========== ========== ==========
</TABLE>
The income tax provision varies from the statutory rate primarily because
of the valuation allowance and certain expenses not deductible for tax
purposes.
The current tax benefit in fiscal 1995 includes the carryback of net
operating losses for a refund of prior taxes paid. The refund request was
filed with the Internal Revenue Service ("IRS") by the Corporation's
parent, Beerman-Peal Holdings, Inc.
In fiscal 1995, the IRS issued a notice of proposed adjustment to the
Corporation asserting the Corporation owed additional federal income taxes
with respect to its consolidated income tax returns filed for the fiscal
years 1989, and 1992 through 1994. The case was tried in Bankruptcy Court.
A decision was rendered in March 1997 rejecting the IRS claim in its
entirety; the IRS has appealed the Bankruptcy Court's decision to the
District Court. Management believes the effect of any adjustment to
federal and state income tax returns resulting from the audit will not
have a material effect on the Corporation's financial position, results of
operations or cash flows.
F-24
<PAGE> 62
Deferred income taxes consist of the following:
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
<S> <C> <C>
Deferred tax assets:
Net operating losses and tax credit carryforwards $ 20,047 $ 6,487
Discontinued operations 2,362 2,520
Deferred income 2,406 3,919
Bad debts 1,414 1,121
Inventory basis 1,208 3,606
Deferred compensation 1,092 1,092
Restructuring 511 1,904
Other 4,706 6,286
-------- --------
33,746 26,935
Valuation allowance (27,282) (20,787)
-------- --------
Total deferred tax assets 6,464 6,148
-------- --------
Deferred tax liabilities:
Interest expense 6,119 --
Depreciation 219 3,945
Other 126 2,203
-------- --------
Total deferred tax liabilities 6,464 6,148
-------- --------
Net $ 0 $ 0
======== ========
</TABLE>
The net operating loss carryforwards, tax credit carryforwards, and other
deferred tax assets will result in future benefits only if the Corporation
has taxable income in future periods. Under current accounting
pronouncements, future taxable income cannot be assumed. In addition, net
operating losses may be reduced due to the bankruptcy proceeding and the
IRS assessment previously discussed. Accordingly, a 100% valuation
allowance has been recorded.
The federal net operating loss carryforward is approximately $49,482 and
is available to reduce federal taxable income through 2011. The tax credit
carryforward is approximately $2,728; $632 will expire in 2009 and 2010,
and the balance is an indefinite carryforward.
J. EMPLOYEE BENEFIT PLAN
A defined-contribution employee benefit plan (the "Plan") covers
substantially all employees. The Corporation may contribute to the Plan
based on a percentage of compensation and on a percentage of income before
income taxes. No contributions were made in fiscal year 1996 and 1995
(Note Q). Corporate contributions to the Plan were approximately $1,391 in
fiscal year 1994. Eligible employees can make contributions to the Plan
through payroll withholdings of one to fifteen percent of their annual
compensation. The Plan includes an employee stock ownership (ESOP)
component. At February 1, 1997, the Plan held all of the outstanding
Preferred Shares of the Corporation (Note M). Under the ESOP component,
the Corporation is required to repurchase these shares from the Plan, to
the extent necessary, for the Plan to provide participant distributions.
Such Preferred Share repurchases would require approval of the Bankruptcy
Court.
F-25
<PAGE> 63
K. DEFERRED COMPENSATION AND BONUS PLAN
The Corporation has unfunded deferred compensation plans for certain
retired and current executive officers, management personnel and the board
of directors. Upon establishment of the key employee bonus programs,
certain deferred compensation agreements were waived by the executives. At
February 1, 1997 and February 3, 1996, the deferred compensation
obligations of $3,122 are included in accounts payable and accrued
liabilities as Liabilities Subject to Compromise (see Note A). Deferred
compensation expense, including service cost and interest on the accrued
obligation, was $406 and $492 in 1995 and 1994, respectively. No such
expense was incurred during the current year. The assumed discount rate is
generally 6%.
The Corporation established a key employee bonus program for the duration
of its Chapter 11 reorganization. Bonus amounts are determined primarily
on operating results and continued employment.
L. TRANSACTIONS WITH RELATED PARTIES
Transactions with related parties are as follows:
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
<S> <C> <C>
Customer accounts receivable $ 368 $ 400
Other current assets 60 563
Other long-term assets 460 --
Accounts payable and other liabilities 536 190
Liabilities subject to compromise 951 506
</TABLE>
See Note I for federal refundable income tax request filed by parent
company.
Repayment of certain obligations of the Corporation owed to a vendor are
guaranteed by a related party.
The Corporation leases real estate under operating leases from certain
affiliated entities and directors, and made payments to these related
parties totaling $3,742, $4,129 and $2,996 in fiscal years 1996, 1995 and
1994, respectively.
M. SHAREHOLDERS' EQUITY
PREFERRED STOCK - Each Series B Preferred Share provides cumulative
dividends at $1.39 per share and is convertible to .7 shares of common
stock. Shares may be called, after January 31, 1999, at the option of the
Corporation for a price of $20.32 declining to $19.17 in 2005 and
thereafter. These shareholders are also entitled to receive out of the
assets of the Corporation liquidating distributions in the amount of
$19.17 per share upon any voluntary or involuntary liquidation of the
Corporation. At February 1, 1997, there were 463,732 shares of common
stock reserved for conversion of Series B Preferred Shares. Dividends in
arrears at February 1, 1997 and February 3, 1996 were $1,842 and $921,
respectively.
RETAINED EARNINGS - Stock repurchases and dividend payments would require
approval of the Bankruptcy Court. No dividends were declared or paid
during fiscal year 1996 and 1995. The Corporation declared and distributed
a $6,985 dividend in the form of property during fiscal year 1994. The
dividend was recorded at the net book value of the property transferred.
F-26
<PAGE> 64
N. DISCONTINUED OPERATIONS
In fiscal 1994, the Corporation adopted formal plans to dispose of its
subsidiaries Margo's La Mode, Inc. ("Margo's") and The Bee-Gee Shoe Corp.
("Bee Gee") and recorded reserves for loss on disposal of $9,834, net of
tax benefit of $5,066. During fiscal 1995, the Corporation was
unsuccessful in its attempt to sell Margo's and decided to liquidate the
subsidiary. In connection with the liquidation, Margo's has rejected all
of its existing operating leases. During fiscal 1996 and 1995, the
Corporation closed 11 and 44 Bee Gee locations, respectively, and rejected
certain leases. The ultimate settlement of these liabilities is contingent
upon approval of the creditors' committees and the Bankruptcy Court. The
remaining assets of Bee Gee were held for sale at February 3, 1996.
During fiscal 1996, management determined the value of Bee Gee would be
more effectively realized by retaining Bee Gee as a part of the
Corporation's ongoing operations. Accordingly, the balance sheet for
fiscal 1995 and the results of operations for fiscal 1995 and fiscal 1994
have been reclassified to continuing operations.
<TABLE>
<CAPTION>
MARGO'S
LA MODE, INC.
------------------------
YEAR ENDED
------------------------
FEBRUARY 1, FEBRUARY 3,
ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS: 1997 1996
<S> <C> <C>
Merchandise inventories
Income tax receivable
Other current assets $ 3 $ 581
Property, net
Assets of discontinued operations $ 3 $ 581
========== ==========
Accounts payable $ 38 $ 88
Other liabilities 125 249
Liabilities subject to compromise 9,743 9,847
Reserve for loss on disposal 310 916
---------- ----------
Liabilities of discontinued operations $ 10,216 $ 11,100
========== ==========
</TABLE>
Based on management's estimates and the change in the disposition strategy
of Margo's in 1995, the Corporation provided an additional reserve of
$19,262 (including income tax expense of $1,992) for the discontinued
operations of Margo's. The discontinued operations expense of $12,276 for
fiscal 1995 includes the additional reserve for Margo's net of the
reversal of reserves for Bee Gee of $6,986 as a result of management's
decision in fiscal 1996, previously discussed. The amounts shown above do
not include amounts owed to or due from the parent. Margo's operating
losses of $451, $16,419 and $1,517 were charged against the reserve for
discontinued operations for fiscal years 1996, 1995 and 1994,
respectively. Margo's net sales in the period of disposal were $34,227 in
1995 and $26,551 in 1994. Margo's loss for 1994 prior to adopting a formal
plan of disposal was $1,457, net of tax benefit of $529.
F-27
<PAGE> 65
O. REORGANIZATION ITEMS
Reorganization costs consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------
FEBRUARY 1, FEBRUARY 3,
1997 1996
<S> <C> <C>
Professional fees $ 8,612 $ 3,586
Equipment lease settlements 7,458 --
Restructuring 4,497 8,897
Financing costs 3,081 2,203
Market value adjustments of interest rate swaps -- 5,025
---------- ----------
Total $ 23,648 $ 19,711
========== ==========
</TABLE>
Subsequent to the Chapter 11 filings, the Corporation began restructuring
its business and decided, among other things, to close two outlet stores
and certain Bee Gee locations and discontinue certain vendors in fiscal
1995 and to close a furniture store in fiscal 1996. Property impairment,
severance payments and certain store closing costs are included in
restructuring costs. The Corporation negotiated various equipment lease
settlements during the year. Equipment lease settlement costs primarily
resulted from renegotiated leases where cash payments and unsecured claims
were granted in exchange for ownership of the equipment and relief from
other claims previously filed.
In 1995, the market value adjustments of interest rate swaps represent the
recognition of losses on interest rate swap s previously hedged against
accounts receivable sold. Financing costs include the write-off of the
unamortized balance of previously deferred financing costs and
amortization of fees associated with the DIP Facility.
P. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
CASH AND EQUIVALENTS - The carrying amount approximates fair value
because of the short maturity of those instruments.
ACCOUNTS RECEIVABLE AND DIP FACILITY - The net carrying amount
approximates fair value because of the relatively short average
maturity of the instruments.
LONG-TERM DEBT - It is not practicable to estimate the fair value of
the Corporation's long-term debt as the quoted market prices for the
same or similar issues and the current rates offered to the
Corporation for debt of the same remaining maturities are not
available as a result of the Corporation's Chapter 11 status.
INTEREST RATE SWAP AGREEMENTS - The fair value of interest rate
swaps is based on the quoted market prices which the Corporation
would pay to terminate the swap agreements at the reporting date.
F-28
<PAGE> 66
LIABILITIES SUBJECT TO COMPROMISE - Subsequent to the filing under
Chapter 11, a market has developed for the trading of prepetition
claims against the Corporation. However, as the market for claims
against Corporations under Chapter 11 is not well developed, no
reliable source of market prices is available.
The estimated fair value of the Corporation's financial instruments,
excluding liabilities subject to compromise and long-term debt are as
follows:
<TABLE>
<CAPTION>
FEBRUARY 1, 1997 FEBRUARY 3, 1996
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Financial assets (liabilities):
Cash and equivalents $ 7,091 $ 7,091 $ 14,215 $ 14,215
Customer accounts receivable 147,814 147,814 144,376 144,376
DIP Facility (57,773) (57,773) (50,000) (50,000)
Financial instruments - interest rate
swaps (1,415) (1,415) (3,100) (3,100)
Unrecognized financial instruments -
interest rate swaps (579) (844) (925) (1,440)
</TABLE>
Q. COMMITMENTS AND CONTINGENCIES
LITIGATION - The Corporation is a party to various legal actions and
administrative proceedings and subject to various claims arising in the
ordinary course of business. Management believes the outcome of any of the
litigation matters that will have a material effect on the Corporation's
results of operations, cash flows or financial position have been
appropriately accrued.
As discussed in Note A, on October 17, 1995, the Corporation and its
subsidiaries filed voluntary petitions in the Bankruptcy Court under
Chapter 11 of the Bankruptcy Code. All material civil litigation commenced
against the Corporation and those referenced subsidiaries prior to that
date has been stayed under the Bankruptcy Code.
OTHER CLAIMS - The Elder-Beerman Stores Corp. Profit-Sharing and Stock
Ownership Plan Committee has made claims relevant to fiscal 1996 and
fiscal 1995 corporate contributions and payment of certain expenses. The
Corporation believes that such contributions are discretionary and the
expenses are not liabilities of the Corporation.
LETTERS OF CREDIT - At February 1, 1997, the Corporation had outstanding
commercial and standby letters of credit totaling $11,717 under the DIP
facility and with other banks, relating to trade financing and insurance
activities.
INSURANCE - The Corporation is self-insured for employee medical and
workers' compensation subject to limitation for which insurance has been
purchased. Management believes that those claims reported and not paid and
claims incurred, but not yet reported, are appropriately accrued.
* * * * * *
F-29
<PAGE> 67
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------ ----------------------
2 Third Amended Joint Plan of Reorganization of The Elder-
Beerman Stores Corp. and its Subsidiaries dated
November 17, 1997**
3(a) Form of Amended Articles of Incorporation**
3(b) Form of Amended Code of Regulations**
4(a) Form of Stock Certificate for Common Stock
4(b) Form of Registration Rights Agreement**
4(c) Form of Rights Agreement**
4(d) Form of Warrant Agreement**
10(a) Form of New Receivables Securitization Facility
10(b) Form of New Revolving Credit Facility
10(c) Form of Employment Agreement for Senior Vice
Presidents**
10(d) Form of Employment Agreement for Executive Vice
Presidents**
10(e) Form of Severance Pay Plan for Key Employees of the
Company**
10(f) Form of Director Indemnification Agreement**
10(g) Form of Officer Indemnification Agreement**
10(h) Form of Director and Officer Indemnification
Agreement**
10(i) Form of The Elder-Beerman Stores Corp. Equity and
Performance Incentive Plan**
10(j) Form of Restricted Stock Agreement for Non-Employee
Director**
10(k) Form of Restricted Stock Agreement**
10(l) Form of Deferred Shares Agreement**
10(m) Form of Nonqualified Stock Option Agreement for Non-
Employee Director**
10(n) Form of Nonqualified Stock Option Agreement**
10(o) Form of Employee Stock Purchase Plan**
10(p) Form of Comprehensive Settlement Agreement**
10(q) Form of Tax Indemnification Agreement**
10(r) Form of Tax Sharing Agreement**
21 Subsidiaries of the Company**
27 Financial Data Schedule**
- ---------
* Previously filed
** Filed herewith
<PAGE> 1
EXHIBIT 2
---------
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
<TABLE>
<CAPTION>
<S> <C>
IN RE: : JOINTLY ADMINISTERED
: CASE NO. 95-33643
THE ELDER-BEERMAN STORES CORP., :
AN OHIO CORPORATION, ET AL., : CHAPTER 11
:
DEBTORS. : CHIEF JUDGE CLARK
:
- ------------------------------------------------------------------ :
:
(THE ELDER-BEERMAN STORES CORP.) : (CASE NO. 95-33643)
(THE EL-BEE CHARGIT CORP.) : (CASE NO. 95-33644)
(THE BEE-GEE SHOE CORP.) : (CASE NO. 95-33645)
(MARGO'S LAMODE, INC.) : (CASE NO. 95-33646)
(MCCOOK WHOLESALE CORP.) : (CASE NO. 95-33647)
(E-B COMMUNITY URBAN REDEVELOPMENT CORP.) : (CASE NO. 95-33648)
(EBA, INC.) : (CASE NO. 95-33649)
:
: THIRD AMENDED JOINT PLAN OF
: REORGANIZATION OF THE
: ELDER-BEERMAN STORES CORP.
: AND ITS SUBSIDIARIES
- ------------------------------------------------------------------ : ----------------------------------
RICHARD M. CIERI (0032464)
JONES, DAY, REAVIS & POGUE
NORTH POINT
901 LAKESIDE AVENUE
CLEVELAND, OHIO 44114
(216) 586-3939
SCOTT J. DAVIDO (PA. ATTY. NO. 75565)
JONES, DAY, REAVIS & POGUE
ONE MELLON BANK CENTER, 31ST FLOOR
500 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15219
(412) 391-3939
ATTORNEYS FOR DEBTORS AND DEBTORS
IN POSSESSION
NOVEMBER 17, 1997
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
INTRODUCTION...........................................................................................................1
<S> <C> <C>
ARTICLE I. DEFINED TERMS, RULES OF INTERPRETATION, AND COMPUTATION OF TIME......................................1
A. DEFINED TERMS........................................................................................1
1. "ADMINISTRATIVE CLAIM"......................................................................1
2. "ALLOWED CLAIM".............................................................................1
3. "ALLOWED . . . CLAIM".......................................................................1
4. "ALLOWED INTEREST"..........................................................................1
5. "ATKINS"....................................................................................1
6. "ATKINS STIPULATION"........................................................................1
7. "BALLOT"....................................................................................2
8. "BANK LOAN CLAIM"...........................................................................2
9. "BANKRUPTCY CODE"...........................................................................2
10. "BANKRUPTCY COURT"..........................................................................2
11. "BANKRUPTCY RULES"..........................................................................2
12. "BAR DATE"..................................................................................2
13. "BAR DATE ORDER"............................................................................2
14. "BEE-GEE"...................................................................................2
15. "BEERMAN ENTITIES"..........................................................................2
16. "BEERMAN-PEAL"..............................................................................2
17. "BUSINESS DAY"..............................................................................2
18. "CASH DISTRIBUTION AMOUNT"..................................................................2
19. "CASH INVESTMENT YIELD".....................................................................2
20. "CASH MANAGEMENT ORDER".....................................................................2
21. "CHARGIT"...................................................................................2
22. "CLAIM".....................................................................................2
23. "CLAIMS OBJECTION BAR DATE".................................................................2
24. "CLAIMS RESOLUTION COMMITTEE"...............................................................2
25. "CLAIMS TRANSFER ORDER".....................................................................2
26. "CLASS".....................................................................................3
27. "CLOSE OUT NOTICE"..........................................................................3
28. "COLLATERAL"................................................................................3
29. "COMPREHENSIVE SETTLEMENT AGREEMENT"........................................................3
30. "CONFIRMATION"..............................................................................3
31. "CONFIRMATION DATE".........................................................................3
32. "CONFIRMATION HEARING"......................................................................3
33. "CONFIRMATION ORDER"........................................................................3
34. "CREDITORS' COMMITTEES".....................................................................3
35. "CURE AMOUNT CLAIM".........................................................................3
36. "DEBTORS"...................................................................................3
37. "DIP CREDIT AGREEMENT"......................................................................3
38. "DIP LENDER"................................................................................3
39. "DISBURSING AGENT"..........................................................................3
40. "DISCLOSURE STATEMENT"......................................................................3
41. "DISPUTED CLAIM"............................................................................3
42. "DISPUTED CLAIMS RESERVES"..................................................................4
43. "DISPUTED ELDER-BEERMAN CLAIMS RESERVE".....................................................4
44. "DISPUTED INSURED CLAIM" AND "DISPUTED UNINSURED CLAIM".....................................4
45. "DISPUTED INTEREST".........................................................................4
46. "DISPUTED MARGO'S CLAIMS RESERVE"...........................................................4
47. "DISTRIBUTION RECORD DATE"..................................................................4
48. "DOCUMENT REVIEWING CENTERS"................................................................4
49. "EFFECTIVE DATE"............................................................................4
50. "ELDER-BEERMAN".............................................................................4
51. "ELDER-BEERMAN DEBTORS".....................................................................4
52. "ELDER-BEERMAN RESERVE CLASS"...............................................................4
53. "ELDER-BEERMAN SUBSIDIARY DEBTORS"..........................................................4
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
54. "ESOP"......................................................................................4
55. "ESOP CLAIM"................................................................................4
56. "ESOP COMMITTEE"............................................................................4
57. "ESTATE"....................................................................................5
58. "EXECUTORY CONTRACT AND UNEXPIRED LEASE"....................................................5
59. "EXIT FINANCING FACILITY"...................................................................5
60. "FACE AMOUNT"...............................................................................5
61. "FEE CLAIM".................................................................................5
62. "FEE ORDER".................................................................................5
63. "FILE," "FILED," OR "FILING"................................................................5
64. "FINAL ORDER"...............................................................................5
65. "FIRST CHICAGO".............................................................................5
66. "FIRST CHICAGO SWAP AGREEMENT"..............................................................5
67. "FIRST CHICAGO SWAP CLAIMS".................................................................5
68. "IDRB"......................................................................................5
69. "INSTITUTIONAL LENDERS' COMMITTEE"..........................................................5
70. "INSURED CLAIM".............................................................................5
71. "INTERCOMPANY CLAIM"........................................................................6
72. "INTEREST"..................................................................................6
73. "IRS".......................................................................................6
74. "KEY EMPLOYEE RETENTION PROGRAM ORDERS".....................................................6
75. "MARGO'S"...................................................................................6
76. "MARGO'S RESERVE CLASS".....................................................................6
77. "NATIONAL SECURITIES EXCHANGE"..............................................................6
78. "NBD BANK"..................................................................................6
79. "NBD SWAP CLAIM"............................................................................6
80. "NCB IDRB"..................................................................................6
81. "NEW COMMON STOCK"..........................................................................6
82. "NEW EQUITY"................................................................................6
83. "NEW FORM WARRANT AGREEMENT"................................................................6
84. "NEW PREFERRED STOCK".......................................................................6
85. "NEW REGISTRATION RIGHTS AGREEMENT".........................................................6
86. "NEW RECEIVABLES SECURITIZATION FACILITY"...................................................6
87. "NEW REVOLVING CREDIT FACILITY".............................................................6
88. "NEW SERIES A WARRANTS".....................................................................6
89. "NEW SERIES B WARRANTS".....................................................................7
90. "NEW SHARE PURCHASE RIGHTS".................................................................7
91. "NEW SHARE PURCHASE RIGHTS AGREEMENT".......................................................7
92. "NEW TAX INDEMNIFICATION AGREEMENT".........................................................7
93. "NEW TAX SHARING AGREEMENT".................................................................7
94. "NEW WARRANTS"..............................................................................7
95. "NEW WARRANTS AGREEMENTS"...................................................................7
96. "NOTE CLAIM"................................................................................7
97. "OHIO REVISED CODE".........................................................................7
98. "OLD COMMON STOCK OF . . .".................................................................7
99. "OLD EQUITY"................................................................................7
100. "OLD NOTES".................................................................................7
101. "OLD PREFERRED STOCK".......................................................................7
102. "ORDINARY COURSE PROFESSIONALS ORDER".......................................................7
103. "PERFORMANCE INCENTIVE PLAN"................................................................7
104. "PERSONAL INJURY CLAIMS"....................................................................7
105. "PETITION DATE".............................................................................7
106. "PLAN"......................................................................................7
107. "PREPETITION CREDIT FACILITY"...............................................................7
108. "PREPETITION NOTE AGREEMENTS"...............................................................8
109. "PRINCIPAL MUTUAL MORTGAGE".................................................................8
110. "PRINCIPAL MUTUAL MORTGAGE CLAIM"...........................................................8
111. "PRIORITY CLAIM"............................................................................8
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
112. "PRIORITY TAX CLAIM"........................................................................8
113. "PRO RATA"..................................................................................8
114. "PROFESSIONAL"..............................................................................8
115. "QUARTERLY DISTRIBUTION DATE"...............................................................8
116. "REAL PROPERTY EXECUTORY CONTRACT AND UNEXPIRED LEASE"......................................8
117. "RECLAMATION PROGRAM ORDER".................................................................8
118. "REINSTATED" OR "REINSTATEMENT".............................................................8
119. "REORGANIZATION CASE".......................................................................9
120. "REORGANIZED . . .".........................................................................9
121. "RESERVE CLASSES"...........................................................................9
122. "RESTRUCTURING TRANSACTIONS"................................................................9
123. "SCHEDULES".................................................................................9
124. "SECONDARY LIABILITY CLAIM".................................................................9
125. "SECURED CLAIM".............................................................................9
126. "SECURITIES ACT"............................................................................9
127. "STIPULATION OF AMOUNT AND NATURE OF CLAIM".................................................9
128. "THIRD PARTY DISBURSING AGENT"..............................................................9
129. "TOLEDO STORES MODIFICATION AGREEMENTS"....................................................10
130. "TRADE CLAIM"..............................................................................10
131. "TRADE CREDITORS' COMMITTEE"...............................................................10
132. "UNINSURED CLAIM"..........................................................................10
133. "UNSECURED CLAIM"..........................................................................10
134. "UNTENDERED SECURITIES"....................................................................10
135. "VOTING DEADLINE"..........................................................................10
B. RULES OF INTERPRETATION AND COMPUTATION OF TIME.....................................................10
1. RULES OF INTERPRETATION....................................................................10
2. COMPUTATION OF TIME........................................................................10
ARTICLE II. CLASSES OF CLAIMS AND INTERESTS.....................................................................10
A. CLASSES OF CLAIMS AGAINST THE DEBTORS...............................................................11
1. SECURED CLAIMS.............................................................................11
A. CLASS C-1 (NCB IDRB CLAIMS AND PRINCIPAL MUTUAL MORTGAGE CLAIM)...................11
B. CLASS C-2 (OTHER SECURED CLAIMS)..................................................11
2. UNSECURED CLAIMS...........................................................................11
A. CLASS C-3 (UNSECURED PRIORITY CLAIMS).............................................11
B. CLASS C-4 (CONVENIENCE CLAIMS)....................................................11
C. CLASS C-5 (GENERAL UNSECURED CLAIMS)..............................................11
D. CLASS C-6 (MARGO'S UNSECURED CLAIMS)..............................................11
E. CLASS C-7 (INTERCOMPANY CLAIMS)...................................................11
B. CLASSES OF INTERESTS IN THE DEBTORS.................................................................11
1. CLASS E-1 (SUBSIDIARY OLD COMMON STOCK INTERESTS)..........................................11
2. CLASS E-2 (ELDER-BEERMAN OLD COMMON STOCK INTERESTS).......................................11
3. CLASS E-3 (OTHER INTERESTS IN ELDER-BEERMAN)...............................................11
ARTICLE III. TREATMENT OF CLAIMS AND INTERESTS..........................................................11
A. UNCLASSIFIED CLAIMS.................................................................................11
1. PAYMENT OF ADMINISTRATIVE CLAIMS...........................................................11
a. ADMINISTRATIVE CLAIMS IN GENERAL..................................................11
b. STATUTORY FEES....................................................................12
c. ORDINARY COURSE LIABILITIES.......................................................12
d. CLAIMS UNDER DIP CREDIT AGREEMENT AND THE FIRST CHICAGO SWAP AGREEMENT............12
i. DIP CREDIT AGREEMENT......................................................12
ii. THE FIRST CHICAGO SWAP AGREEMENT..........................................12
e. FEE CLAIMS OF ESOP COMMITTEE AND BEERMAN ENTITIES.................................12
f. BAR DATES FOR ADMINISTRATIVE CLAIMS...............................................12
i. GENERAL BAR DATE PROVISIONS...............................................12
ii. BAR DATES FOR CERTAIN ADMINISTRATIVE CLAIMS...............................13
A. PROFESSIONAL COMPENSATION........................................13
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
B. ORDINARY COURSE LIABILITIES......................................13
C. CLAIMS UNDER DIP CREDIT AGREEMENT AND THE FIRST CHICAGO SWAP
CLAIMS...........................................................13
2. PAYMENT OF PRIORITY TAX CLAIMS.............................................................13
a. PRIORITY TAX CLAIMS...............................................................13
b. OTHER PROVISIONS CONCERNING TREATMENT OF PRIORITY TAX CLAIMS......................13
B. CLASSIFIED CLAIMS...................................................................................14
1. SECURED CLAIMS.............................................................................14
a. CLASS C-1 CLAIMS (NCB IDRB CLAIMS AND PRINCIPAL MUTUAL MORTGAGE CLAIM)............14
b. CLASS C-2 CLAIMS (OTHER SECURED CLAIMS)...........................................14
2. UNSECURED CLAIMS...........................................................................14
a. CLASS C-3 CLAIMS (UNSECURED PRIORITY CLAIMS)......................................14
b. CLASS C-4 CLAIMS (CONVENIENCE CLAIMS).............................................14
c. CLASS C-5 CLAIMS (GENERAL UNSECURED CLAIMS).......................................14
d. CLASS C-6 CLAIMS (MARGO'S UNSECURED CLAIMS).......................................14
e. CLASS C-7 CLAIMS (INTERCOMPANY CLAIMS)............................................14
C. CLASSIFIED INTERESTS................................................................................14
1. CLASS E-1 INTERESTS (SUBSIDIARY OLD COMMON STOCK INTERESTS)................................14
2. CLASS E-2 INTERESTS (ELDER-BEERMAN OLD COMMON STOCK INTERESTS).............................14
3. CLASS E-3 INTERESTS (OTHER INTERESTS IN ELDER-BEERMAN).....................................14
D. SPECIAL PROVISIONS REGARDING TREATMENT OF ALLOWED SECONDARY LIABILITY CLAIMS........................15
ARTICLE IV. MEANS FOR IMPLEMENTATION OF THE PLAN................................................................15
A. CONTINUED CORPORATE EXISTENCE AND VESTING OF ASSETS IN THE REORGANIZED DEBTORS......................15
B. RESTRUCTURING TRANSACTIONS..........................................................................15
1. RESTRUCTURING TRANSACTIONS GENERALLY.......................................................15
2. OBLIGATIONS OF ANY SUCCESSOR CORPORATION IN A RESTRUCTURING TRANSACTION....................16
C. CORPORATE GOVERNANCE, DIRECTORS AND OFFICERS, EMPLOYMENT-RELATED AGREEMENTS, AND COMPENSATION
PROGRAMS............................................................................................16
1. ARTICLES OF INCORPORATION AND CODE OF REGULATIONS..........................................16
a. REORGANIZED ELDER-BEERMAN.........................................................16
b. THE REORGANIZED ELDER-BEERMAN SUBSIDIARY DEBTORS..................................16
2. DIRECTORS AND OFFICERS OF THE REORGANIZED DEBTORS..........................................16
3. NEW EMPLOYMENT, RETIREMENT, INDEMNIFICATION, AND OTHER RELATED AGREEMENTS AND INCENTIVE
COMPENSATION PROGRAMS......................................................................17
4. CORPORATE ACTION...........................................................................17
D. EXIT FINANCING FACILITY, OBTAINING CASH FOR PLAN DISTRIBUTIONS, AND TRANSFERS OF FUNDS AMONG
THE DEBTORS.........................................................................................17
E. EXECUTION OF AGREEMENTS RELATED TO NEW EQUITY.......................................................17
F. PRESERVATION OF RIGHTS OF ACTION; SETTLEMENT AGREEMENTS AND RELEASES................................17
1. PRESERVATION OF RIGHTS OF ACTION BY THE DEBTORS AND REORGANIZED DEBTORS....................17
2. SETTLEMENT AGREEMENTS AND RELEASES.........................................................18
a. COMPREHENSIVE SETTLEMENT AGREEMENT................................................18
b. RELEASES BY HOLDERS OF CLAIMS OR INTERESTS........................................18
c. INJUNCTION RELATED TO RELEASES....................................................18
G. CONTINUATION OF CERTAIN EMPLOYEE, RETIREE, AND WORKERS' COMPENSATION BENEFITS.......................18
1. EMPLOYEE BENEFITS..........................................................................18
2. RETIREE HEALTH, MEDICAL, AND LIFE INSURANCE BENEFITS.......................................19
3. PURCHASE DISCOUNT FOR RETIREES.............................................................19
4. SELF-INSURED WORKERS' COMPENSATION BENEFITS................................................19
H. LIMITATIONS ON AMOUNTS TO BE DISTRIBUTED TO HOLDERS OF ALLOWED INSURED CLAIMS.......................19
I. CANCELLATION AND SURRENDER OF INSTRUMENTS, SECURITIES, AND OTHER DOCUMENTATION......................19
J. OTHER AGREEMENTS RELATED TO IMPLEMENTATION OF THE PLAN..............................................19
K. RELEASE OF LIENS....................................................................................20
L. EFFECTUATING DOCUMENTS; FURTHER TRANSACTIONS; EXEMPTION FROM CERTAIN TRANSFER TAXES.................20
ARTICLE V. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES...............................................20
A. EXECUTORY CONTRACTS AND UNEXPIRED LEASES TO BE ASSUMED OR ASSUMED AND ASSIGNED......................20
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
1. ASSUMPTION AND ASSIGNMENT GENERALLY........................................................20
2. ASSUMPTIONS AND ASSIGNMENTS OF REAL PROPERTY EXECUTORY CONTRACTS AND UNEXPIRED LEASES......20
3. ASSUMPTION OF TOLEDO, OHIO STORES LEASES AS MODIFIED.......................................21
4. ASSIGNMENTS RELATED TO THE RESTRUCTURING TRANSACTIONS......................................21
5. APPROVAL OF ASSUMPTIONS AND ASSIGNMENTS....................................................21
B. PAYMENTS RELATED TO ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES..........................21
C. EXECUTORY CONTRACTS AND UNEXPIRED LEASES TO BE REJECTED.............................................21
D. BAR DATE FOR REJECTION DAMAGES......................................................................22
E. SPECIAL EXECUTORY CONTRACT AND UNEXPIRED LEASE ISSUES...............................................22
1. OBLIGATIONS TO INDEMNIFY DIRECTORS, OFFICERS, AND EMPLOYEES................................22
2. REINSTATEMENT OF ALLOWED SECONDARY LIABILITY CLAIMS ARISING FROM OR RELATED TO
EXECUTORY CONTRACTS OR UNEXPIRED LEASES ASSUMED BY THE DEBTORS.............................22
F. EXECUTORY CONTRACTS AND UNEXPIRED LEASES ENTERED INTO AND OTHER OBLIGATIONS INCURRED AFTER
THE PETITION DATE...................................................................................22
ARTICLE VI. PROVISIONS GOVERNING DISTRIBUTIONS..................................................................23
A. DISTRIBUTIONS FOR CLAIMS OR INTERESTS ALLOWED AS OF THE EFFECTIVE DATE..............................23
1. DISTRIBUTIONS TO BE MADE ON EFFECTIVE DATE.................................................23
2. DISTRIBUTIONS ON EFFECTIVE DATE IN RESPECT OF ELDER-BEERMAN RESERVE CLASS CLAIMS...........23
3. DISTRIBUTIONS ON EFFECTIVE DATE IN RESPECT OF MARGO'S RESERVE CLASS CLAIMS.................23
B. METHOD OF DISTRIBUTIONS TO HOLDERS OF CLAIMS........................................................23
C. COMPENSATION AND REIMBURSEMENT FOR SERVICES RELATED TO DISTRIBUTIONS................................23
D. DELIVERY OF DISTRIBUTIONS AND UNDELIVERABLE OR UNCLAIMED DISTRIBUTIONS..............................23
1. DELIVERY OF DISTRIBUTIONS IN GENERAL.......................................................23
2. UNDELIVERABLE DISTRIBUTIONS HELD BY DISBURSING AGENTS......................................24
a. HOLDING AND INVESTMENT OF UNDELIVERABLE DISTRIBUTIONS.............................24
b. AFTER DISTRIBUTIONS BECOME DELIVERABLE............................................24
c. FAILURE TO CLAIM UNDELIVERABLE DISTRIBUTIONS......................................24
E. DISTRIBUTION RECORD DATE............................................................................24
F. MEANS OF CASH PAYMENTS..............................................................................25
G. TIMING AND CALCULATION OF AMOUNTS TO BE DISTRIBUTED.................................................25
1. ALLOWED CLAIMS OR ALLOWED INTERESTS IN NON-RESERVE CLASSES.................................25
2. ALLOWED CLAIMS IN RESERVE CLASSES..........................................................25
a. INITIAL DISTRIBUTIONS.............................................................25
b. ADDITIONAL QUARTERLY DISTRIBUTIONS ON ACCOUNT OF PREVIOUSLY ALLOWED CLAIMS........25
3. DISTRIBUTIONS OF NEW EQUITY ...............................................................25
4. DE MINIMIS DISTRIBUTIONS...................................................................26
5. COMPLIANCE WITH TAX REQUIREMENTS...........................................................26
H. SETOFFS.............................................................................................26
I. SURRENDER OF CANCELED INSTRUMENTS OR SECURITIES.....................................................26
1. UNTENDERED SECURITIES......................................................................27
2. LOST, STOLEN, MUTILATED, OR DESTROYED UNTENDERED SECURITIES................................27
3. FAILURE TO SURRENDER CANCELED UNTENDERED SECURITIES........................................27
4. OTHER NOTES, INSTRUMENTS, OR DOCUMENTS.....................................................27
ARTICLE VII. PROCEDURES FOR RESOLVING DISPUTED CLAIMS OR INTERESTS......................................27
A. PROSECUTION OF OBJECTIONS TO CLAIMS OR INTERESTS....................................................27
1. OBJECTIONS TO CLAIMS OR INTERESTS..........................................................27
2. AUTHORITY TO PROSECUTE OBJECTIONS..........................................................27
B. TREATMENT OF DISPUTED CLAIMS OR DISPUTED INTERESTS..................................................28
1. NO PAYMENTS ON ACCOUNT OF DISPUTED CLAIMS OR DISPUTED INTERESTS AND DISPUTED
CLAIMS RESERVES............................................................................28
2. FUNDING OF DISPUTED CLAIMS RESERVES AND RECOURSE...........................................28
a. FUNDING...........................................................................28
b. RECOURSE..........................................................................28
3. PROPERTY HELD IN DISPUTED CLAIMS RESERVES..................................................28
C. DISTRIBUTIONS ON ACCOUNT OF DISPUTED CLAIMS OR DISPUTED INTERESTS ONCE ALLOWED......................29
D. TAX REQUIREMENTS FOR INCOME GENERATED BY DISPUTED CLAIM RESERVES....................................29
</TABLE>
v
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<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE VIII. CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN...................................29
A. CONDITIONS TO CONFIRMATION..........................................................................29
B. CONDITIONS TO EFFECTIVE DATE........................................................................29
C. WAIVER OF CONDITIONS TO CONFIRMATION OR EFFECTIVE DATE..............................................30
D. EFFECT OF NONOCCURRENCE OF CONDITIONS TO EFFECTIVE DATE.............................................30
ARTICLE IX. CONFIRMABILITY AND SEVERABILITY OF A PLAN AND CRAMDOWN..............................................30
A. CONFIRMABILITY AND SEVERABILITY OF A PLAN...........................................................30
B. CRAMDOWN............................................................................................30
ARTICLE X. DISCHARGE, TERMINATION, INJUNCTION, AND SUBORDINATION RIGHTS........................................31
A. DISCHARGE OF CLAIMS AND TERMINATION OF INTERESTS....................................................31
B. INJUNCTIONS.........................................................................................31
C. TERMINATION OF SUBORDINATION RIGHTS AND SETTLEMENT OF RELATED CLAIMS AND CONTROVERSIES..............32
ARTICLE XI. RETENTION OF JURISDICTION...........................................................................32
ARTICLE XII. MISCELLANEOUS PROVISIONS...................................................................33
A. DISSOLUTION OF THE CREDITORS' COMMITTEES AND CREATION OF THE CLAIMS RESOLUTION COMMITTEE............33
1. CREDITORS' COMMITTEE.......................................................................33
2. CLAIMS RESOLUTION COMMITTEE................................................................33
a. FUNCTION AND COMPOSITION OF THE COMMITTEE.........................................33
b. COMMITTEE PROCEDURES..............................................................33
c. EMPLOYMENT OF PROFESSIONALS BY THE COMMITTEE AND REIMBURSEMENT OF COMMITTEE
MEMBERS...........................................................................34
d. DISSOLUTION OF THE COMMITTEE......................................................34
B. LIMITATION OF LIABILITY.............................................................................34
C. MODIFICATION OF THE PLAN............................................................................34
D. REVOCATION OF THE PLAN..............................................................................34
E. SEVERABILITY OF PLAN PROVISIONS.....................................................................34
F. SUCCESSORS AND ASSIGNS..............................................................................35
G. SERVICE OF CERTAIN PLAN EXHIBITS AND DISCLOSURE STATEMENT EXHIBITS..................................35
H. SERVICE OF DOCUMENTS................................................................................35
</TABLE>
vi
<PAGE> 8
TABLE OF EXHIBITS(1)
<TABLE>
<CAPTION>
<S> <C>
Exhibit I.A.29 Comprehensive Settlement Agreement
Exhibit I.A.83 New Form Warrant Agreement
Exhibit I.A.85 New Registration Rights Agreement
Exhibit I.A.86 Terms of New Receivables Securitization Facility
Exhibit I.A.87 Terms of New Revolving Credit Facility
Exhibit I.A.91 New Share Purchase Rights Agreement
Exhibit I.A.92 New Tax Indemnification Agreement
Exhibit I.A.93 New Tax Sharing Agreement
Exhibit I.A.129 Terms of Toledo Stores Modification Agreements(2)
Exhibit IV.C.1.a(i) Articles of Incorporation of Reorganized Elder-Beerman
Exhibit IV.C.1.a(ii) Code of Regulations of Reorganized Elder-Beerman
Exhibit IV.C.1.b(i) Articles of Incorporation of each Reorganized Elder-Beerman Subsidiary Debtor
Exhibit IV.C.1.b(ii) Code of Regulations of each Reorganized Elder-Beerman Subsidiary Debtor
Exhibit IV.C.2 Initial directors and officers of each of the Reorganized Debtors(2)
Exhibit IV.C.3 Forms of employment and other agreements and plans that are to take effect as of the
Effective Date
Exhibit V.A.1 Schedule of Executory Contracts and Unexpired Leases to be Assumed and Assigned
Exhibit V.C Nonexclusive Schedule of Executory Contracts and Unexpired Leases to be Rejected
- --------
<FN>
1 Except as otherwise indicated, all Exhibits are available for review at the Document Reviewing Centers.
2 To be Filed and available for review at the Document Reviewing Centers no later than 10 days before
the hearing on confirmation of the Plan.
</TABLE>
vii
<PAGE> 9
INTRODUCTION
The Elder-Beerman Stores Corp. ("Elder-Beerman") and the other
above-captioned debtors and debtors in possession (collectively, the "Debtors")
propose the following joint plan of reorganization (the "Plan") for the
resolution of the outstanding claims against and equity interests in the
Debtors. The Debtors are proponents of the Plan within the meaning of section
1129 of the Bankruptcy Code, 11 U.S.C. Section 1129. Reference is made to the
Debtors' disclosure statement, filed contemporaneously with the Plan (the
"Disclosure Statement"), for a discussion of the Debtors' history, businesses,
results of operations, historical financial information, projections, and
properties, and for a summary and analysis of the Plan. There are also other
agreements and documents on file with the Bankruptcy Court that are referenced
in the Plan or the Disclosure Statement that are available for review.
ARTICLE I.
DEFINED TERMS, RULES OF INTERPRETATION,
AND COMPUTATION OF TIME
A. DEFINED TERMS
As used in the Plan, capitalized terms have the meanings set forth
below. Any term that is not otherwise defined herein, but that is used in the
Bankruptcy Code or the Bankruptcy Rules, will have the meaning given to that
term in the Bankruptcy Code or the Bankruptcy Rules, as applicable.
1. "ADMINISTRATIVE CLAIM" means a Claim for costs and expenses of
administration allowed under sections 503(b), 507(b), or 1114(e)(2) of the
Bankruptcy Code, including: (a) the actual and necessary costs and expenses
incurred after the Petition Date of preserving the respective Estates and
operating the businesses of the Debtors (such as wages, salaries, commissions
for services, and payments for inventories, leased equipment, and premises); (b)
compensation for legal, financial advisory, accounting, and other services and
reimbursement of expenses awarded or allowed under sections 330(a) or 331 of the
Bankruptcy Code; (c) all fees and charges assessed against the Estates under
chapter 123 of title 28, United States Code, 28 U.S.C. Sections 1911-1930; (d)
Claims for reclamation allowed in accordance with section 546(c) (2) of the
Bankruptcy Code and the Reclamation Program Order, to the extent not already
paid pursuant to the Reclamation Program Order; (e) all Intercompany Claims
accorded priority pursuant to section 364(c)(1) of the Bankruptcy Code or the
Cash Management Order; (f) the First Chicago Swap Claims; and (g) the
professional fees and expenses of approximately $7,000 incurred by First Chicago
in connection with the Claims Transfer Order.
2. "ALLOWED CLAIM" means:
a. a Claim that has been listed by a particular Debtor on its
Schedules as other than disputed, contingent, or unliquidated, to the
extent that it is not otherwise a Disputed Claim;
b. a Claim for which a proof of Claim has been Filed by the
applicable Bar Date or has otherwise been deemed timely Filed under
applicable law, to the extent that it is not otherwise a Disputed
Claim; or
c. a Claim that is allowed: (i) in any Stipulation of Amount
and Nature of Claim executed by the applicable Reorganized Debtor and
Claim holder on or after the Effective Date; (ii) in any contract,
instrument, or other agreement entered into in connection with the
Plan; (iii) in a Final Order; or (iv) pursuant to the terms of the
Plan.
3. "ALLOWED . . . CLAIM" means an Allowed Claim in the particular Class
or category specified. Any reference herein to a particular Allowed Claim
includes both the secured and unsecured portions of such Claim.
4. "ALLOWED INTEREST" means an Interest: (a) that is registered or
listed as of the Distribution Record Date in a stock register that is maintained
by or on behalf of a Debtor and (b) either (i) is not a Disputed Interest or
(ii) has been allowed (A) in any Stipulation of Amount and Nature of Claim
executed by Reorganized Elder-Beerman and an Interest holder on or after the
Effective Date; (B) in any contract, instrument, or other agreement entered into
in connection with the Plan; (C) in a Final Order; or (D) pursuant to the terms
of the Plan.
5. "ATKINS" means Frederick Atkins, Incorporated.
6. "ATKINS STIPULATION" means the Final Stipulated Order Resolving
Motion of Debtors and Debtors in Possession for an Order Approving Stipulated
Order Assuming Frederick Atkins, Incorporated Standard Service Agreement,
entered by the Bankruptcy Court.
<PAGE> 10
2
7. "BALLOT" means the form or forms distributed to each holder of an
impaired Claim or Interest on which the holder indicates acceptance or rejection
of the Plan or any election for treatment of such Claim or Interest under the
Plan.
8. "BANK LOAN CLAIM" means a Claim under or evidenced by the
Prepetition Credit Facility.
9. "BANKRUPTCY CODE" means title 11 of the United States Code, 11
U.S.C. Sections 101-1330, as now in effect or hereafter amended.
10. "BANKRUPTCY COURT" means the United States District Court having
jurisdiction over the Reorganization Cases and, to the extent of any reference
made pursuant to 28 U.S.C. Section 157, the bankruptcy unit of such District
Court.
11. "BANKRUPTCY RULES" means, collectively, the Federal Rules of
Bankruptcy Procedure and the local rules of the Bankruptcy Court, as now in
effect or hereafter amended.
12. "BAR DATE" means the applicable bar date by which a proof of Claim
or proof of Interest must be or must have been Filed, as established by an order
of the Bankruptcy Court, including the Bar Date Order and the Confirmation
Order.
13. "BAR DATE ORDER" means the Order Establishing Bar Dates for Filing
Proofs of Claims and Interests entered by the Bankruptcy Court on March 15,
1996, as the same may have been or may be amended, modified, or supplemented.
14. "BEE-GEE" means The Bee-Gee Shoe Corp., an Ohio corporation, and
one of the Debtors.
15. "BEERMAN ENTITIES" means, collectively; (a) Beerman-Peal; (b) The
Beerman-Peal Corporation; (c) Beerman Investments, Inc.; (d) The Beerman
Corporation; and (e) each of the other entities affiliated with Beerman-Peal
that are identified in paragraph 3.b of the Comprehensive Settlement Agreement.
16. "BEERMAN-PEAL" means Beerman-Peal Holdings, Inc., an Ohio
corporation, and the holder of the Old Common Stock of Elder-Beerman.
17. "BUSINESS DAY" means any day, other than a Saturday, Sunday, or
"legal holiday" (as defined in Bankruptcy Rule 9006(a)).
18. "CASH DISTRIBUTION AMOUNT" means $79,150,000, subject to an
increase of $548,730 if Atkins makes the election in paragraph 2 of the Atkins
Stipulation to have its "Cure Claim" (as defined in the Atkins Stipulation)
treated as a Class C-5 Claim.
19. "CASH INVESTMENT YIELD" means the net yield earned by the
applicable Disbursing Agent from the investment of cash held pending
distribution pursuant to the Plan (including any cash received by such
Disbursing Agent on account of dividends and other distributions on New Common
Stock), which investment will be in a manner consistent with the Reorganized
Elder-Beerman's investment and deposit guidelines.
20. "CASH MANAGEMENT ORDER" means the Order (A) Approving Centralized
Cash Management System, Use of Existing Bank Accounts and Business Forms, and
Current Investment and Deposit Guidelines and (B) According Priority Status to
All Postpetition Intercompany Claims, entered by the Bankruptcy Court on October
17, 1995.
21. "CHARGIT" means The El-Bee Chargit Corp., an Ohio corporation, and
one of the Debtors.
22. "CLAIM" means a "claim," as defined in section 101(5) of the
Bankruptcy Code, against any Debtor.
23. "CLAIMS OBJECTION BAR DATE" means, for all Claims, other than those
Claims allowed in accordance with Section I.A.2.c, the latest of: (a) 60 days
after the Effective Date; (b) 45 days after the Filing of a proof of claim for
such Claim; and (c) such other period of limitation as may be specifically fixed
by the Plan, the Confirmation Order, the Bankruptcy Rules, or a Final Order for
objecting to such Claim.
24. "CLAIMS RESOLUTION COMMITTEE" means the committee to be established
pursuant to Section XII.A.2.
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25. "CLAIMS TRANSFER ORDER" means the Agreed Order Establishing
Procedure for Transfer/Assignment of Claims, entered by the Bankruptcy Court on
August 20, 1997.
26. "CLASS" means a class of Claims or Interests, as described in
Article II.
27. "CLOSE OUT NOTICE" means a written notice provided by Reorganized
Elder-Beerman to First Chicago of Reorganized Chargit's intent to close out all
of the outstanding interest rate swaps under the First Chicago Swap Agreement.
28. "COLLATERAL" means any property of the Debtors that is subject to a
valid and enforceable lien to secure a Claim.
29. "COMPREHENSIVE SETTLEMENT AGREEMENT" means, the Settlement
Agreement among the Debtors, the ESOP, the ESOP Committee, and the Beerman
Entities, substantially in the form of Exhibit I.A.29.
30. "CONFIRMATION" means the entry of the Confirmation Order on the
docket of the Bankruptcy Court.
31. "CONFIRMATION DATE" means the date on which the Bankruptcy Court
enters the Confirmation Order on its docket, within the meaning of Bankruptcy
Rules 5003 and 9021.
32. "CONFIRMATION HEARING" means the hearing held by the Bankruptcy
Court on Confirmation of the Plan, as such hearing may be continued from time to
time.
33. "CONFIRMATION ORDER" means the order of the Bankruptcy Court
confirming the Plan pursuant to section 1129 of the Bankruptcy Code.
34. "CREDITORS' COMMITTEES" means, collectively: (a) the Trade
Creditors' Committee, (b) the Institutional Lenders' Committee, and (c) any
other committee of creditors appointed in the Reorganization Cases pursuant to
section 1102 of the Bankruptcy Code.
35. "CURE AMOUNT CLAIM" means a Claim based upon a Debtor's defaults
pursuant to an Executory Contract or Unexpired Lease at the time such contract
or lease is assumed by that Debtor under section 365 of the Bankruptcy Code.
36. "DEBTORS" means, collectively, the above-captioned debtors and
debtors in possession.
37. "DIP CREDIT AGREEMENT" means, collectively: (a) the Post-Petition
Loan and Security Agreement, dated as of October 16, 1995, as subsequently
amended and modified, among Elder-Beerman and Chargit (as borrowers), the
Guarantors Party thereto (as guarantors), those entities identified therein as
"Lenders" and their respective successors and assigns, Citibank, N.A. (as
issuer), and Citicorp U.S.A., Inc. (as agent and swing loan bank); (b) all
amendments and extensions thereto; and (c) all security agreements and
instruments related to the documents identified in (a) and (b).
38. "DIP LENDER" means, collectively: (a) those entities identified as
"Lenders" in the DIP Credit Agreement and their respective successors and
assigns, (b) Citibank, N.A. (as issuer), and (c) Citicorp U.S.A., Inc. (as agent
and swing loan bank).
39. "DISBURSING AGENT" means Reorganized Elder-Beerman, in its capacity
as a disbursing agent pursuant to Article VI, or any Third Party Disbursing
Agent.
40. "DISCLOSURE STATEMENT" means the disclosure statement (including
all exhibits and schedules thereto or referenced therein) that relates to the
Plan, as approved by the Bankruptcy Court pursuant to section 1125 of the
Bankruptcy Code, as the same may be amended, modified, or supplemented.
41. "DISPUTED CLAIM" means:
a. if no proof of Claim has been Filed by the applicable Bar
Date or has otherwise been deemed timely Filed under applicable law:
(i) a Claim that is listed on a Debtor's Schedules as other than
disputed, contingent, or unliquidated, but as to which the applicable
Debtor, Reorganized Debtor, or, prior to the Confirmation Date, any
other party in interest, has Filed an objection by the Claims Objection
Bar Date, but only to the extent of the
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difference between the amount of the Claim listed in the Schedules and
the amount of such Claim asserted in the objection, or (ii) a Claim
that is listed on a Debtor's Schedules as disputed, contingent, or
unliquidated;
b. if a proof of Claim or request for payment of an
Administrative Claim has been Filed by the Bar Date or has otherwise
been deemed timely Filed under applicable law: (i) a Claim for which no
corresponding Claim is listed on a Debtor's Schedules; (ii) a Claim for
which a corresponding Claim is listed on a Debtor's Schedules as other
than disputed, contingent, or unliquidated, but the nature or amount of
the Claim as asserted in the proof of Claim varies from the nature and
amount of such Claim as it is listed on the Schedules, but only to the
extent of such variation; (iii) a Claim for which a corresponding Claim
is listed on a Debtor's Schedules as disputed, contingent, or
unliquidated; (iv) a Claim for which an objection has been Filed by the
applicable Debtor, Reorganized Debtor, or, prior to the Confirmation
Date, any other party in interest, by the Claims Objection Bar Date,
and such objection has not been withdrawn or denied by a Final Order,
but only to the extent of the difference between the amount of the
Claim asserted in the proof of Claim and the amount of such Claim
asserted in the objection; or (v) any Personal Injury Claim; or
c. notwithstanding a. or b. above, any Allowed Secondary
Liability Claim against Elder-Beerman for which the underlying Claim is
an Allowed Class C-6 Claim, until the holder of such Class C-6 Claim
has received the full recovery to which such holder is entitled under
Section III.B.2.d in respect of such Class C-6 Claim.
42. "DISPUTED CLAIMS RESERVES" means, collectively, the Disputed
Elder-Beerman Claims Reserve and the Disputed Margo's Claims Reserve.
43. "DISPUTED ELDER-BEERMAN CLAIMS RESERVE" means the reserve of cash
and New Common Stock established pursuant to Section VII.B.2.a for Disputed
Claims in the Elder-Beerman Reserve Class, which reserve will be held in trust
for holders of Allowed Claims in the Elder-Beerman Reserve Class and will not
constitute property of any of the Reorganized Debtors.
44. "DISPUTED INSURED CLAIM" and "DISPUTED UNINSURED CLAIM" mean,
respectively, an Insured Claim or an Uninsured Claim that is also a Disputed
Claim.
45. "DISPUTED INTEREST" means: (a) any Interest as to which an
objection has been filed by the applicable Debtor, Reorganized Debtor, or, prior
to the Confirmation Date, any other party in interest, by the Claims Objection
Bar Date, and such objection has not been withdrawn or denied by a Final Order.
46. "DISPUTED MARGO'S CLAIMS RESERVE" means the reserve of cash
established pursuant to Section VII.B.2.a.iii for Disputed Claims in the Margo's
Reserve Class, which reserve will be held in trust for holders of Allowed Claims
in the Margo's Reserve Class and will not constitute property of any of the
Reorganized Debtors.
47. "DISTRIBUTION RECORD DATE" means the Confirmation Date.
48. "DOCUMENT REVIEWING CENTERS" means, collectively: (a) the offices
of Jones, Day, Reavis & Pogue located at 901 Lakeside Avenue, Cleveland, Ohio
44114, and (b) any other locations designated by the Debtors at which any party
in interest may review all of the exhibits and schedules to the Plan and the
Disclosure Statement.
49. "EFFECTIVE DATE" means a Business Day, as determined by the
Debtors, that (a) is as soon as reasonably practicable after the Confirmation
Date and (b) is the day on which (i) all conditions to the Effective Date in
Section VIII.B have been met or waived pursuant to Section VIII.C and (ii) no
stay of the Confirmation Order is in effect.
50. "ELDER-BEERMAN" means The Elder-Beerman Stores Corp., an Ohio
corporation, one of the Debtors, and the direct parent corporation of each of
the other Debtors.
51. "ELDER-BEERMAN DEBTORS" means all Debtors other than Margo's.
52. "ELDER-BEERMAN RESERVE CLASS" means Class C-5.
53. "ELDER-BEERMAN SUBSIDIARY DEBTORS" means, individually or
collectively, a Debtor or Debtors other than Elder-Beerman, as applicable.
<PAGE> 13
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54. "ESOP" means The Elder-Beerman Stores Corp. Profit Sharing and
Stock Ownership Plan.
55. "ESOP CLAIM" means the Allowed Unsecured Claim of the ESOP in an
amount such that the ESOP's Pro Rata share of the distributions to be made to
Class C-5 equals 5.25% of the distributions to be made to such Class, which
Claim is estimated to total approximately $13 million. This Claim shall be in
lieu of all other Claims and Old Preferred Stock Interests of the ESOP in Class
E-3 pursuant to the terms of the Comprehensive Settlement Agreement.
56. "ESOP COMMITTEE" means The Elder-Beerman Stores Corp. Profit
Sharing and Stock Ownership Plan Administration Committee.
57. "ESTATE" means, as to each Debtor, the estate created for that
Debtor in its Reorganization Case pursuant to section 541 of the Bankruptcy
Code.
58. "EXECUTORY CONTRACT AND UNEXPIRED LEASE" means a contract or lease
to which one or more of the Debtors is a party that is subject to assumption or
rejection under section 365 of the Bankruptcy Code.
59. "EXIT FINANCING FACILITY" means, collectively, the New Receivables
Securitization Facility and the New Revolving Credit Facility.
60. "FACE AMOUNT" means:
a. when used with reference to a Disputed Insured Claim, either
(i) the full stated amount claimed by the holder of such Claim in any
proof of Claim Filed by the Bar Date, or otherwise deemed timely Filed
under applicable law, if the proof of Claim specifies only a liquidated
amount, or (ii) the applicable deductible under the relevant insurance
policy, minus any reimbursement obligations of the applicable Debtor to
the insurance carrier for sums expended by the insurance carrier on
account of such Claim (including defense costs), if such amount is less
than the amount specified in (i) above or the proof of Claim specifies
an unliquidated amount; and
b. when used with reference to a Disputed Uninsured Claim,
either (i) the full stated amount claimed by the holder of such Claim
in any proof of Claim Filed by the Bar Date or otherwise deemed timely
Filed under applicable law, if the proof of Claim specifies only a
liquidated amount or (ii) the amount of the Claim acknowledged by the
applicable Debtor or Reorganized Debtor in any objection Filed to such
Claim, if no proof of Claim has been Filed by the Bar Date or has
otherwise been deemed timely Filed under applicable law or if the proof
of Claim specifies an unliquidated amount.
61. "FEE CLAIM" means a Claim under sections 330(a), 331, 503, or 1103
of the Bankruptcy Code for compensation of a Professional or other entity for
services rendered or expenses incurred in the Reorganization Cases.
62. "FEE ORDER" means, collectively: (a) the Order on Procedure for
Allowance and Payment of Professional Interim Fees and Expenses, entered by the
Bankruptcy Court on December 12, 1995, and (b) the Order Modifying Interim Fee
Order, entered by the Bankruptcy Court on March 26, 1997.
63. "FILE," "FILED," or "FILING" means file, filed, or filing with the
Bankruptcy Court in the Reorganization Cases.
64. "FINAL ORDER" means an order or judgment of the Bankruptcy Court,
or other court of competent jurisdiction, as entered on the docket in any
Reorganization Case or the docket of any other court of competent jurisdiction,
that has not been reversed, stayed, modified, or amended, and as to which the
time to appeal or seek certiorari has expired, and no appeal or petition for
certiorari has been timely taken, or as to which any appeal that has been taken
or any petition for certiorari that has been timely filed has been resolved by
the highest court to which the order or judgment was appealed or from which
certiorari was sought.
65. "FIRST CHICAGO" means The First National Bank of Chicago.
66. "FIRST CHICAGO SWAP AGREEMENT" means the Interest Rate Swap
Agreement, dated July 7, 1989, between Elder-Beerman and First Chicago.
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67. "FIRST CHICAGO SWAP CLAIMS" means the interest rate swap Claims and
related guaranty Claims of First Chicago accorded administrative expense
priority pursuant to the Order Ratifying Debtors' Interest Rate Swap
Arrangements with First National Bank of Chicago, entered by the Bankruptcy
Court on October 17, 1995.
68. "IDRB" means industrial development revenue bond.
69. "INSTITUTIONAL LENDERS' COMMITTEE" means the Official Committee of
Unsecured Creditors appointed in the Reorganization Cases pursuant to section
1102 of the Bankruptcy Code, as the same may have been or is constituted from
time to time.
70. "INSURED CLAIM" means any Claim arising from an incident or
occurrence that is covered under a Debtor's insurance policy, other than a
workers' compensation insurance policy.
71. "INTERCOMPANY CLAIM" means, collectively: (a) any account
reflecting intercompany book entries by one Debtor with respect to any other
Debtor and (b) any Claim not reflected in such book entries that is held by a
Debtor against another Debtor.
72. "INTEREST" means the rights of the holders of the Old Common Stock
of any Debtor, the Old Preferred Stock, and the rights of any entity to purchase
or demand the issuance of any of the foregoing, including: (a) redemption,
conversion, exchange, voting, participation, and dividend rights; (b)
liquidation preferences; and (c) stock options and warrants.
73. "IRS" means the Internal Revenue Service of the United States of
America.
74. "KEY EMPLOYEE RETENTION PROGRAM ORDERS" means, collectively: (a)
the Order Authorizing Debtors and Debtors in Possession to Implement Key
Employee Retention/Performance Program, entered by the Bankruptcy Court on
December 14, 1995; (b) the Order Authorizing The Elder-Beerman Stores Corp. to
Implement Reorganization Bonus Plan, entered by the Bankruptcy Court on November
15, 1996; and (c) the Order Approving Employment Agreement with New Chief
Executive Officer, entered by the Bankruptcy Court on January 3, 1997.
75. "MARGO'S" means Margo's LaMode, Inc., a Texas corporation, and one
of the Debtors.
76. "MARGO'S RESERVE CLASS" means Class C-6.
77. "NATIONAL SECURITIES EXCHANGE" means any exchange registered
pursuant to Section 6(a) of the Securities Exchange Act of 1934, as amended,
including the New York Stock Exchange and the National Association of Securities
Dealers Automated Quotation System -- National Market System.
78. "NBD BANK" means NBD Bank, N.A.
79. "NBD SWAP CLAIM" means the Claim of NBD Bank against Elder-Beerman
under or evidenced by the Interest Rate Swap Agreement, dated as of May 17,
1995, between Elder-Beerman and NBD Bank.
80. "NCB IDRB" means the IDRBs under or evidenced by the Indenture of
Mortgage between County of Warren, Ohio and The Ohio Citizens Trust Co., Toledo,
Ohio (n/k/a National City Bank, Northwest), dated as of May 1, 1976, as the same
may have been subsequently modified, supplemented, or amended, together with all
leases, guaranty agreements, and other instruments or agreements related
thereto.
81. "NEW COMMON STOCK" means the shares of common stock, without par
value, of Reorganized Elder-Beerman, authorized pursuant to the articles of
incorporation of Reorganized Elder-Beerman.
82. "NEW EQUITY" means, collectively: (a) the New Common Stock and (b)
the New Warrants.
83. "NEW FORM WARRANT AGREEMENT" means the warrants agreement between
Reorganized Elder-Beerman and the warrants agent named therein, substantially in
the form of Exhibit I.A.83.
84. "NEW PREFERRED STOCK" means the Class A, Class B, and Class C
Preferred Stock, without par value, of Reorganized Elder-Beerman authorized
pursuant to the Amended Articles of Incorporation of Reorganized Elder-Beerman.
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85. "NEW REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement between Reorganized Elder-Beerman and holders of New Common Stock
named therein with respect to the registration of shares of New Common Stock
held by such parties, substantially in the form of Exhibit I.A.85.
86. "NEW RECEIVABLES SECURITIZATION FACILITY" means the $125 million
accounts receivable securitization facility of the Reorganized Debtors,
substantially on the terms set forth in Exhibit I.A.86.
87. "NEW REVOLVING CREDIT FACILITY" means the $125 million revolving
credit facility of the Reorganized Debtors, substantially on the terms set forth
in Exhibit I.A.87.
88. "NEW SERIES A WARRANTS" means the warrants to be issued by
Reorganized Elder-Beerman to purchase up to 2% of the outstanding common stock
of Reorganized Elder-Beerman pursuant to the New Form Warrant Agreement,
substantially in the form provided therein, which warrants will have a strike
price set to reflect a total equity value for the Reorganized Elder-Beerman
Debtors of $160,000,000.
89. "NEW SERIES B WARRANTS" means the warrants to be issued by
Reorganized Elder-Beerman to purchase up to 3% of the outstanding common stock
of Reorganized Elder-Beerman pursuant to the New Form Warrant Agreement,
substantially in the form provided therein, which warrants will have a strike
price set to reflect a total equity value for the Reorganized Elder-Beerman
Debtors of $185,000,000.
90. "NEW SHARE PURCHASE RIGHTS" means the rights to purchase shares of
New Preferred Stock, which rights will be issued pursuant to the New Share
Purchase Rights Agreement.
91. "NEW SHARE PURCHASE RIGHTS AGREEMENT" means the share purchase
rights agreement, substantially in the form of Exhibit I.A.91, pursuant to which
New Share Purchase Rights will be issued.
92. "NEW TAX INDEMNIFICATION AGREEMENT" means the indemnification
agreement among each of the Reorganized Debtors and each of the Beerman
Entities, substantially in the form of Exhibit I.A.92.
93. "NEW TAX SHARING AGREEMENT" means the tax sharing agreement among
the Reorganized Debtors, substantially in the form of Exhibit I.A.93.
94. "NEW WARRANTS" means, collectively: (a) the New Series A Warrants
and (b) the New Series B Warrants.
95. "NEW WARRANTS AGREEMENTS" means, collectively, the New Series A
Warrant Agreement and the New Series B Warrant Agreement.
96. "NOTE CLAIM" means a Claim under or evidenced by the Prepetition
Note Agreements.
97. "OHIO REVISED CODE" means the Revised Code of Ohio Sections 1.01
et seq.
98. "OLD COMMON STOCK OF . . ." means, when used with reference to a
particular Debtor or Debtors, the common stock issued by such Debtor or Debtors
and outstanding immediately prior to the Petition Date.
99. "OLD EQUITY" means, collectively: (a) the Old Common Stock of any
of the Debtors and (b) the Old Preferred Stock.
100. "OLD NOTES" means the promissory notes issued by Elder-Beerman
pursuant to the Prepetition Note Agreements.
101. "OLD PREFERRED STOCK" means the preferred stock (Series B) of
Elder-Beerman issued and outstanding immediately prior to the Petition Date.
102. "ORDINARY COURSE PROFESSIONALS ORDER" means, collectively: (a) the
Order Authorizing Debtors and Debtors in Possession to Retain, Employ and Pay
Professionals in the Ordinary Course of Debtors' Businesses, entered by the
Bankruptcy Court on October 18, 1995, and (b) the Agreed Order Clarifying Order
Authorizing Debtors and Debtors in Possession to Retain, Employ and Pay
Professionals in the Ordinary Course of Debtors' Businesses, entered by the
Bankruptcy Court on April 19, 1996.
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103. "PERFORMANCE INCENTIVE PLAN" means The Elder-Beerman Stores Corp.
Equity and Performance Incentive Plan, which is included as part of Exhibit
IV.C.3.
104. "PERSONAL INJURY CLAIMS" means all Claims alleging or involving
personal injuries, wrongful death, or damages related thereto or arising in
connection therewith asserted against any of the Debtors that, prior to the
Effective Date, were not settled, compromised, or otherwise resolved.
105. "PETITION DATE" means October 17, 1995.
106. "PLAN" means this joint plan of reorganization for each of the
Debtors, to the extent applicable to any Debtor, and all Exhibits attached
hereto or referenced herein, as the same may be amended, modified, or
supplemented.
107. "PREPETITION CREDIT FACILITY" means the Credit Agreement, dated as
of March 22, 1994, among Elder-Beerman, the lender parties named therein, The
First National Bank of Chicago (as agent), Bank One, Dayton, NA (as co-agent),
The Fifth Third Bank and National City Bank, Dayton (as lead managers), as the
same may have been subsequently modified, amended, or supplemented, together
with all instruments and agreements related thereto.
108. "PREPETITION NOTE AGREEMENTS" means, collectively: (a) the Note
Agreement, dated as of October 31, 1988, by and among Elder-Beerman and the
Purchasers named therein concerning $25,000,000 Principal Amount of 11.05%
Senior Notes due October 31, 1998 and (b) the Note Purchase Agreement, dated as
of January 15, 1994, by and among Elder-Beerman and the Purchasers named
therein concerning $25,000,000 Principal Amount of 7.09% Series A Senior Notes
due March 1, 2004, $15,000,000 Principal Amount of 7.43% Series B Senior Notes
due March 31, 2006, and $10,000,000 Principal Amount of 6.87% Series C Senior
Notes due March 1, 2004, as the same may have been subsequently modified,
amended, or supplemented, together with all instruments and agreements related
thereto.
109. "PRINCIPAL MUTUAL MORTGAGE" means the Mortgage by and between The
Abco Land Development Corp. (as fee owner), The Beerman Corporation (as
mortgagor), and Principal Mutual Life Insurance Company (as mortgagee), as the
same may have been subsequently modified, amended, or supplemented, together
with all notes, mortgages, and other instruments and agreements related thereto.
110. "PRINCIPAL MUTUAL MORTGAGE CLAIM" means any Claim under or
evidenced by the Principal Mutual Mortgage.
111. "PRIORITY CLAIM" means a Claim that is entitled to priority in
payment pursuant to section 507(a) of the Bankruptcy Code that is not an
Administrative Claim or a Priority Tax Claim.
112. "PRIORITY TAX CLAIM" means a Claim that is entitled to priority in
payment pursuant to section 507(a)(8) of the Bankruptcy Code.
113. "PRO RATA" means:
a. when used with reference to a distribution of cash or New
Equity pursuant to Article III, proportionately so that with respect to
a particular Allowed Claim, the ratio of (i)(A) the amount of property
distributed on account of such Claim to (B) the amount of such Claim,
is the same as the ratio of (ii)(A) the amount of property distributed
on account of all Allowed Claims of the Class in which such Claim is
included to (B) the amount of all Allowed Claims in that Class; and
b. when used with reference to distributions of the Cash
Investment Yield pursuant to Sections VI.A, VI.D, VI.G, and VII.C, the
portion of the Cash Investment Yield allocable to a particular Allowed
Claim on the basis of the amount of cash then being distributed on
account of such Claims (including dividends and other distributions on
New Common Stock being distributed on account of such Claim).
Calculations of the Pro Rata shares of the Cash Investment Yield to be
distributed at any particular time will be based on the Cash Investment
Yield generated as of the last day of the month prior to the month in
which such distributions are to be made.
114. "PROFESSIONAL" means any professional employed in the
Reorganization Cases pursuant to sections 327 or 1103 of the Bankruptcy Code or
any professional or other entity seeking compensation or reimbursement of
expenses in connection with the Reorganization Cases pursuant to section
503(b)(4) of the Bankruptcy Code.
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115. "QUARTERLY DISTRIBUTION DATE" means the last Business Day of the
month following the end of each calendar quarter after the Effective Date;
provided, however, that if the Effective Date is within 45 days of the end of a
calendar quarter, the first Quarterly Distribution Date will be the last
Business Day of the month following the end of the first calendar quarter after
the calendar quarter in which the Effective Date falls.
116. "REAL PROPERTY EXECUTORY CONTRACT AND UNEXPIRED LEASE" means an
Executory Contract or Unexpired Lease relating to a Debtor's interest in real
property, and any Executory Contracts and Unexpired Leases appurtenant to the
applicable real property, including all easements; licenses; permits; rights;
privileges; immunities; options; rights of first refusal; powers; uses;
usufructs; reciprocal easement or operating agreements; vault, tunnel or bridge
agreements or franchises; development rights; and any other interests in real
estate or rights in rem related to the applicable real property.
117. "RECLAMATION PROGRAM ORDER" means the Order Establishing
Procedures for Settlement and Payment of Reclamation Demands, entered by the
Bankruptcy Court on April 11, 1996.
118. "REINSTATED" or "REINSTATEMENT" means rendering a Claim or
Interest unimpaired within the meaning of section 1124 of the Bankruptcy Code.
Unless the Plan specifies a particular method of Reinstatement, when the Plan
provides that an Allowed Claim or Allowed Interest will be Reinstated, such
Claim or Interest will be Reinstated, at the applicable Reorganized Debtor's
sole discretion, in accordance with one of the following:
a. The legal, equitable, and contractual rights to which such
Claim or Interest entitles the holder will be unaltered; or
b. Notwithstanding any contractual provision or applicable law
that entitles the holder of such Claim or Interest to demand or receive
accelerated payment of such Claim or Interest after the occurrence of a
default:
i. any such default that occurred before or after the
commencement of the applicable Reorganization Case, other than
a default of a kind specified in section 365(b)(2) of the
Bankruptcy Code, will be cured;
ii. the maturity of such Claim or Interest as such
maturity existed before such default will be reinstated;
iii. the holder of such Claim or Interest will be
compensated for any damages incurred as a result of any
reasonable reliance by such holder on such contractual
provision or such applicable law; and
iv. the legal, equitable, or contractual rights to
which such Claim or Interest entitles the holder of such Claim
or Interest will not otherwise be altered.
119. "REORGANIZATION CASE" means: (a) when used with reference to a
particular Debtor, the chapter 11 case pending for that Debtor in the Bankruptcy
Court and (b) when used with reference to all Debtors, the chapter 11 cases
pending for the Debtors in the Bankruptcy Court.
120. "REORGANIZED . . ." means, when used in reference to a particular
Debtor, such Debtor on and after the Effective Date.
121. "RESERVE CLASSES" means, collectively, Classes C-5 and C-6.
122. "RESTRUCTURING TRANSACTIONS" means, collectively, those mergers,
consolidations, restructurings, dispositions, liquidations, or dissolutions that
the Debtors or Reorganized Debtors determine to be necessary or appropriate to
effect a corporate restructuring of their respective businesses or otherwise to
simplify the overall corporate structure of the Reorganized Debtors.
123. "SCHEDULES" means the schedules of assets and liabilities and the
statements of financial affairs Filed by the Debtors, as required by section 521
of the Bankruptcy Code and the Official Bankruptcy Forms, as the same may have
been or may be amended, modified, or supplemented.
124. "SECONDARY LIABILITY CLAIM" means an Unsecured Claim that arises
from a Debtor being liable as a guarantor of, or otherwise being jointly,
severally, or secondarily liable for, any contractual, tort, or other obligation
of
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another Debtor, including any Unsecured Claim based on: (a) guaranties of
collection, payment, or performance; (b) indemnity bonds, obligations to
indemnify, or obligations to hold harmless; (c) performance bonds; (d)
contingent liabilities arising out of contractual obligations or out of
undertakings (including any assignment or other transfer) with respect to
leases, operating agreements, or other similar obligations made or given by a
Debtor relating to the obligations or performance of another Debtor; (e)
vicarious liability; or (f) any other joint or several liability that any Debtor
may have in respect of any obligation that is the basis of a Claim.
125. "SECURED CLAIM" means a Claim that is secured by a lien on
property in which an Estate has an interest or that is subject to setoff under
section 553 of the Bankruptcy Code, to the extent of the value of the Claim
holder's interest in the applicable Estate's interest in such property or to the
extent of the amount subject to setoff, as applicable, as determined pursuant to
sections 506(a) and, if applicable, 1129(b) of the Bankruptcy Code.
126. "SECURITIES ACT" means the Securities Act of 1933, 15 U.S.C.
Sections 77a-77aa, as now in effect or hereafter amended.
127. "STIPULATION OF AMOUNT AND NATURE OF CLAIM" means a stipulation or
other agreement between the applicable Debtor or Reorganized Debtor and a holder
of a Claim or Interest, or an agreed order of the Bankruptcy Court, establishing
the amount and nature of a Claim or Interest.
128. "THIRD PARTY DISBURSING AGENT" means an entity designated by
Reorganized Elder-Beerman to act as a Disbursing Agent pursuant to Section VI.B.
129. "TOLEDO STORES MODIFICATION AGREEMENTS" means, collectively, the
lease and related agreements between Reorganized Elder-Beerman and the entities
named therein, substantially in the form of Exhibit I.A.129.
130. "TRADE CLAIM" means any Unsecured Claim arising from or with
respect to the sale of goods or rendition of services prior to the Petition
Date, in the ordinary course of the applicable Debtor's business, including any
Claim of an employee that is not a Priority Claim.
131. "TRADE CREDITORS' COMMITTEE" means the Official Committee of
Unsecured Trade Creditors appointed in the Reorganization Cases pursuant to
section 1102 of the Bankruptcy Code, as the same may have been or is constituted
from time to time.
132. "UNINSURED CLAIM" means any Claim that is not an Insured Claim.
133. "UNSECURED CLAIM" means any Claim that is not an Administrative
Claim, Priority Claim, Priority Tax Claim, Secured Claim, or Intercompany Claim.
134. "UNTENDERED SECURITIES" means, collectively: (a) all promissory
notes and related agreements or instruments executed pursuant to or in
connection with the Prepetition Note Agreements; (b) the untendered or
unredeemed shares of Old Common Stock of Elder-Beerman issued and outstanding as
of the Petition Date; (c) the untendered or unredeemed shares of Old Preferred
Stock issued and outstanding as of the Petition Date; and (d) the previously
issued common stock of The Elder-Beerman Stores Corp., which is subject to
redemption pursuant to the Agreement of Merger by and between E-B Acquisition
Co. and The Elder-Beerman Stores Corp., dated as of May 26, 1987.
135. "VOTING DEADLINE" means the deadline for submitting Ballots to
accept or reject the Plan in accordance with section 1126 of the Bankruptcy
Code, as specified in the Disclosure Statement.
B. RULES OF INTERPRETATION AND COMPUTATION OF TIME
1. RULES OF INTERPRETATION
For purposes of the Plan, unless otherwise provided herein: (a)
whenever from the context it is appropriate, each term, whether stated in the
singular or the plural, will include both the singular and the plural; (b)
unless otherwise provided in the Plan, any reference in the Plan to a contract,
instrument, release, or other agreement or document being in a particular form
or on particular terms and conditions means that such document will be
substantially in such form or substantially on such terms and conditions; (c)
any reference in the Plan to an existing document or Exhibit Filed or to be
Filed means such document or Exhibit, as it may have been or may be amended,
modified, or supplemented pursuant to the
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Plan; (d) any reference to an entity as a holder of a Claim includes that
entity's successors, assigns, and affiliates; (e) all references in the Plan to
Sections, Articles, and Exhibits are references to Sections, Articles, and
Exhibits of or to the Plan; (f) the words "herein," "hereunder," and "hereto"
refer to the Plan in its entirety rather than to a particular portion of the
Plan; (g) captions and headings to Articles and Sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the interpretation of the Plan; (h) subject to the provisions of any contract,
articles of incorporation, code of regulations, similar constituent documents,
instrument, release, or other agreement or document entered into in connection
with the Plan, the rights and obligations arising under the Plan shall be
governed by, and construed and enforced in accordance with, federal law,
including the Bankruptcy Code and Bankruptcy Rules; and (i) the rules of
construction set forth in section 102 of the Bankruptcy Code will apply.
2. COMPUTATION OF TIME
In computing any period of time prescribed or allowed by the
Plan, the provisions of Bankruptcy Rule 9006(a) will apply.
ARTICLE II.
CLASSES OF CLAIMS AND INTERESTS
The Plan constitutes a separate plan of reorganization for each
Debtor, and each Class of Claims and Interests constitutes a separate Class for
each Debtor. All Claims and Interests, except Administrative Claims and Priority
Tax Claims, are placed in the following Classes for each of the Debtors. In
accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims
and Priority Tax Claims, as described in Section III.A, have not been classified
and thus are excluded from the following Classes. A Claim or Interest is
classified in a particular Class only to the extent that the Claim or Interest
qualifies within the description of that Class and is classified in other
Classes to the extent that any remainder of the Claim or Interest qualifies
within the description of such other Classes.
A. CLASSES OF CLAIMS AGAINST THE DEBTORS
1. SECURED CLAIMS
a. CLASS C-1 (NCB IDRB CLAIMS AND PRINCIPAL MUTUAL MORTGAGE
CLAIM): NCB IDRB Claims and the Principal Mutual Mortgage Claim.
b. CLASS C-2 (OTHER SECURED CLAIMS): Secured Claims that are
not otherwise classified in Class C-1.
2. UNSECURED CLAIMS
a. CLASS C-3 (UNSECURED PRIORITY CLAIMS): Unsecured Claims that
are entitled to priority under section 507(a)(3), 507(a)(4), or 507(a)(6) of the
Bankruptcy Code.
b. CLASS C-4 (CONVENIENCE CLAIMS): Unsecured Claims against the
Elder-Beerman Debtors that would otherwise be classified in Class C-5, for which
the Claim holder elects, on the Ballot provided for voting on the Plan, by the
Voting Deadline, to include in this Class C-4, provided that if such Claim is
greater than $500, such election shall include an election to reduce the amount
of the Claim to $500.
c. CLASS C-5 (GENERAL UNSECURED CLAIMS): Unsecured Claims
against any of the Debtors that are not otherwise classified in Classes C-4,
C-6, or C-7, including Bank Loan Claims, Note Claims, the NBD Swap Claim, Trade
Claims, and the ESOP Claim.
d. CLASS C-6 (MARGO'S UNSECURED CLAIMS): Unsecured Claims
against Margo's not otherwise classified in Class C-7.
e. CLASS C-7 (INTERCOMPANY CLAIMS): Intercompany Claims.
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B. CLASSES OF INTERESTS IN THE DEBTORS
1. CLASS E-1 (SUBSIDIARY OLD COMMON STOCK INTERESTS): Interests of
Elder-Beerman on account of the Old Common Stock of the Elder-Beerman Subsidiary
Debtors.
2. CLASS E-2 (ELDER-BEERMAN OLD COMMON STOCK INTERESTS): Interests of
Beerman-Peal on account of Old Common Stock of Elder-Beerman.
3. CLASS E-3 (OTHER INTERESTS IN ELDER-BEERMAN): Any Interests in
Elder-Beerman that are not otherwise classified in Class E-2, including any
Interests of the ESOP in respect of the Old Preferred Stock and Interests in
respect of options, warrants, or other rights to purchase Old Preferred Stock or
Old Common Stock, whenever granted.
ARTICLE III.
TREATMENT OF CLAIMS AND INTERESTS
A. UNCLASSIFIED CLAIMS
1. PAYMENT OF ADMINISTRATIVE CLAIMS
a. ADMINISTRATIVE CLAIMS IN GENERAL
Except as specified in this Section III.A.1, and subject to the
bar date provisions herein, unless otherwise agreed by the holder of an
Administrative Claim and the applicable Debtor or Reorganized Debtor, each
holder of an Administrative Claim will receive, in full satisfaction of its
Claim, cash equal to the amount of such Administrative Claim on the Effective
Date or, if the Administrative Claim is not allowed as of the Effective Date, 30
days after the date on which an order allowing such Claim becomes a Final Order
or a Stipulation of Amount and Nature of Claim is executed by the applicable
Reorganized Debtor and Claim holder.
b. STATUTORY FEES
On or before the Effective Date, Administrative Claims for fees
payable pursuant to 28 U.S.C. Section 1930 as determined by the Bankruptcy
Court at the Confirmation Hearing, will be paid in cash equal to the amount of
such Administrative Claims. All fees payable pursuant to 28 U.S.C. Section
1930 will be paid in accordance therewith until the closing of the
Reorganization Cases pursuant to section 350(a) of the Bankruptcy Code.
c. ORDINARY COURSE LIABILITIES
Administrative Claims based on liabilities incurred by a Debtor
in the ordinary course of its business (including Administrative Claims that are
Trade Claims, Administrative Claims of governmental units for taxes (including
tax audit Claims related to tax years commencing after the Petition Date), and
Administrative Claims arising from those Executory Contracts and Unexpired
Leases of the kind described in Section V.F) will be assumed and paid by the
applicable Reorganized Debtor pursuant to the terms and conditions of the
particular transaction giving rise to such Administrative Claims, without any
further action by the holders of such Claims.
d. CLAIMS UNDER DIP CREDIT AGREEMENT AND THE FIRST
CHICAGO SWAP AGREEMENT
i. DIP CREDIT AGREEMENT
On the Effective Date or at a later date determined pursuant to
the DIP Credit Agreement, Administrative Claims under or evidenced by the DIP
Credit Agreement will be paid in cash equal to the amount of such Administrative
Claims.
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ii. THE FIRST CHICAGO SWAP AGREEMENT
On the Effective Date, Reorganized Chargit will provide First
Chicago with a Close Out Notice. The Close Out Notice will include a proposed
close out amount in accordance with the terms of the First Chicago Swap
Agreement. In connection with the close out of outstanding interest rate swaps
and in full satisfaction of the First Chicago Swap Claims, Reorganized Chargit
will pay to First Chicago in full in cash as an Administrative Claim a close out
amount mutually agreeable to First Chicago and Reorganized Chargit or otherwise
established in accordance with the First Chicago Swap Agreement on the later of
(A) the Effective Date or (B) the date that the close out amount is established
by agreement of the parties, a Final Order, or otherwise. If First Chicago does
not object to the proposed close out amount identified in the Close Out Notice
by serving a written statement on Reorganized Chargit in accordance with Section
XII.H within 10 days after service of the Close Out Notice, First Chicago will
be deemed to have agreed to the close out amount contained in the Close Out
Notice.
e. FEE CLAIMS OF ESOP COMMITTEE AND BEERMAN ENTITIES
The ESOP Committee and the Beerman Entities may each file, in
accordance with Section III.A.1.f.ii.A, an application for payment of their
respective Fee Claims pursuant to section 503(b) of the Bankruptcy Code,
provided that the Beerman Entities may not seek allowance for payment of any
fees or expenses of The Gordian Group. Neither the Debtors, the Reorganized
Debtors, nor the Creditors' Committees shall object to such applications other
than on grounds that the Fee Claims are not reasonable compensation for actual,
necessary services or do not represent actual, necessary expenses; provided,
however, that the foregoing will not apply to the Fee Claims of the Beerman
Entities if Beerman-Peal votes to reject the Plan. The Fee Claims for which the
ESOP may seek approval shall not exceed $700,000, and the Fee Claims for which
the Beerman Entities may seek approval shall not exceed $1 million.
f. BAR DATES FOR ADMINISTRATIVE CLAIMS
i. GENERAL BAR DATE PROVISIONS
Except as otherwise provided in Section III.A.1.f.ii, unless
previously Filed, requests for payment of Administrative Claims must be Filed
and served on the Reorganized Debtors, pursuant to the procedures specified in
the Confirmation Order and the notice of entry of the Confirmation Order, no
later than 30 days after the Effective Date. Holders of Administrative Claims
that are required to File and serve a request for payment of such Claims and
that do not File and serve a request by the applicable bar date will be forever
barred from asserting such Claims against the Debtors, the Reorganized Debtors,
or their respective property and such Claims will be deemed discharged as of the
Effective Date. Objections to such requests must be Filed and served on the
Reorganized Debtors and the requesting party by the later of: (A) 90 days after
the Effective Date or (B) 60 days after the Filing of the applicable request for
payment of Administrative Claims.
ii. BAR DATES FOR CERTAIN ADMINISTRATIVE CLAIMS
A. PROFESSIONAL COMPENSATION
Professionals or other entities asserting a Fee Claim for
services rendered before the Effective Date must File and serve on the
Reorganized Debtors and such other entities who are designated by the Bankruptcy
Rules, the Confirmation Order, or other order of the Bankruptcy Court, an
application for final allowance of such Fee Claim no later than 45 days after
the Effective Date; provided, however, that any Professional who may receive
compensation or reimbursement of expenses pursuant to the Ordinary Course
Professionals Order may continue to receive such compensation and reimbursement
of expenses for services rendered before the Effective Date, without further
Bankruptcy Court review or approval, pursuant to the Ordinary Course
Professionals Order. Objections to any Fee Claim must be Filed and served on the
Reorganized Debtors and the requesting party by the later of: (1) 75 days after
the Effective Date or (2) 30 days after the Filing of the applicable request for
payment of the Fee Claim. To the extent necessary, entry of the Confirmation
Order shall amend and supersede any previously entered order of the Bankruptcy
Court, including the Fee Order, regarding the payment of Fee Claims.
B. ORDINARY COURSE LIABILITIES
Holders of Administrative Claims based on liabilities incurred
by a Debtor in the ordinary course of its business (including Administrative
Claims that are Trade Claims, Administrative Claims of governmental units for
taxes (including tax audit Claims related to tax years commencing after the
Petition Date) and Administrative Claims arising from
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those Executory Contracts and Unexpired Leases of the kind described in Section
V.F) will not be required to File or serve any request for payment of such
Claims. Such Claims will be satisfied pursuant to Section III.A.1.c.
C. CLAIMS UNDER DIP CREDIT AGREEMENT
AND THE FIRST CHICAGO SWAP CLAIMS
Holders of Administrative Claims under or evidenced by the DIP
Credit Agreement and the First Chicago Swap Claims will not be required to File
or serve any request for payment of such Claims. Such Claims will be satisfied
pursuant to Section III.A.1.d.
2. PAYMENT OF PRIORITY TAX CLAIMS
a. PRIORITY TAX CLAIMS
Pursuant to section 1129(a)(9)(C) of the Bankruptcy Code,
unless otherwise agreed by the holder of a Priority Tax Claim and the applicable
Debtor or Reorganized Debtor, each holder of a Priority Tax Claim will receive,
in full satisfaction of its Claim, deferred cash payments over a period not
exceeding six years from the date of assessment of such Claim. Payments will be
made in equal annual installments of principal, plus simple interest accruing
from the Effective Date at 7.0% per annum on the unpaid portion of each Priority
Tax Claim (or upon such other terms determined by the Bankruptcy Court to
provide the holders of Priority Tax Claims with deferred cash payments having a
value, as of the Effective Date, equal to such Claims). Unless otherwise agreed
by the holder of such Claim and the applicable Debtor or Reorganized Debtor, the
first payment will be payable one year after the Effective Date or, if the
Priority Tax Claim is not allowed within one year after the Effective Date, the
first Quarterly Distribution Date after the date on which (i) an order allowing
such Claim becomes a Final Order or (ii) a Stipulation of Amount and Nature of
Claim is executed by the applicable Reorganized Debtor and Claim holder;
provided, however, that the Reorganized Debtors will have the right to pay any
Priority Tax Claim, or any remaining balance of such Claim, in full, at any time
on or after the Effective Date, without premium or penalty.
b. OTHER PROVISIONS CONCERNING TREATMENT OF PRIORITY TAX
CLAIMS
The holder of an Allowed Priority Tax Claim will not be
entitled to receive any payment on account of any penalty arising with respect
to or in connection with the Allowed Priority Tax Claim. Any such Claim or
demand for any such penalty will be discharged by Confirmation of the Plan and
the holder of an Allowed Priority Tax Claim will not assess or attempt to
collect such penalty from the Reorganized Debtors or their property.
B. CLASSIFIED CLAIMS
1. SECURED CLAIMS
a. CLASS C-1 CLAIMS (NCB IDRB CLAIMS AND PRINCIPAL MUTUAL
MORTGAGE CLAIM) ARE UNIMPAIRED. On the Effective Date, each holder of an Allowed
Claim in Class C-1 will have such Claim Reinstated.
b. CLASS C-2 CLAIMS (OTHER SECURED CLAIMS) ARE UNIMPAIRED. On
the Effective Date, unless otherwise agreed by a Claim holder and the applicable
Debtor or Reorganized Debtor, each holder of an Allowed Claim in Class C-2 will
receive treatment on account of such Allowed Claim in the manner set forth in
Option A or B below, at the election of the applicable Debtor. The applicable
Debtor or Reorganized Debtor will be deemed to have elected Option B except with
respect to any Allowed Claim as to which the applicable Debtor elects Option A
in a Filed certification prior to the conclusion of the Confirmation Hearing.
Option A: Allowed Claims in Class C-2 with respect to which the
applicable Debtor or Reorganized Debtor selects Option A will be paid
in cash, in full, by such Reorganized Debtor, unless the holder of such
Claim agrees to less favorable treatment.
Option B: Allowed Claims in Class C-2 with respect to which the
applicable Debtor or Reorganized Debtor selects Option B will be
Reinstated.
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2. UNSECURED CLAIMS
a. CLASS C-3 CLAIMS (UNSECURED PRIORITY CLAIMS) ARE UNIMPAIRED.
On the Effective Date, each holder of an Allowed Claim in Class C-3 will receive
cash equal to the amount of such Claim.
b. CLASS C-4 CLAIMS (CONVENIENCE CLAIMS) ARE IMPAIRED. On the
Effective Date, each holder of an Allowed Claim in Class C-4 will receive cash
equal to 85% of the amount of such Claim (as reduced, if applicable, pursuant to
an election by the holder thereof).
c. CLASS C-5 CLAIMS (GENERAL UNSECURED CLAIMS) ARE IMPAIRED. On
the Effective Date, each holder of an Allowed Claim in Class C-5 will receive,
in full satisfaction of such Allowed Claim, its Pro Rata share, based upon the
principal amount of each holder's Allowed Claim, of: (i) the Cash Distribution
Amount and (ii) 12,279,611 shares of New Common Stock.
d. CLASS C-6 CLAIMS (MARGO'S UNSECURED CLAIMS) ARE IMPAIRED. On
the Effective Date, each holder of an Allowed Claim in Class C-6 will receive,
in full satisfaction of such Allowed Claim, its Pro Rata share of $2,516,641.
e. CLASS C-7 CLAIMS (INTERCOMPANY CLAIMS) ARE IMPAIRED. No
property will be distributed to or retained by the Debtors on account of Claims
in Class C-7, and such Claims will be discharged as of the Effective Date.
Notwithstanding this treatment of Class C-7 Claims, each of the Debtors holding
an Intercompany Claim shall be deemed to have accepted the Plan.
C. CLASSIFIED INTERESTS
1. CLASS E-1 INTERESTS (SUBSIDIARY OLD COMMON STOCK INTERESTS) ARE
UNIMPAIRED. On the Effective Date, Elder-Beerman's Allowed Interests in Class
E-1 will be Reinstated.
2. CLASS E-2 INTERESTS (ELDER-BEERMAN OLD COMMON STOCK INTERESTS) ARE
IMPAIRED. On the Effective Date, unless Beerman-Peal rejects the Plan,
Beerman-Peal will receive, in full satisfaction of its Allowed Interests in
Class E-2: (a) 124,036 shares of New Common Stock, (b) the New Series A
Warrants, and (c) the New Series B Warrants. If Beerman-Peal votes to reject
the Plan, no property will be distributed to or retained by Beerman-Peal on
account of its Allowed Interests in Class E-2, and such Interests will be
terminated as of the Effective Date.
3. CLASS E-3 INTERESTS (OTHER INTERESTS IN ELDER-BEERMAN) ARE IMPAIRED.
No property will be distributed to or retained by the holders of Allowed
Interests in Class E-3 on account of such Interests, and such Interests will be
terminated as of the Effective Date. Notwithstanding this treatment of the Class
E-3 Interests of the ESOP, if the ESOP votes in Class C-5 to accept the Plan,
the ESOP shall be deemed to have accepted the Plan in Class E-3.
D. SPECIAL PROVISIONS REGARDING TREATMENT OF ALLOWED SECONDARY LIABILITY
CLAIMS
The classification and treatment of Allowed Claims under the
Plan takes into consideration all Allowed Secondary Liability Claims. On the
Effective Date, Allowed Secondary Liability Claims will be treated as follows:
1. The Allowed Secondary Liability Claims arising from or related to
any Debtor's joint or several liability for the obligations under any: (a)
Allowed Claim that is being Reinstated under the Plan or (b) Executory Contract
or Unexpired Lease that is being assumed by another Debtor or under any
Executory Contract or Unexpired Lease that is being assumed by and assigned to
another Debtor or any other entity, will be Reinstated.
2. a. Except as provided in Sections III.D.1 or III.D.2.b, holders of
Allowed Secondary Liability Claims, including such Claims against Elder-Beerman
arising from or related to Elder-Beerman's (i) guarantees of payment or
collection of Unsecured Claims in Class C-5 and (ii) assignment of real property
leases to Bee-Gee, will be entitled to only one distribution from the Debtor
that is primarily liable for the underlying Allowed Claim, which distribution
will be as provided in the Plan in respect of such underlying Allowed Claim. No
multiple recovery on account of any Allowed Secondary Liability Claim will be
provided or permitted. Allowed Secondary Liability Claims will be deemed
satisfied in full by the distributions on account of the related underlying
Allowed Claim.
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b. Section III.D.2.a will not apply to Allowed Secondary
Liability Claims against Elder-Beerman related to the assignment of real
property leases to Margo's. Such Allowed Claims will be treated as Class C-5
Claims in an amount equal to the difference between: (i) the amount of the
underlying Allowed Class C-6 Claims against Margo's and (ii) the amount of the
distribution made on account of such Claims pursuant to Section III.B.2.d;
provided, however, that each such Claim will be deemed a Disputed Claim until
the holder of the applicable underlying Allowed Class C-6 Claim against Margo's
has received the full recovery to which such holder is entitled under Section
III.B.2.d in respect of such Class C-6 Claim.
ARTICLE IV.
MEANS FOR IMPLEMENTATION OF THE PLAN
A. CONTINUED CORPORATE EXISTENCE AND VESTING OF ASSETS IN THE REORGANIZED
DEBTORS
Except as otherwise provided herein, each Debtor will, as a
Reorganized Debtor, continue to exist after the Effective Date as a separate
corporate entity, with all the powers of a corporation under applicable law and
without prejudice to any right to alter or terminate such existence (whether by
merger, dissolution, or otherwise) under applicable state law. Except as
otherwise provided herein, as of the Effective Date, all property of the
respective Estates of the Debtors, and any property acquired by a Debtor or
Reorganized Debtor under the Plan, will vest in the applicable Reorganized
Debtor, free and clear of all Claims, liens, charges, other encumbrances, and
Interests. On and after the Effective Date, each Reorganized Debtor may operate
its businesses and may use, acquire, and dispose of property, and compromise or
settle any Claims or Interests without supervision or approval by the Bankruptcy
Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules,
other than those restrictions expressly imposed by the Plan or the Confirmation
Order. Without limiting the foregoing, each Reorganized Debtor may pay the
charges that it incurs on or after the Effective Date for professionals' fees,
disbursements, expenses, or related support services without application to the
Bankruptcy Court.
B. RESTRUCTURING TRANSACTIONS
1. RESTRUCTURING TRANSACTIONS GENERALLY
On or after the Effective Date, the applicable Reorganized
Debtors may enter into such transactions and may take such actions as may be
necessary or appropriate to effect a corporate restructuring of their respective
businesses or to otherwise simplify the overall corporate structure of the
Reorganized Debtors. Such restructuring is contemplated to include one or more
mergers, consolidations, restructurings, dispositions, liquidations, or
dissolutions, as may be determined by the Debtors or Reorganized Debtors to be
necessary or appropriate. The actions to effect these transactions may include:
(a) the execution and delivery of appropriate agreements or other documents of
merger, consolidation, restructuring, disposition, liquidation, or dissolution
containing terms that are consistent with the terms of the Plan and that satisfy
the applicable requirements of applicable state law and such other terms to
which the applicable entities may agree; (b) the execution and delivery of
appropriate instruments of transfer, assignment, assumption, or delegation of
any asset, property, right, liability, duty, or obligation on terms consistent
with the terms of the Plan and having such other terms to which the applicable
entities may agree; (c) the filing of appropriate certificates or articles of
merger, consolidation, or dissolution pursuant to applicable state law; and (d)
all other actions that the applicable entities determine to be necessary or
appropriate, including making filings or recordings that may be required by
applicable state law in connection with such transactions.
2. OBLIGATIONS OF ANY SUCCESSOR CORPORATION IN A RESTRUCTURING
TRANSACTION
The Restructuring Transactions may include one or more mergers,
consolidations, restructurings, dispositions, liquidations, or dissolutions, as
may be determined by the Reorganized Debtors to be necessary or appropriate to
result in substantially all of the respective assets, properties, rights,
liabilities, duties, and obligations of certain of the Reorganized Debtors
vesting in one or more surviving, resulting, or acquiring corporations. In each
case in which the surviving, resulting, or acquiring corporation in any such
transaction is a successor to a Reorganized Debtor, such surviving, resulting,
or acquiring corporation will perform the obligations of the applicable
Reorganized Debtor pursuant to the Plan to pay or otherwise satisfy the Allowed
Claims against such Reorganized Debtor, except as provided in any contract,
instrument, or other agreement or document effecting a disposition to such
surviving, resulting, or acquiring corporation, which may provide that another
Reorganized Debtor will perform such obligations.
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C. CORPORATE GOVERNANCE, DIRECTORS AND OFFICERS, EMPLOYMENT-RELATED
AGREEMENTS, AND COMPENSATION PROGRAMS
1. ARTICLES OF INCORPORATION AND CODE OF REGULATIONS
a. REORGANIZED ELDER-BEERMAN
As of the Effective Date, the articles of incorporation and the
code of regulations of Reorganized Elder-Beerman will be substantially in the
forms of Exhibits IV.C.1.a(i) and IV.C.1.a(ii), respectively. The initial
articles of incorporation and code of regulations of Reorganized Elder-Beerman
will, among other things: (i) prohibit the issuance of nonvoting equity
securities to the extent required by section 1123(a) of the Bankruptcy Code and
(ii) authorize the issuance of New Equity and New Share Purchase Rights in
amounts not less than the amounts necessary to permit the distributions thereof
required or contemplated by the Plan. After the Effective Date, Reorganized
Elder-Beerman may amend and restate its articles of incorporation or code of
regulations as permitted by the Ohio Revised Code, subject to the terms and
conditions of such constituent documents.
b. THE REORGANIZED ELDER-BEERMAN SUBSIDIARY DEBTORS
As of the Effective Date, the articles of incorporation and the
code of regulations or similar constituent documents of each Reorganized
Elder-Beerman Subsidiary Debtor will be substantially in the forms of Exhibits
IV.C.1.b(i) and IV.C.1.b(ii), respectively. The initial articles of
incorporation and code of regulations or similar constituent documents of each
Reorganized Elder-Beerman Subsidiary Debtor will, among other things, prohibit
the issuance of nonvoting equity securities to the extent required by section
1123(a) of the Bankruptcy Code. After the Effective Date or the effective time
of any applicable Restructuring Transaction, each such entity may amend and
restate its articles of incorporation or code of regulations or similar
constituent documents as permitted by applicable state law, subject to the terms
and conditions of such constituent documents.
2. DIRECTORS AND OFFICERS OF THE REORGANIZED DEBTORS
a. The initial board of directors of Reorganized Elder-Beerman
will consist of nine members, two of whom are the top two officers of
Elder-Beerman and the remainder of whom will be individuals of indisputable
integrity, competence, experience, and independence. Elder-Beerman and the
Creditors' Committees have agreed to a process to select the remaining seven
directors. Pursuant to that process, the Institutional Lenders' Committee and
the Trade Creditors' Committee have consulted and selected a proposed slate of
directors, which was provided to the Debtors on November 7, 1997. In accordance
with the director selection process, if Elder-Beerman has a good faith objection
to any of the candidates proposed by the Creditors' Committees, the
Institutional Lenders' Committee, after consultation with the Trade Creditors'
Committee, will replace those candidates with substitute candidates; provided,
however, that no replacement candidate may be proposed to Elder-Beerman by the
Institutional Lenders' Committee without the prior agreement of the Trade
Creditors' Committee. Upon completion of this process, the initial directors and
officers of each of the Reorganized Debtors will be listed on Exhibit IV.C.2.
b. Each such director and officer will serve from and after the
Effective Date until his or her successor is duly elected or appointed and
qualified or until their earlier death, resignation, or removal in accordance
with the terms of the articles of incorporation and code of regulations or
similar constituent documents of the applicable Reorganized Debtor and
applicable state law. Exhibit IV.C.2 will identify the initial term for each
director in accordance with the provisions of the Reorganized Debtors'
respective articles of incorporation and code of regulations.
3. NEW EMPLOYMENT, RETIREMENT, INDEMNIFICATION, AND OTHER RELATED
AGREEMENTS AND INCENTIVE COMPENSATION PROGRAMS
As of the Effective Date, the Reorganized Debtors will have the
authority to: (a) enter into employment, retirement, severance, indemnification,
and other agreements with their active directors, officers, and employees and
(b) implement retirement income plans, welfare benefit plans, and other
incentive plans for active employees. Such agreements and plans may include
equity, bonus, and other incentive plans in which officers and other active
employees of the Reorganized Debtors may be eligible to participate. Exhibit
IV.C.3 provides the forms of employment and other related agreements and plans
that are to take effect as of the Effective Date. In addition, the Disclosure
Statement provides a schedule and a general summary and description of the
Debtors' employment, retirement, severance, indemnification, and other related
agreements and incentive compensation programs that are to take or remain in
effect on or as of the Effective Date.
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4. CORPORATE ACTION
The Restructuring Transactions; the adoption of new or amended
and restated articles of incorporation and codes of regulations or similar
constituent documents for the Reorganized Debtors; the initial selection of
directors and officers for the Reorganized Debtors; the entry into the Exit
Financing Facility; the distribution of cash pursuant to the Plan; the issuance
and distribution of New Equity and New Share Purchase Rights pursuant to the
Plan; the entry into the Toledo Stores Modification Agreements; the adoption,
execution, delivery, and implementation of all contracts, leases, instruments,
releases, and other agreements or documents related to any of the foregoing,
including the New Warrants Agreements, the New Share Purchase Rights Agreement,
the New Registration Rights Agreement, and the Comprehensive Settlement
Agreement; the adoption, execution, and implementation of employment,
retirement, and indemnification agreements, incentive compensation programs,
retirement income plans, welfare benefit plans, and other employee plans and
related agreements, including the plans and agreements in Exhibit IV.C.3; entry
into the New Tax Indemnification Agreement and the New Tax Sharing Agreement;
and the other matters provided for under the Plan involving the corporate
structure of any Debtor or Reorganized Debtor or corporate action to be taken by
or required of any Debtor or Reorganized Debtor will occur and be effective as
of the Effective Date, and will be authorized and approved in all respects and
for all purposes without any requirement of further action by stockholders or
directors of any of the Debtors or the Reorganized Debtors.
D. EXIT FINANCING FACILITY, OBTAINING CASH FOR PLAN DISTRIBUTIONS, AND
TRANSFERS OF FUNDS AMONG THE DEBTORS
On the Effective Date, the Reorganized Debtors will execute and
deliver those documents necessary or appropriate to obtain the Exit Financing
Facility. All cash necessary for the Reorganized Debtors to make payments
pursuant to the Plan will be obtained from the Reorganized Debtors' cash
balances and operations or the Exit Financing Facility. Cash payments to be made
pursuant to the Plan will be made by Reorganized Elder-Beerman or such other
Reorganized Debtor that is liable on the underlying Allowed Claim; provided,
however, that the Debtors and the Reorganized Debtors will be entitled to
transfer funds between and among themselves as they determine to be necessary or
appropriate to enable each Reorganized Debtor to satisfy its obligations under
the Plan. Any Intercompany Claims resulting from such transfers will be
accounted for and settled in accordance with the Debtors' historical
intercompany account settlement practices.
E. EXECUTION OF AGREEMENTS RELATED TO NEW EQUITY
On the Effective Date, Reorganized Elder-Beerman will execute
and deliver the New Share Purchase Rights Agreement, the New Registration Rights
Agreement, and, if Beerman-Peal does not vote to reject the Plan, the New
Warrants Agreements. As a condition precedent to a holder of an Allowed Claim or
Allowed Interest receiving a distribution of New Equity pursuant to the Plan,
the applicable parties shall have executed and delivered the applicable
agreement governing the particular issue of New Equity to be distributed. Any
New Equity to be distributed will, pending execution and delivery of the
applicable agreement, be treated as an undeliverable distribution pursuant to
Section VI.D.2 below.
F. PRESERVATION OF RIGHTS OF ACTION; SETTLEMENT AGREEMENTS AND RELEASES
1. PRESERVATION OF RIGHTS OF ACTION BY THE DEBTORS AND
REORGANIZED DEBTORS
Except as provided in the Plan or in any contract, instrument,
release, or other agreement entered into in connection with the Plan, in
accordance with section 1123(b) of the Bankruptcy Code, the Reorganized Debtors
will retain and may enforce any claims, demands, rights, and causes of action
that any Debtor or Estate may hold against any entity. The Reorganized Debtors
or their successors may pursue such retained claims, demands, rights, or causes
of action as appropriate, in accordance with the best interests of the
Reorganized Debtors or the successors holding such claims, demands, rights, or
causes of action. Further, the Reorganized Debtors retain their rights to file
and pursue any adversary proceedings against any trade creditor, vendor, or
factor related to debit balances or deposits owed to any Debtor. Notwithstanding
the foregoing, the Reorganized Debtors will not pursue any avoidance actions
against any entities under sections 544, 547, 548, or 549 of the Bankruptcy Code
due to the expiration of the applicable two-year statute of limitation for such
claims contained in section 546(a)(1)(A) of the Bankruptcy Code.
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2. SETTLEMENT AGREEMENTS AND RELEASES
a. COMPREHENSIVE SETTLEMENT AGREEMENT
On the Effective Date, the Reorganized Debtors and each other
party identified in the Comprehensive Settlement Agreement will execute the
Comprehensive Settlement Agreement and deliver the releases provided for
therein; provided, however, that if Beerman-Peal votes to reject the Plan, the
Beerman Entities will not execute and deliver the Comprehensive Settlement
Agreement and the Comprehensive Settlement Agreement and the releases described
in the following sentence will not apply to the Beerman Entities. As of the
Effective Date, to the fullest extent permissible under applicable law, in
consideration for the obligations of the Debtors and Reorganized Debtors under
the Plan and the cash, New Equity, contracts, instruments, releases, or other
agreements or documents to be delivered in connection with the Plan, including
the Comprehensive Settlement Agreement, each entity receiving cash or New Equity
pursuant to the Plan will be deemed to release each party to the Comprehensive
Settlement Agreement and their respective present and former directors,
officers, employees, agents, attorneys, accountants, investment bankers, and
other representatives (acting in such capacity) from all claims, demands, debts,
rights, causes of action, and liabilities released or to be released pursuant to
the Comprehensive Settlement Agreement.
b. RELEASES BY HOLDERS OF CLAIMS OR INTERESTS
As of the Effective Date, to the fullest extent permissible
under applicable law, in consideration for the obligations of the Debtors and
Reorganized Debtors under the Plan and the cash, New Equity, contracts,
instruments, releases, or other agreements or documents to be delivered in
connection with the Plan, each entity that has held, holds, or may hold a Claim
or Interest will be deemed to forever release, waive, and discharge all claims,
demands, debts, rights, causes of action, or liabilities (other than the right
to enforce the Debtors' or the Reorganized Debtors' obligations under the Plan
and the contracts, instruments, releases, and other agreements and documents
delivered thereunder), whether liquidated or unliquidated, fixed or contingent,
matured or unmatured, known or unknown, foreseen or unforeseen, then existing or
thereafter arising, that are based in whole or in part on any act, omission, or
other occurrence taking place on or prior to the Effective Date in any way
relating to a Debtor, the Reorganization Cases, or the Plan that such entity
has, had, or may have against: (i) the Creditors' Committees; (ii) any Debtor
(which release will be in addition to the discharge of Claims and termination of
Interests provided herein and under the Confirmation Order and the Bankruptcy
Code); (iii) the ESOP Committee; (iv) Beerman-Peal; and (v) the respective
present and former directors, officers, employees, agents, attorneys,
accountants, investment bankers, and other representatives of any of the
foregoing, acting in such capacity, including any claims, demands, rights, or
causes of action that Elder-Beerman or Reorganized Elder-Beerman may have
against Max Gutmann or Herbert O. Glaser to recover payment of any severance
benefits under the Key Employee Retention Program Orders. Notwithstanding the
foregoing, and notwithstanding any other release in any other document to be
delivered in connection with the Plan, (i) the Beerman Entities shall not
release or be deemed to release any claims, demands, debts, rights, causes of
action, or liabilities against any of the Beerman Entities' present or former
investment bankers (other than McDonald & Company Securities, Inc.) and (ii)
neither Beerman-Peal nor its present or former directors, officers, employees,
agents, attorneys, accountants, investment bankers, and other representatives
shall receive the release described herein if Beerman-Peal votes to reject the
Plan.
c. INJUNCTION RELATED TO RELEASES
As further provided in Section X.B, the Confirmation Order will
permanently enjoin the commencement or prosecution by any entity, whether
directly, derivatively, or otherwise, of any claim, demand, debt, right, cause
of action, or liability released pursuant to the Plan.
G. CONTINUATION OF CERTAIN EMPLOYEE, RETIREE, AND WORKERS' COMPENSATION
BENEFITS
1. EMPLOYEE BENEFITS
Except as modified by the agreements, plans, and programs
described in Exhibit IV.C.3, from and after the Effective Date, the Reorganized
Debtors will continue their existing employee benefit policies, plans, and
agreements, including: (a) employee purchase discounts; (b) health, life, and
travel insurance; (c) sick pay and long-term disability pay; (d) vacation and
holiday pay; (e) the ESOP; and (f) the bonus and severance programs established
pursuant to the Key Employee Retention Program Orders.
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2. RETIREE HEALTH, MEDICAL, AND LIFE INSURANCE BENEFITS
From and after the Effective Date, the Reorganized Debtors will
be obligated to pay retiree benefits (as defined in section 1114(a) of the
Bankruptcy Code) and any similar health and medical benefits in accordance with
the terms of the retiree benefit plans or other agreements governing the payment
of such benefits, subject to any rights to amend, modify, or terminate such
benefits under the terms of the applicable retiree benefits plan, other
agreement, or applicable nonbankruptcy law.
3. PURCHASE DISCOUNT FOR RETIREES
From and after the Effective Date, the Reorganized Debtors will
continue to provide their respective retirees with merchandise and service
purchase price discounts, in accordance with the Debtors' current business
practices; provided, however, that each of the Reorganized Debtors will have the
right to modify, reduce, or eliminate such discounts in its sole discretion
without any claims, demands, debts, rights, causes of action, or liabilities
arising against the Reorganized Debtors from such action.
4. SELF-INSURED WORKERS' COMPENSATION BENEFITS
From and after the Effective Date, the Reorganized Debtors will
continue to pay the Claims arising before the Petition Date under the Debtors'
self-insured workers' compensation programs that the Debtors obtained authority
to pay pursuant to the Order Authorizing Debtors and Debtors in Possession to
Continue Self-Insured Workers' Compensation Insurance Program and Pay Certain
Prepetition Workers' Compensation and Liability Claims, entered by the
Bankruptcy Court on October 18, 1995.
H. LIMITATIONS ON AMOUNTS TO BE DISTRIBUTED TO HOLDERS OF ALLOWED INSURED
CLAIMS
Distributions under the Plan to each holder of an Allowed
Insured Claim will be in accordance with the treatment provided under the Plan
for the Class in which such Allowed Insured Claim is classified, but solely to
the extent that such Allowed Insured Claim is not satisfied from proceeds
payable to the holder thereof under any pertinent insurance policies and
applicable law. Nothing in this Section IV.H will constitute a waiver of any
claim, demand, debt, right, cause of action, or liability that any entity may
hold against any other entity, including the Debtors' insurance carriers.
I. CANCELLATION AND SURRENDER OF INSTRUMENTS, SECURITIES, AND OTHER
DOCUMENTATION
Except as provided in any contract, instrument, or other
agreement or document created in connection with the Plan, on the Effective Date
and concurrently with the applicable distributions made pursuant to Article III,
the Prepetition Credit Facility, the Prepetition Note Agreements, the Old Notes,
the Old Preferred Stock, and the Old Common Stock of Elder-Beerman will be
canceled and of no further force and effect, without any further action on the
part of any Debtor or Reorganized Debtor. The holders of or parties to such
canceled instruments, securities, and other documentation will have no rights
arising from or relating to such instruments, securities, and other
documentation or the cancellation thereof, except the rights provided pursuant
to the Plan; provided, however, that no distribution under the Plan will be made
to or on behalf of any holder of an Allowed Claim or Allowed Interest evidenced
by such canceled instruments or securities unless and until such instruments or
securities are received by the applicable Disbursing Agent pursuant to Section
VI.I.
J. OTHER AGREEMENTS RELATED TO IMPLEMENTATION OF THE PLAN
1. As of the Effective Date, the Reorganized Debtors will enter into
the New Tax Sharing Agreement, which will, among other things, allocate among
the parties thereto responsibility for any post-Effective Date tax obligations
and benefits between and among them.
2. As of the Effective Date, if Beerman-Peal does not vote to reject
the Plan, each of the Reorganized Debtors and each of the Beerman Entities named
herein will enter into the New Tax Indemnification Agreement, which will, among
other things, allocate among the parties thereto responsibility for (a) any
pre-Effective Date tax liabilities of the Beerman-Peal consolidated tax group
and (b) any tax liabilities of the Beerman-Peal consolidated tax group arising
from consummation of the Plan.
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3. As of the Effective Date, Reorganized Elder-Beerman will enter into
the Toledo Stores Modification Agreements, which will, among other things,
provide for modification of certain terms of the leases relating to Elder-
Beerman's stores located at the Westgate and Woodville Malls in Toledo, Ohio.
4. As of the Confirmation Date, the Performance Incentive Plan, which
is included as part of Exhibit IV.C.3, becomes effective under its own terms and
as provided in Section IV.C.4. As of the date the Performance Incentive Plan
becomes effective, the Performance Incentive Plan will be deemed authorized and
approved in all respects and for all purposes without any requirements of
further action by shareholders or directors of Elder-Beerman or Reorganized
Elder-Beerman.
K. RELEASE OF LIENS
Except as otherwise provided in the Plan or in any contract,
instrument, release, or other agreement or document created in connection with
the Plan, on the Effective Date and concurrently with the applicable
distributions made pursuant to Article III, all mortgages, deeds of trust,
liens, or other security interests against the property of any Estate will be
fully released and discharged, and all of the right, title, and interest of any
holder of such mortgages, deeds of trust, liens, or other security interests
will revert to the applicable Reorganized Debtor and its successors and assigns.
L. EFFECTUATING DOCUMENTS; FURTHER TRANSACTIONS; EXEMPTION FROM CERTAIN
TRANSFER TAXES
The Chairman of the Board, Chief Executive Officer, President,
Executive Vice President, Chief Financial Officer, Senior Vice President, or any
Vice President of each Debtor or Reorganized Debtor will be authorized to
execute, deliver, file, or record such contracts, instruments, releases, and
other agreements or documents and take such actions as may be necessary or
appropriate to effectuate and implement the provisions of the Plan. The
Secretary or any Assistant Secretary of each Debtor or Reorganized Debtor will
be authorized to certify or attest to any of the foregoing actions. Pursuant to
section 1146(c) of the Bankruptcy Code: (a) the issuance, transfer, or exchange
of New Equity; (b) the creation of any mortgage, deed of trust, lien, or other
security interest; (c) the making or assignment of any lease or sublease; or (d)
the making or delivery of any deed or other instrument of transfer under, in
furtherance of, or in connection with, the Plan, including any merger
agreements; agreements of consolidation, restructuring, disposition,
liquidation, or dissolution; deeds; bills of sale; or assignments executed in
connection with any Restructuring Transaction pursuant to the Plan will not be
subject to any stamp tax, real estate transfer tax, or similar tax.
ARTICLE V.
TREATMENT OF EXECUTORY CONTRACTS
AND UNEXPIRED LEASES
A. EXECUTORY CONTRACTS AND UNEXPIRED LEASES TO BE ASSUMED OR ASSUMED AND
ASSIGNED
1. ASSUMPTION AND ASSIGNMENT GENERALLY
Except as otherwise provided in the Plan or in any contract,
instrument, release, or other agreement or document entered into in connection
with the Plan, on the Effective Date, pursuant to section 365 of the Bankruptcy
Code, the Debtors will assume, or assume and assign, as indicated, each of the
Executory Contracts and Unexpired Leases listed on Exhibit V.A.1; provided,
however, that the Debtors and Reorganized Debtors reserve the right, at any time
prior to 60 days after the Effective Date, to amend Exhibit V.A.1 to: (a) delete
any Executory Contract or Unexpired Lease listed therein, thus providing for its
rejection pursuant to Section V.C, or (b) add any Executory Contract or
Unexpired Lease thereto, thus providing for its assumption or assumption and
assignment pursuant to this Section V.A.1. The Debtors or Reorganized Debtors
will provide notice of any amendments to Exhibit V.A.1 to the parties to the
Executory Contracts or Unexpired Leases affected thereby, and (a) if such
amendments are made before the Effective Date, to the parties on the then
applicable service list in the Reorganization Cases (including the Creditors'
Committees) and (b) if such amendments are made on or after the Effective Date,
to the Claims Resolution Committee. Any amendment to Exhibit V.A.1 after the
Effective Date to delete an Executory Contract or Unexpired Lease listed therein
will be deemed and treated as a rejection of such contract or lease pursuant to
section 365(g)(1) of the Bankruptcy Code as of the Effective Date. Each contract
and lease listed on Exhibit V.A.1 will be assumed only to the extent that any
such contract or lease constitutes an Executory Contract or Unexpired Lease.
Listing a contract or lease on Exhibit V.A.1 will not constitute an admission by
a Debtor or Reorganized Debtor that
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such contract or lease (including any related agreements as described in Section
V.A.2) is an Executory Contract or Unexpired Lease or that a Debtor or
Reorganized Debtor has any liability thereunder.
2. ASSUMPTIONS AND ASSIGNMENTS OF REAL PROPERTY EXECUTORY
CONTRACTS AND UNEXPIRED LEASES
Each Real Property Executory Contract and Unexpired Lease
listed on Exhibit V.A.1 will include any modifications, amendments, supplements,
restatements, or other agreements made directly or indirectly by any agreement,
instrument, or other document that in any manner affects such contract or lease,
irrespective of whether such agreement, instrument, or other document is listed
on Exhibit V.A.1, unless any such modification, amendment, supplement,
restatement, or other agreement is rejected pursuant to Section V.C and is
listed on Exhibit V.C.
3. ASSUMPTION OF TOLEDO, OHIO STORES LEASES AS MODIFIED
Elder-Beerman's assumption of the Unexpired Leases listed on
Exhibit V.A.1 with respect to its Westgate and Woodville department stores
located in Toledo, Ohio will be on the terms of the Toledo Stores Modification
Agreements.
4. ASSIGNMENTS RELATED TO THE RESTRUCTURING TRANSACTIONS
As of the effective time of the applicable Restructuring
Transaction, any Executory Contract or Unexpired Lease (including any related
agreements as described in Section V.A.2) to be held by Reorganized
Elder-Beerman or another surviving, resulting, or acquiring corporation in the
applicable Restructuring Transaction, will be deemed assigned to the applicable
entity, pursuant to section 365 of the Bankruptcy Code.
5. APPROVAL OF ASSUMPTIONS AND ASSIGNMENTS
The Confirmation Order will constitute an order of the
Bankruptcy Court approving the assumptions and assignments described in this
Section V.A, pursuant to section 365 of the Bankruptcy Code, as of the Effective
Date. The order of the Bankruptcy Court approving the Disclosure Statement, the
Confirmation Order, or another order of the Bankruptcy Court entered on or prior
to the Confirmation Date will specify the procedures for providing notice to
each party whose Executory Contract or Unexpired Lease is being assumed or
assumed and assigned pursuant to the Plan of: (a) the contract or lease being
assumed or assumed and assigned; (b) the Cure Amount Claim, if any, that the
applicable Debtor believes it would be obligated to pay in connection with such
assumption; and (c) the procedures for such party to object to the assumption,
assignment, or amount of the proposed Cure Amount Claim.
B. PAYMENTS RELATED TO ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED
LEASES
To the extent that such Claims constitute monetary defaults,
the Cure Amount Claims associated with each Executory Contract and Unexpired
Lease to be assumed pursuant to the Plan will be satisfied, pursuant to section
365(b)(1) of the Bankruptcy Code, at the option of the Debtor assuming such
contract or lease or the assignee of such Debtor, if any: (1) by payment of the
Cure Amount Claim in cash on the Effective Date or (2) on such other terms as
are agreed to by the parties to such Executory Contract or Unexpired Lease,
provided that no such agreement shall call for the satisfaction of any Cure
Amount Claim, in whole or in part, by the issuance of New Equity. If there is a
dispute regarding: (1) the amount of any Cure Amount Claim, (2) the ability of
the applicable Reorganized Debtor or any assignee to provide "adequate assurance
of future performance" (within the meaning of section 365 of the Bankruptcy
Code) under the contract or lease to be assumed, or (3) any other matter
pertaining to assumption of such contract or lease, the cure payments required
by section 365(b)(1) of the Bankruptcy Code will be made following the entry of
a Final Order resolving the dispute and approving the assumption. For
assumptions of Executory Contracts or Unexpired Leases between Debtors, the
Reorganized Debtor assuming such contract may cure any monetary default (1) by
treating such amount as either a direct or indirect contribution to capital or
distribution (as appropriate) or (2) through an intercompany account balance in
lieu of payment in cash.
C. EXECUTORY CONTRACTS AND UNEXPIRED LEASES TO BE REJECTED
On the Effective Date, except for an Executory Contract or
Unexpired Lease that was previously assumed, assumed and assigned, or rejected
by an order of the Bankruptcy Court or that is assumed pursuant to Section V.A
(including any related agreements assumed pursuant to Section V.A.2), each
Executory Contract and Unexpired Lease entered into by a Debtor prior to the
Petition Date that has not previously expired or terminated pursuant to its own
terms will be rejected pursuant to section 365 of the Bankruptcy Code. The
Executory Contracts and Unexpired Leases to be rejected will include the
Executory Contracts and Unexpired Leases listed on Exhibit V.C. Each contract
and lease listed on Exhibit V.C will be
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rejected only to the extent that any such contract or lease constitutes an
Executory Contract or Unexpired Lease. Listing a contract or lease on Exhibit
V.C will not constitute an admission by a Debtor or Reorganized Debtor that such
contract or lease (including related agreements as described above in Section
V.A.2) is an Executory Contract or Unexpired Lease or that a Debtor or
Reorganized Debtor has any liability thereunder. Any Executory Contract and
Unexpired Lease not listed on Exhibit V.A.1 will be rejected irrespective of
whether such contract is listed on Exhibit V.C. The Confirmation Order will
constitute an order of the Bankruptcy Court approving such rejections, pursuant
to section 365 of the Bankruptcy Code, as of the Effective Date.
D. BAR DATE FOR REJECTION DAMAGES
Notwithstanding anything in the Bar Date Order to the contrary,
if the rejection of an Executory Contract or Unexpired Lease pursuant to Section
V.C gives rise to a Claim (including any Claims arising from those
indemnification obligations described in Section V.E.1) by the other party or
parties to such contract or lease, such Claim will be forever barred and will
not be enforceable against the Debtors, the Reorganized Debtors, their
respective successors, or their respective properties unless a proof of Claim is
Filed and served on the Reorganized Debtors, pursuant to the procedures
specified in the Confirmation Order and the notice of the entry of the
Confirmation Order or another order of the Bankruptcy Court, no later than 30
days after the later of: (1) the Effective Date and (2) service of a notice of
amendment pursuant to Section V.A providing for the rejection of the applicable
Executory Contract or Unexpired Lease.
E. SPECIAL EXECUTORY CONTRACT AND UNEXPIRED LEASE ISSUES
1. OBLIGATIONS TO INDEMNIFY DIRECTORS, OFFICERS, AND EMPLOYEES
a. The obligations of each Debtor or Reorganized Debtor to
indemnify any person serving as one of its directors, officers, or employees as
of or following the Petition Date, by reason of such person's prior or future
service in such a capacity, or as a director, officer, or employee of another
corporation, partnership, or other legal entity, to the extent provided in the
applicable articles of incorporation, code of regulations, or similar
constituent documents or by statutory law or written agreement of or with such
Debtor, will be deemed and treated as executory contracts that are assumed by
the applicable Debtor or Reorganized Debtor pursuant to the Plan and section 365
of the Bankruptcy Code as of the Effective Date. Accordingly, such
indemnification obligations will survive and be unaffected by entry of the
Confirmation Order, irrespective of whether such indemnification is owed for an
act or event occurring before or after the Petition Date.
b. The obligations of each Debtor or Reorganized Debtor to
indemnify any person who, as of the Petition Date, was no longer serving as a
director, officer, or employee of such Debtor or Reorganized Debtor, which
indemnity obligation arose by reason of such person's prior service in any such
capacity, or as a director, officer, or employee of another corporation,
partnership, or other legal entity, whether provided in the applicable articles
of incorporation, code of regulations, or similar constituent documents or by
statutory law, written agreement, policies, or procedures of or with such
Debtor, will terminate and be discharged pursuant to section 502(e) of the
Bankruptcy Code or otherwise, as of the Effective Date; provided, however, that,
to the extent that such indemnification obligations no longer give rise to
contingent Claims that can be disallowed pursuant to section 502(e) of the
Bankruptcy Code, such indemnification obligations will be deemed and treated as
executory contracts that are rejected by the applicable Debtor pursuant to the
Plan and section 365 of the Bankruptcy Code, as of the Effective Date, and any
Claims arising from such indemnification obligations (including any rejection
damage claims) will be subject to the bar date provisions of Section V.D.
2. REINSTATEMENT OF ALLOWED SECONDARY LIABILITY CLAIMS ARISING
FROM OR RELATED TO EXECUTORY CONTRACTS OR UNEXPIRED LEASES
ASSUMED BY THE DEBTORS
On the Effective Date, any Allowed Secondary Liability Claim
arising from or related to any Debtor's joint or several liability for the
obligations under or with respect to: (a) any Executory Contract or Unexpired
Lease that is being assumed or deemed assumed pursuant to section 365 of the
Bankruptcy Code by another Debtor; (b) any Executory Contract or Unexpired Lease
that is being assumed by and assigned to another Debtor; or (c) a Reinstated
Claim will be Reinstated. Accordingly, such Allowed Secondary Liability Claims
will survive and be unaffected by entry of the Confirmation Order.
F. EXECUTORY CONTRACTS AND UNEXPIRED LEASES ENTERED INTO AND OTHER
OBLIGATIONS INCURRED AFTER THE PETITION DATE
Executory Contracts and Unexpired Leases entered into or
assumed and other obligations incurred after the Petition Date by any Debtor
will be performed by the Debtor or Reorganized Debtor liable thereunder in the
ordinary course
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of its business. Accordingly, such Executory Contracts and Unexpired Leases and
other obligations will survive and remain unaffected by entry of the
Confirmation Order.
ARTICLE VI.
PROVISIONS GOVERNING DISTRIBUTIONS
A. DISTRIBUTIONS FOR CLAIMS OR INTERESTS ALLOWED AS OF THE EFFECTIVE DATE
1. DISTRIBUTIONS TO BE MADE ON EFFECTIVE DATE
Except as otherwise provided in this Article VI, distributions
of cash and New Equity to be made on the Effective Date to holders of Claims or
Interests that are allowed as of the Effective Date will be deemed made on the
Effective Date if made on the Effective Date or as promptly thereafter as
practicable, but in any event no later than: (a) 60 days after the Effective
Date or (b) such later date when the applicable conditions of Section V.B
(regarding cure payments for Executory Contracts and Unexpired Leases being
assumed), Section VI.D.2 (regarding undeliverable distributions), or Section
VI.I (regarding surrender of canceled instruments and securities) are satisfied.
Distributions on account of Claims or Interests that become Allowed Claims or
Allowed Interests after the Effective Date will be made pursuant to Sections
VI.G and VII.C.
2. DISTRIBUTIONS ON EFFECTIVE DATE IN RESPECT OF ELDER-BEERMAN
RESERVE CLASS CLAIMS
From and after the Effective Date, cash to be distributed on
account of Elder-Beerman Reserve Class Claims will be deposited in a segregated
bank account in the name of the applicable Disbursing Agent, held in trust
pending distribution by the Disbursing Agent for the benefit of the holders of
such Claims, accounted for separately, and will not constitute property of any
of the Reorganized Debtors. The Disbursing Agent will invest such cash in a
manner consistent with Reorganized Elder-Beerman's investment and deposit
guidelines. Distributions of cash on account of each Allowed Elder-Beerman
Reserve Class Claim will include a Pro Rata share of the Cash Investment Yield
from such investment of cash.
New Equity to be issued and distributed will be issued as of the Effective
Date, irrespective of the date on which it actually is distributed.
3. DISTRIBUTIONS ON EFFECTIVE DATE IN RESPECT OF MARGO'S RESERVE
CLASS CLAIMS
From and after the Effective Date, cash to be distributed on
account of Allowed Margo's Reserve Class Claims will be deposited in a
segregated bank account in the name of the applicable Disbursing Agent, held in
trust pending distribution by the Disbursing Agent for the benefit of the
holders of such Claims, accounted for separately, and will not constitute
property of any of the Reorganized Debtors. The Disbursing Agent will invest
such cash in a manner consistent with Reorganized Elder-Beerman's investment and
deposit guidelines. Distributions of cash on account of each Allowed Margo's
Reserve Class Claim will include a Pro Rata share of the Cash Investment Yield
from such investment of cash.
B. METHOD OF DISTRIBUTIONS TO HOLDERS OF CLAIMS
Reorganized Elder-Beerman, or such Third Party Disbursing
Agents as Reorganized Elder-Beerman may employ in its sole discretion, will make
all distributions of cash and New Equity required under the Plan. Each
Disbursing Agent will serve without bond, and any Disbursing Agent may employ or
contract with other entities to assist in or make the distributions required by
the Plan.
C. COMPENSATION AND REIMBURSEMENT FOR SERVICES RELATED TO DISTRIBUTIONS
Each Third Party Disbursing Agent providing services related to
distributions pursuant to the Plan will receive from Reorganized Elder-Beerman,
without further Bankruptcy Court approval, reasonable compensation for such
services and reimbursement of reasonable out-of-pocket expenses incurred in
connection with such services. These payments will be made on terms agreed to
with Reorganized Elder-Beerman, and will not be deducted from distributions to
be made pursuant to the Plan to holders of Allowed Claims or Allowed Interests
(including any distributions of Cash Investment Yield) receiving distributions
from a Third Party Disbursing Agent.
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D. DELIVERY OF DISTRIBUTIONS AND UNDELIVERABLE OR UNCLAIMED DISTRIBUTIONS
1. DELIVERY OF DISTRIBUTIONS IN GENERAL
Distributions to holders of Allowed Claims or Allowed Interests
will be made by a Disbursing Agent (a) at the addresses set forth on the
respective proofs of Claim or Interest Filed by holders of such Claims or
Interests; (b) at the addresses set forth in any written certification of
address change delivered to the Disbursing Agents after the date of Filing of
any related proof of Claim or Interest; or (c) at the addresses reflected in the
applicable Debtor's Schedules if no proof of Claim has been Filed and the
Disbursing Agent has not received a written notice of a change of address.
2. UNDELIVERABLE DISTRIBUTIONS HELD BY DISBURSING AGENTS
a. HOLDING AND INVESTMENT OF UNDELIVERABLE DISTRIBUTIONS
I. If any distribution to an Allowed Claim or Allowed
Interest holder is returned to a Disbursing Agent as undeliverable, no further
distributions will be made to such holder unless and until the applicable
Disbursing Agent is notified by written certification of such holder's
then-current address. Undeliverable distributions will remain in the possession
of the applicable Disbursing Agent pursuant to this Section VI.D.2.a.i until
such time as a distribution becomes deliverable. Undeliverable cash (including
dividends or other distributions on undeliverable New Common Stock) will be held
in segregated bank accounts in the name of the applicable Disbursing Agent for
the benefit of the potential claimants of such funds. Any Disbursing Agent
holding undeliverable cash will invest such cash in a manner consistent with the
investment and deposit guidelines of Reorganized Elder-Beerman. Undeliverable
New Equity will be held by the applicable Disbursing Agent for the benefit of
the potential claimants of such securities.
II. Pending the distribution of any New Common Stock,
each Disbursing Agent will cause
all of the New Common Stock held by it in its capacity as Disbursing Agent to
be: (a) represented in person or by proxy at each meeting of the stockholders of
Reorganized Elder-Beerman; (b) voted in any election of directors of Reorganized
Elder- Beerman, for the nominees recommended by the board of directors of
Reorganized Elder-Beerman; and (c) voted with respect to any other matter, as
recommended by the board of directors of Reorganized Elder-Beerman.
b. AFTER DISTRIBUTIONS BECOME DELIVERABLE
On each Quarterly Distribution Date, the applicable Disbursing
Agents will make all distributions that become deliverable to holders of Allowed
Claims or Allowed Interests during the preceding calendar quarter. Each such
distribution will include, to the extent applicable: (i) dividends or other
distributions, if any, that were previously paid to the Disbursing Agent in
respect of any New Common Stock included in such distribution and (ii) a Pro
Rata share of the Cash Investment Yield from the investment of any undeliverable
cash (including dividends or other distributions on undeliverable New Common
Stock) from the date that such distribution would have first been due had it
then been deliverable to the date that such distribution becomes deliverable.
c. FAILURE TO CLAIM UNDELIVERABLE DISTRIBUTIONS
Any holder of an Allowed Claim or Allowed Interest that does
not assert a claim pursuant to the Plan for an undeliverable distribution to be
made by a Disbursing Agent within two years after the later of (i) the Effective
Date and (ii) the last date on which a distribution was deliverable will have
its claim for such undeliverable distribution discharged and will be forever
barred from asserting any such claim against the Reorganized Debtors or their
respective property. In such cases with respect to Allowed Claims in a Reserve
Class, cash and New Common Stock will be retained in applicable Disputed Claims
Reserve, for redistribution Pro Rata to holders of Allowed Claims in the
applicable Reserve Class, pursuant to Section VI.G.2.b. For purposes of this
redistribution, each Allowed Claim in a Reserve Class for which such
distributions are undeliverable will be deemed disallowed in its entirety. In
such cases with respect to Allowed Claims or Allowed Interests in a non-Reserve
Class, unclaimed cash and New Equity will become property of Reorganized
Elder-Beerman, free of any restrictions thereon, and any such cash held by a
Third Party Disbursing Agent will be returned to Reorganized Elder-Beerman.
Nothing contained in the Plan will require any Debtor, Reorganized Debtor, or
Disbursing Agent to attempt to locate any holder of an Allowed Claim or Allowed
Interest.
E. DISTRIBUTION RECORD DATE
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1. A Disbursing Agent will have no obligation to recognize the transfer
of, or the sale of any participation in, any Allowed Bank Loan Claim that is not
in accordance with the Claims Transfer Order or that occurs after the close of
business on the Distribution Record Date, and will be entitled for all purposes
herein to recognize and distribute only to those holders of Allowed Bank Loan
Claims who are holders of such Claims, or participants therein, as of the close
of business on the Distribution Record Date in accordance with the Claims
Transfer Order, if applicable.
2. As of the close of business on the Distribution Record Date, the
respective transfer registers for the Old Notes and the Old Equity, as
maintained by the Debtors, will be closed. The applicable Disbursing Agents will
have no obligation to recognize the transfer or sale of any Note Claim that is
not in accordance with the Claims Transfer Order or that occurs after the close
of business on the Distribution Record Date, and will be entitled for all
purposes herein to recognize and distribute only to those holders of Note Claims
who are holders of such Claims as of the close of business on the Distribution
Record Date in accordance with the Claims Transfer Order, if applicable.
3. Except as otherwise provided in an order of the Bankruptcy Court
that is not subject to any stay, the transferees of Claims in a Reserve Class
that are transferred pursuant to Bankruptcy Rule 3001 on or prior to the
Distribution Record Date will be treated as the holders of such Claims for all
purposes, notwithstanding that any period provided by Bankruptcy Rule 3001 for
objecting to such transfer has not expired by the Distribution Record Date.
F. MEANS OF CASH PAYMENTS
Except as otherwise specified herein, cash payments made
pursuant to the Plan will be in U.S. dollars by checks drawn on a domestic bank
selected by the applicable Debtor or Reorganized Debtor, or by wire transfer
from a domestic bank, at the option of the applicable Debtor or Reorganized
Debtor; provided, however, that cash payments to foreign holders of Allowed
Trade Claims may be made, at the option of the applicable Debtor or Reorganized
Debtor, in such funds and by such means as are necessary or customary in a
particular foreign jurisdiction.
G. TIMING AND CALCULATION OF AMOUNTS TO BE DISTRIBUTED
1. ALLOWED CLAIMS OR ALLOWED INTERESTS IN NON-RESERVE CLASSES
Subject to Section VI.A, on the Effective Date, each holder of
an Allowed Claim or an Allowed Interest in a non-Reserve Class will receive the
full amount of the distributions that the Plan provides for Allowed Claims or
Allowed Interests in the applicable non-Reserve Class. On each Quarterly
Distribution Date, distributions will also be made, pursuant to Section VII.C,
to holders of Disputed Claims or Disputed Interests in any such Class that were
allowed during the preceding calendar quarter. Such quarterly distributions also
will be in the full amount that the Plan provides for Allowed Claims or Allowed
Interests in the applicable Class.
2. ALLOWED CLAIMS IN RESERVE CLASSES
a. INITIAL DISTRIBUTIONS
The amount of distributions to be made on the Effective Date
(subject to Section VI.A) to holders of Allowed Claims in a Reserve Class on
account of such Claims will be calculated as if each Disputed Claim in the
applicable Reserve Class were an Allowed Claim in its Face Amount. On each
Quarterly Distribution Date, distributions also will be made, pursuant to
Section VII.C, to holders of Disputed Claims in a Reserve Class that were
allowed during the preceding calendar quarter. Such quarterly distributions will
also be calculated pursuant to the provisions set forth in this Section
VI.G.2.a.
b. ADDITIONAL QUARTERLY DISTRIBUTIONS ON ACCOUNT OF
PREVIOUSLY ALLOWED CLAIMS
On each Quarterly Distribution Date, each holder of a Claim
previously allowed in a Reserve Class will receive an additional distribution
from the applicable Disputed Claims Reserve on account of such Claim in an
amount equal to: (i) the amount of cash and New Common Stock that such holder
would have been entitled to receive pursuant to Section VI.G.2.a as if such
Claim had become an Allowed Claim on the applicable Quarterly Distribution Date,
minus (ii) the aggregate amount of cash and New Common Stock previously
distributed on account of such Claim. Each such quarterly additional
distribution also will include, on the basis of the amount then being
distributed: (i) any dividends or other distributions made on account of the New
Common Stock held in the Disputed Elder-Beerman Claims Reserve and (ii) a Pro
Rata share of the Cash Investment Yield from the investment of any cash in a
Disputed Claims Reserve, from the date such
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amounts would have been due had such Claim initially been paid on the Effective
Date 100% of the allowed amount to the date that such distribution is made.
3. DISTRIBUTIONS OF NEW EQUITY
a. Notwithstanding any other provision of the Plan, only whole
numbers of shares of New Common Stock and whole numbers of New Warrants will be
issued. When any distribution on account of an Allowed Claim or Allowed Interest
would otherwise result in the issuance of a number of shares of New Common Stock
or New Warrants that is not a whole number, the actual distribution of shares of
such stock or warrants will be rounded to the next higher or lower whole number
as follows: (i) fractions equal to or greater than 1/2 will be rounded to the
next higher whole number and (ii) fractions less than 1/2 will be rounded to the
next lower whole number. The total number of shares of New Common Stock and the
number of New Warrants to be distributed to a Class of Claims or Interests will
be adjusted as necessary to account for the rounding provided for in this
Section VI.G.3. No consideration will be provided in lieu of fractional shares
or warrants that are rounded down.
b. Subject to the provisions of the New Share Purchase Rights
Agreement, each share of New Common Stock distributed pursuant to the Plan will
be accompanied by one New Share Purchase Right.
4. DE MINIMIS DISTRIBUTIONS
No Disbursing Agent will be required to distribute cash to the
holder of an Allowed Claim in an impaired Class if the amount of cash to be
distributed on account of such Claim is less than $20. Any holder of an Allowed
Claim on account of which the amount of cash to be distributed is less than $20
will have its claim for such distribution discharged and will be forever barred
from asserting any such claim against the Reorganized Debtors or their
respective property. Any cash not distributed pursuant to this Section VI.G.4
with respect to Claims in a non-Reserve Class will be the property of
Reorganized Elder-Beerman, free of any restrictions thereon, and any such cash
held by a Third Party Disbursing Agent will be returned to Reorganized
Elder-Beerman. Any cash not distributed pursuant to this Section VI.G.4 with
respect to Allowed Claims in a Reserve Class, including dividends or other
distributions made on account of New Common Stock held in the Disputed
Elder-Beerman Claims Reserve, will be retained in the applicable Disputed Claims
Reserve for redistribution Pro Rata to holders of Allowed Claims in the
applicable Reserve Class, pursuant to Section VI.G.2.b. For purposes of this
redistribution, each Allowed Claim in a Reserve Class for which distributions
are less than $20 will be deemed disallowed in its entirety.
5. COMPLIANCE WITH TAX REQUIREMENTS
a. In connection with the Plan, to the extent applicable, each
Disbursing Agent will comply with all tax withholding and reporting requirements
imposed on it by any governmental unit, and all distributions pursuant to the
Plan will be subject to such withholding and reporting requirements. Each
Disbursing Agent will be authorized to take any actions that may be necessary or
appropriate to comply with such withholding and reporting requirements.
b. Notwithstanding any other provision of the Plan, each entity
receiving a distribution of cash or New Equity pursuant to the Plan will have
sole and exclusive responsibility for the satisfaction and payment of any tax
obligations imposed on it by any governmental unit on account of such
distribution, including income, withholding, and other tax obligations.
H. SETOFFS
Except with respect to claims of a Debtor or Reorganized Debtor
released pursuant to the Plan or any contract, instrument, release, or other
agreement or document created in connection with the Plan, the Reorganized
Debtors or, with instructions from the applicable Reorganized Debtor, a Third
Party Disbursing Agent may, pursuant to section 553 of the Bankruptcy Code or
applicable nonbankruptcy law, set off against any Allowed Claim or Allowed
Interest and the distributions to be made pursuant to the Plan on account of
such Claim or Interest (before any distribution is made on account of such Claim
or Interest) the claims, rights, and causes of action of any nature that the
applicable Debtor or Reorganized Debtor may hold against the holder of such
Allowed Claim or Allowed Interest; provided, however, that neither the failure
to effect such a setoff nor the allowance of any Claim or Interest hereunder
will constitute a waiver or release by the applicable Debtor or Reorganized
Debtor of any such claims, rights, and causes of action that the Debtor or
Reorganized Debtor may possess against such holder. With respect to any claim,
right, or cause of action of any Debtor that arose prior to the Petition Date,
to the extent that a Reorganized Debtor fails to effect a setoff with a holder
of an Allowed Claim or
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Allowed Interest and seeks to collect on such claim, right, or cause of action
from such holder after a distribution to such holder pursuant to the Plan on
account of its Claim or Interest, the applicable Reorganized Debtor's recovery
on its claim against such holder will be limited to an amount that does not
exceed the amount that would have been recovered had such claim, right, or cause
of action against the holder been set off against the holder's Allowed Claim or
Allowed Interest prior to any distribution pursuant to the Plan to the holder on
account of such Allowed Claim or Allowed Interest.
I. SURRENDER OF CANCELED INSTRUMENTS OR SECURITIES
As a condition precedent to receiving any distribution pursuant
to the Plan on account of an Allowed Claim or Allowed Interest evidenced by the
notes, instruments, securities, or other documentation canceled pursuant to
Section IV.I, the holder of such Claim or Interest will tender, as specified in
this Section VI.I, the applicable notes, instruments, securities, or other
documentation evidencing such Claim or Interest to the applicable Disbursing
Agent, together with any letter of transmittal required by such Disbursing
Agent. Any cash and New Equity to be distributed pursuant to the Plan on account
of any such Claim or Interest will, pending such surrender, be treated as an
undeliverable distribution pursuant to Section VI.D.2.
1. UNTENDERED SECURITIES
Except as provided in Section VI.I.2 for lost, stolen,
mutilated, or destroyed Untendered Securities, each holder of an Allowed Claim
or Allowed Interest evidenced by an Untendered Security will tender such
Untendered Security to the applicable Disbursing Agent in accordance with a
letter of transmittal to be provided to such holders by the Disbursing Agents as
promptly as practicable following the Effective Date. The letter of transmittal
will include, among other provisions, customary provisions with respect to the
authority of the holder of the applicable Untendered Security to act and the
authenticity of any signatures required thereon. All surrendered Untendered
Securities will be marked as canceled and delivered to the appropriate
Reorganized Debtor.
2. LOST, STOLEN, MUTILATED, OR DESTROYED UNTENDERED SECURITIES
Any holder of a Claim or Interest evidenced by an Untendered
Security that has been lost, stolen, mutilated, or destroyed will, in lieu of
surrendering such Untendered Security, deliver to the applicable Disbursing
Agent: (a) evidence satisfactory to the Disbursing Agent of the loss, theft,
mutilation, or destruction and (b) such security or indemnity as may be required
by the Disbursing Agent to hold the Disbursing Agent and the Reorganized
Debtors, as applicable, harmless from any damages, liabilities, or costs
incurred in treating such individual as a holder of an Untendered Security. Upon
compliance with this Section VI.I.2 by a holder of a Claim or Interest evidenced
by an Untendered Security, such holder will, for all purposes under the Plan, be
deemed to have surrendered an Untendered Security.
3. FAILURE TO SURRENDER CANCELED UNTENDERED SECURITIES
Any holder of an Untendered Security that fails to surrender or
be deemed to have surrendered the Untendered Security within two years after the
Effective Date will have its claim for a distribution pursuant to the Plan on
account of such Untendered Security discharged and will be forever barred from
asserting any such claim against the Reorganized Debtors or their respective
property. In such cases, any cash or New Equity held for distribution on account
of such claim will be disposed of pursuant to the provisions set forth in
Section VI.D.2.c.
4. OTHER NOTES, INSTRUMENTS, OR DOCUMENTS
Except as provided below for lost, stolen, mutilated, or
destroyed notes or other instruments, holders of Allowed Bank Loan Claims will
be required to surrender any existing notes or, if not evidenced by a note, any
other instrument evidencing their respective Allowed Claims as and when such
entities receive cash or New Common Stock pursuant to the Plan. If any such
entity's notes or their instruments evidencing its Allowed Claims are lost,
stolen, mutilated, or destroyed, such entity will be required, in lieu of
surrendering such note or other instrument, to deliver to the applicable
Disbursing Agent evidence satisfactory to the Disbursing Agent of the loss,
theft, mutilation, or destruction.
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ARTICLE VII.
PROCEDURES FOR RESOLVING DISPUTED CLAIMS OR INTERESTS
A. PROSECUTION OF OBJECTIONS TO CLAIMS OR INTERESTS
1. OBJECTIONS TO CLAIMS OR INTERESTS
All objections to Claims or Interests must be Filed and served
on the holders of such Claims or Interests by the Claims Objection Bar Date, and
(a) if Filed prior to the Effective Date, such objections shall be served on the
parties on the then applicable service list in the Reorganization Cases and (b)
if Filed after the Effective Date, such objections shall be served on the Claims
Resolution Committee. If an objection has not been Filed to a proof of Claim or
Interest or a scheduled Claim by the Claims Objection Bar Date, the Claim or
Interest to which the proof of Claim or Interest or scheduled Claim relates will
be treated as an Allowed Claim or Interest if such Claim or Interest has not
been allowed earlier. An objection is deemed to have been timely Filed as to all
Personal Injury Claims, thus making each such Claim a Disputed Claim as of the
Claims Objection Bar Date. Each such Claim will remain a Disputed Claim until it
becomes an Allowed Claim in accordance with Section I.A.2.
2. AUTHORITY TO PROSECUTE OBJECTIONS
After the Confirmation Date, only the Debtors or Reorganized
Debtors will have the authority to File objections, settle, compromise,
withdraw, or litigate to judgment objections to Claims or Interests. After the
Effective Date, the Reorganized Debtors may settle or compromise any Disputed
Claim or Disputed Interest without approval of the Bankruptcy Court; provided,
however, that (a) the Reorganized Debtors shall promptly serve on the Claims
Resolution Committee and File with the Bankruptcy Court a written notice of any
settlement or compromise of a Claim with a Face Amount in excess of $500,000 and
(b) the Claims Resolution Committee shall be authorized to contest the proposed
settlement or compromise by Filing a written objection with the Bankruptcy Court
and serving such objection on the Reorganized Debtors within ten days of the
service of the settlement notice. If no such objection is Filed, the applicable
settlement or compromise shall be final without further action of the Bankruptcy
Court.
B. TREATMENT OF DISPUTED CLAIMS OR DISPUTED INTERESTS
1. NO PAYMENTS ON ACCOUNT OF DISPUTED CLAIMS OR DISPUTED
INTERESTS AND DISPUTED CLAIMS RESERVES
Notwithstanding any other provisions of the Plan, no payments
or distributions will be made on account of a Disputed Claim or a Disputed
Interest or, if less than an entire Claim is a Disputed Claim, the portion of
such Claim that is a Disputed Claim, until such Claim, portion of a Claim, or
Interest becomes an Allowed Claim or an Allowed Interest. In lieu of
distributions under the Plan to holders of Disputed Claims that would be in a
Reserve Class if allowed, the Disputed Claims Reserves will be established on
the Effective Date. Reorganized Elder-Beerman will fund the Disputed Claims
Reserves with cash and New Common Stock, as applicable, as described in Section
VII.B.2.
2. FUNDING OF DISPUTED CLAIMS RESERVES AND RECOURSE
a. FUNDING
i. On the Effective Date, cash will be
deposited in the Disputed Elder-Beerman Claims Reserve in an amount equal to the
difference between: (A) the Cash Distribution Amount, minus (B) the amount of
cash distributed on the Effective Date on account of Allowed Claims in the
Elder-Beerman Reserve Class.
ii. On the Effective Date, New Common Stock
will be placed in the Disputed Elder-Beerman Claims Reserve in a number of
shares equal to the difference between: (A) 12,279,611 shares, minus (B) the
number of shares of New Common Stock distributed on the Effective Date on
account of Allowed Claims in the Elder-Beerman Reserve Class.
iii. On the Effective Date, cash will be deposited in
the Disputed Margo's Claims Reserve in an amount equal to the difference
between: (A) $2,516,641, minus (B) the amount of cash distributed on the
Effective Date on account of Allowed Claims in the Margo's Reserve Class.
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b. RECOURSE
Each holder of a Disputed Claim that ultimately becomes an
Allowed Claim in a Reserve Class will have recourse only to the undistributed
cash and New Common Stock held in the applicable Disputed Claims Reserve for
satisfaction of the distributions to which holders of Allowed Reserve Class
Claims are entitled under the Plan, and not to any Reorganized Debtor, its
property, or any assets previously distributed on account of any Allowed Claim.
3. PROPERTY HELD IN DISPUTED CLAIMS RESERVES
a. Cash held in a Disputed Claims Reserve (including dividends
and other distributions on New Common Stock held in the Disputed Elder-Beerman
Claims Reserve) will be deposited in a segregated bank account in the name of
the applicable Disbursing Agent, held in trust for the benefit of the potential
claimants of such funds, accounted for separately, and will not constitute
property of the Reorganized Debtors. The Disbursing Agent will invest the cash
held in the applicable Disputed Claims Reserve in a manner consistent with
Reorganized Elder-Beerman's investment and deposit guidelines. The Disbursing
Agent will also place in the applicable Disputed Claims Reserve the Cash
Investment Yield from such investment of cash.
b. New Common Stock held in the Disputed Elder-Beerman Claims
Reserve will be held in trust for the benefit of the potential claimants of such
securities by the applicable Disbursing Agent, accounted for separately, and
will not constitute property of the Reorganized Debtors. Pending the
distribution of any New Common Stock held in the Disputed Elder-Beerman Claims
Reserve, such stock will be voted pursuant to Section VI.D.2.a.ii.
C. DISTRIBUTIONS ON ACCOUNT OF DISPUTED CLAIMS OR DISPUTED INTERESTS ONCE
ALLOWED
On each Quarterly Distribution Date, the applicable Disbursing
Agent will make all distributions on account of any Disputed Claim or Disputed
Interest that has become an Allowed Claim or Allowed Interest during the
preceding calendar quarter. Such distributions will be made pursuant to the
provisions of the Plan governing the applicable Class, including the incremental
distribution provisions set forth in Section VI.G.2. Holders of Disputed Claims
in Reserve Classes that ultimately are allowed will also be entitled to receive,
on the basis of the amount ultimately allowed, the net amount of: (1) any
dividends or other distributions received on account of the shares of New Common
Stock to be distributed and (2) a Pro Rata share of the Cash Investment Yield
from the investment of any cash in the applicable Disputed Claims Reserve from
the Effective Date or, with respect to net cash proceeds generated after the
Effective Date from property held in a Disputed Claims Reserve, the date that
such cash was invested after the Effective Date to the date that such
distributions are made from the Disputed Claims Reserve.
D. TAX REQUIREMENTS FOR INCOME GENERATED BY DISPUTED CLAIM RESERVES
The recovery of holders of Claims in a Reserve Class consists
of the treatment set forth herein and post- Effective Date interest on such
Claims at a rate determined by the Cash Investment Yield. Therefore, the
Reorganized Debtors and the holders of all Allowed Claims in a Reserve Class
will treat cash distributions of the Cash Investment Yield as interest for all
income tax purposes, and the applicable Reorganized Debtor will cause such
information returns to be issued to such holders consistent with this treatment
as may be required by any governmental unit. The applicable Reorganized Debtor
will include in its tax returns all items of income, deduction, and credit of
the Disputed Claims Reserves; provided, however, that no distribution will be
made to the applicable Reorganized Debtor out of the Disputed Claims Reserves as
a result of this inclusion. The applicable Disbursing Agent will pay, or cause
to be paid, out of the funds held in the applicable Disputed Claims Reserve, any
tax imposed on the Disputed Claims Reserve (as opposed to the applicable
Reorganized Debtor or the holders of Claims in the applicable Reserve Class) by
any governmental unit with respect to income generated by the funds and New
Common Stock held in the Disputed Claims Reserve. The applicable Disbursing
Agent will also file or cause to be filed any tax or information return related
to the applicable Disputed Claims Reserve that is required by any governmental
unit.
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ARTICLE VIII.
CONDITIONS PRECEDENT TO CONFIRMATION
AND CONSUMMATION OF THE PLAN
A. CONDITIONS TO CONFIRMATION
The Bankruptcy Court will not enter the Confirmation Order
unless and until each of the following conditions has been satisfied or duly
waived by the Debtors pursuant to Section VIII.C:
1. The Confirmation Order shall be reasonably acceptable in form and
substance to the Debtors.
2. The Comprehensive Settlement Agreement and all of the compromises
and settlements to be effected thereby shall be approved, pursuant to Bankruptcy
Rule 9019, by an order of the Bankruptcy Court (contemplated to be part of the
Confirmation Order); provided, however, that if Beerman-Peal votes to reject the
Plan, this condition shall not apply to the extent that the Comprehensive
Settlement Agreement relates to the Beerman Entities.
B. CONDITIONS TO EFFECTIVE DATE
The Effective Date will not occur and the Plan will not be
consummated unless and until each of the following conditions has been satisfied
or duly waived by the Debtors pursuant to Section VIII.C:
1. The New Common Stock shall have been authorized for listing on or
accepted for quotation through a National Securities Exchange.
2. The Bankruptcy Court shall have entered an order (contemplated to be
part of the Confirmation Order) approving and authorizing the Debtors and the
Reorganized Debtors to take all actions necessary or appropriate to implement
the Plan, including completion of the Restructuring Transactions and the other
transactions contemplated by the Plan and the implementation and consummation of
the contracts, instruments, releases, and other agreements or documents created
in connection with the Plan, including the Comprehensive Settlement Agreement.
3. Each of the parties to the Comprehensive Settlement Agreement shall
have executed and delivered to the Debtors such agreement; provided, however,
that if Beerman-Peal votes to reject the Plan, this condition shall not apply
with respect to the execution and delivery of the Comprehensive Settlement
Agreement by the Beerman Entities.
4. The final terms of the Exit Financing Facility shall be satisfactory
to the Debtors.
C. WAIVER OF CONDITIONS TO CONFIRMATION OR EFFECTIVE DATE
The conditions to Confirmation and the Effective Date set forth
in Sections VIII.A and VIII.B may be waived in whole or part by the Debtors at
any time without an order of the Bankruptcy Court after five days' written
notice of such waiver to (a) each Creditors' Committee, (b) the ESOP Committee,
(c) Beerman-Peal (if Beerman-Peal does not vote to reject the Plan), and (d) the
DIP Lender. The failure to satisfy or waive a condition may be asserted by a
Debtor regardless of the circumstances giving rise to the failure of such
condition to be satisfied (including any action or inaction by the Debtors).
D. EFFECT OF NONOCCURRENCE OF CONDITIONS TO EFFECTIVE DATE
Each of the conditions to the Effective Date must be satisfied
or duly waived by the Debtors in accordance with Article VIII within 60 days
after the Confirmation Date, or by such later date, after notice and a hearing,
as is proposed by the Debtors. If each condition to the Effective Date has not
been satisfied or duly waived pursuant to Section VIII.C by such date, then upon
motion by the Debtors, either of the Creditors' Committees, the ESOP Committee,
or any of the Beerman Entities (if Beerman-Peal does not vote to reject the Plan
) made before the time that each of such conditions has been satisfied or duly
waived and upon notice to such parties in interest as the Bankruptcy Court may
direct, the Confirmation Order will be vacated by the Bankruptcy Court;
provided, however, that, notwithstanding the filing of such motion, the
Confirmation Order may not be vacated if each of the conditions to the Effective
Date is either satisfied or duly waived before the Bankruptcy Court enters an
order granting such motion. If the Confirmation Order is vacated pursuant to
this Section VIII.D, the Plan will be null and void in all respects, including
the discharge of Claims and termination of Interests pursuant to section 1141 of
the Bankruptcy Code, and the assumptions, assignments or rejections of Executory
Contracts or Unexpired Leases
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pursuant to Sections V.A and V.C, and nothing contained in the Plan will: (1)
constitute a waiver or release of any claims by or against, or any Interest in,
the Debtors; or (2) prejudice in any manner the rights of the Debtors or any
other party in interest.
ARTICLE IX.
CONFIRMABILITY AND SEVERABILITY
OF A PLAN AND CRAMDOWN
A. CONFIRMABILITY AND SEVERABILITY OF A PLAN
The Plan constitutes a separate plan of reorganization for each
Debtor. Accordingly, the confirmation requirements of section 1129 of the
Bankruptcy Code must be satisfied separately with respect to each Debtor. The
Debtors reserve the right to modify or to revoke or withdraw the Plan, as it
applies to any particular Debtor, pursuant to Sections XII.C and XII.D. A
determination by the Bankruptcy Court that the Plan, as it applies to any
particular Debtor, is not confirmable pursuant to section 1129 of the Bankruptcy
Code will not limit or affect: (1) the Confirmation of the Plan, as it applies
to any other Debtor, and (2) the Debtors' ability to modify the Plan, as it
applies to any particular Debtor, to satisfy the confirmation requirements of
section 1129 of the Bankruptcy Code.
B. CRAMDOWN
The Debtors request Confirmation under section 1129(b) of the
Bankruptcy Code with respect to any impaired Class that does not accept the Plan
pursuant to section 1126 of the Bankruptcy Code. The Debtors reserve the right
to modify the Plan to the extent, if any, that Confirmation pursuant to section
1129(b) of the Bankruptcy Code requires modification. Such modifications may
include reclassification of certain Claims in Class C-5 to reflect the differing
interests of certain creditors or groups of creditors holding Unsecured Claims
in such Class.
ARTICLE X.
DISCHARGE, TERMINATION, INJUNCTION,
AND SUBORDINATION RIGHTS
A. DISCHARGE OF CLAIMS AND TERMINATION OF INTERESTS
1. Except as provided in Section X.A.2 or in the Confirmation Order,
the rights afforded under the Plan and the treatment of Claims and Interests
under the Plan will be in exchange for and in complete satisfaction, discharge,
and release of all Claims and termination of all Interests arising on or before
the Effective Date, including any interest accrued on Claims from the Petition
Date. Except as provided in Section X.A.2 or in the Confirmation Order,
Confirmation will, as of the Effective Date: (a) discharge the Debtors from all
Claims or other debts that arose on or before the Effective Date, and all debts
of the kind specified in section 502(g), 502(h), or 502(i) of the Bankruptcy
Code, whether or not (i) a proof of Claim based on such debt is Filed or deemed
Filed pursuant to section 501 of the Bankruptcy Code, (ii) a Claim based on such
debt is allowed pursuant to section 502 of the Bankruptcy Code, or (iii) the
holder of a Claim based on such debt has accepted the Plan and (b) terminate all
Interests and other rights of equity security holders in the Debtors.
2. Pursuant to section 1141(d)(3) of the Bankruptcy Code, Confirmation
will not discharge Claims against Margo's; provided, however, that no holder of
a Claim against Margo's may, on account of such Claim, seek or receive any
payment or other distribution from, or seek recourse against, any Debtor,
Reorganized Debtor, their respective successors, or their respective property,
except as expressly provided herein for holders of Administrative Claims
(Section III.A.1), Priority Tax Claims (Section III.A.2), or Classified Claims
(Section III.B) against Margo's.
3. In accordance with the foregoing, except as provided in the Plan or
Confirmation Order, the Confirmation Order will be a judicial determination, as
of the Effective Date, of a discharge of all such Claims and other debts and
liabilities against the Debtors and termination of all such Interests and other
rights of equity security holders in the Debtors, pursuant to sections 524 and
1141 of the Bankruptcy Code, and such discharge will void any judgment obtained
against a Debtor at any time, to the extent that such judgment relates to a
discharged Claim or terminated Interest.
<PAGE> 41
33
B. INJUNCTIONS
1. Except as provided in the Plan or Confirmation Order, as of the
Effective Date, all entities that have held, currently hold, or may hold a Claim
or other debt or liability that is discharged or an Interest or other right of
an equity security holder that is terminated pursuant to the terms of the Plan
are permanently enjoined from taking any of the following actions on account of
any such discharged Claims, debts, or liabilities or terminated Interests or
rights: (a) commencing or continuing in any manner any action or other
proceeding against the Debtors, the Reorganized Debtors, or their respective
property, other than to enforce any right pursuant to the Plan to a
distribution; (b) enforcing, attaching, collecting, or recovering in any manner
any judgment, award, decree, or order against the Debtors, the Reorganized
Debtors, or their respective property, other than as permitted pursuant to (a)
above; (c) creating, perfecting, or enforcing any lien or encumbrance against
the Debtors, the Reorganized Debtors, or their respective property; (d)
asserting a setoff, right of subrogation, or recoupment of any kind against any
debt, liability, or obligation due to the Debtors or the Reorganized Debtors;
and (e) commencing or continuing any action, in any manner, in any place that
does not comply with or is inconsistent with the provisions of the Plan.
2. As of the Effective Date, all entities that have held, currently
hold, or may hold a Claim or other debt or liability against Margo's that would
be discharged upon Confirmation but for the provisions of section 1141(d)(3) of
the Bankruptcy Code and Section X.A.2 are permanently enjoined from taking any
of the following actions on account of any such Claim, debt, or liability: (a)
commencing or continuing in any manner any action or other proceeding against
Margo's, Reorganized Margo's, or its property, other than to enforce any right
pursuant to the Plan to a distribution; (b) enforcing, attaching, collecting, or
recovering in any manner any judgment, award, decree, or order against Margo's,
Reorganized Margo's, or its property, other than as permitted pursuant to (a)
above; (c) creating, perfecting, or enforcing any lien or encumbrance against
Margo's, Reorganized Margo's, or its property; (d) asserting a setoff, right of
subrogation, or recoupment of any kind against any debt, liability, or
obligation due to Margo's or Reorganized Margo's; and (e) commencing or
continuing any action, in any manner, in any place that does not comply with or
is inconsistent with the provisions of the Plan.
3. As of the Effective Date, all entities that have held, currently
hold or may hold a claim, demand, debt, right, cause of action, or liability
that is released pursuant to the Comprehensive Settlement Agreement or otherwise
pursuant to the Plan are permanently enjoined from taking any of the following
actions against any released entity or its property on account of such released
claims, demands, debts, rights, causes of action, or liabilities: (a) commencing
or continuing in any manner any action or other proceeding; (b) enforcing,
attaching, collecting, or recovering in any manner any judgment, award, decree,
or order; (c) creating, perfecting, or enforcing any lien or encumbrance; (d)
asserting a setoff, right of subrogation, or recoupment of any kind against any
debt, liability, or obligation due to any released entity; and (e) commencing or
continuing any action, in any manner, in any place that does not comply with or
is inconsistent with the provisions of the Plan.
4. By accepting distributions pursuant to the Plan, each holder of an
Allowed Claim or Allowed Interest receiving distributions pursuant to the Plan
will be deemed to have specifically consented to the injunctions set forth in
this Section X.B.
C. TERMINATION OF SUBORDINATION RIGHTS AND SETTLEMENT OF RELATED CLAIMS
AND CONTROVERSIES
1. The classification and manner of satisfying all Claims and Interests
under the Plan take into consideration all subordination rights, whether arising
under general principles of equitable subordination, section 510(c) of the
Bankruptcy Code, or otherwise, that a holder of a Claim or Interest may have
against other Claim or Interest holders with respect to any distribution made
pursuant to the Plan. All subordination rights that a holder of a Claim or
Interest may have with respect to any distribution to be made pursuant to the
Plan will be discharged and terminated, and all actions related to the
enforcement of such subordination rights will be permanently enjoined.
Accordingly, distributions pursuant to the Plan to holders of Allowed Claims or
Allowed Interests will not be subject to payment to a beneficiary of such
terminated subordination rights, or to levy, garnishment, attachment, or other
legal process by a beneficiary of such terminated subordination rights.
2. Pursuant to Bankruptcy Rule 9019 and in consideration for the
distributions and other benefits provided under the Plan, the provisions of the
Plan will constitute a good faith compromise and settlement of all claims or
controversies relating to the subordination rights that a holder of a Claim or
Interest may have with respect to any Allowed Claim or Allowed Interest, or any
distribution to be made pursuant to the Plan on account of such Claim or
Interest. The entry of the Confirmation Order will constitute the Bankruptcy
Court's approval, as of the Effective Date, of the compromise or settlement of
all such claims or controversies and the Bankruptcy Court's finding that such
compromise or settlement is in the best
<PAGE> 42
34
interests of the Debtors, the Reorganized Debtors, and their respective property
and Claim and Interest holders, and is fair, equitable, and reasonable.
ARTICLE XI.
RETENTION OF JURISDICTION
Notwithstanding the entry of the Confirmation Order and the
occurrence of the Effective Date, the Bankruptcy Court will retain such
jurisdiction over the Reorganization Cases after the Effective Date as is
legally permissible, including jurisdiction to:
1. Allow, disallow, determine, liquidate, classify, estimate, or
establish the priority or secured or unsecured status of any Claim or Interest,
including the resolution of any request for payment of any Administrative Claim
and the resolution of any objections to the allowance or priority of Claims or
Interests;
2. Grant or deny any applications for allowance of compensation or
reimbursement of expenses authorized pursuant to the Bankruptcy Code or the Plan
for periods ending on or before the Effective Date;
3. Resolve any matters related to the assumption, assumption and
assignment, or rejection of any Executory Contract or Unexpired Lease to which
any Debtor is a party or with respect to which any Debtor or Reorganized Debtor
may be liable and to hear, determine, and, if necessary, liquidate any Claims
arising therefrom, including Cure Amount Claims and those matters related to the
amendment of Exhibits V.A.1 and V.C after the Effective Date pursuant to Section
V.A to add or delete any Executory Contracts or Unexpired Leases to the lists of
Executory Contracts and Unexpired Leases to be assumed, assumed and assigned, or
rejected;
4. Ensure that distributions to holders of Allowed Claims or Allowed
Interests are accomplished pursuant to the provisions of the Plan;
5. Decide or resolve any motions, adversary proceedings, contested or
litigated matters, and any other matters and grant or deny any applications
involving the Debtors that may be pending on the Effective Date;
6. Enter such orders as may be necessary or appropriate to implement or
consummate the provisions of the Plan and all contracts, instruments, releases,
and other agreements or documents created in connection with the Plan, the
Disclosure Statement, or the Confirmation Order;
7. Resolve any cases, controversies, suits, or disputes that may arise
in connection with the consummation, interpretation, or enforcement of the Plan
or any contract, instrument, release, or other agreement or document that is
executed or created pursuant to the Plan, or any entity's rights arising from or
obligations incurred in connection with the Plan or such documents;
8. Modify the Plan before or after the Effective Date pursuant to
section 1127 of the Bankruptcy Code or modify the Disclosure Statement, the
Confirmation Order, or any contract, instrument, release, or other agreement or
document created in connection with the Plan, the Disclosure Statement, or the
Confirmation Order, or remedy any defect or omission or reconcile any
inconsistency in any Bankruptcy Court order, the Plan, the Disclosure Statement,
the Confirmation Order, or any contract, instrument, release, or other agreement
or document created in connection with the Plan, the Disclosure Statement, or
the Confirmation Order, in such manner as may be necessary or appropriate to
consummate the Plan;
9. Issue injunctions, enter and implement other orders, or take such
other actions as may be necessary or appropriate to restrain interference by any
entity with consummation, implementation, or enforcement of the Plan or the
Confirmation Order;
10. Enter and implement such orders as are necessary or appropriate if
the Confirmation Order is for any reason or in any respect modified, stayed,
reversed, revoked, or vacated or distributions pursuant to the Plan are enjoined
or stayed;
<PAGE> 43
35
11. Determine any other matters that may arise in connection with or
relate to the Plan, the Disclosure Statement, the Confirmation Order, or any
contract, instrument, release, or other agreement or document created in
connection with the Plan, the Disclosure Statement, or the Confirmation Order;
and
12. Enter an order concluding the Reorganization Cases.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
A. DISSOLUTION OF THE CREDITORS' COMMITTEES AND CREATION OF THE CLAIMS
RESOLUTION COMMITTEE
1. CREDITORS' COMMITTEE
On the Effective Date, each of the Creditors' Committees will
dissolve and the members of each Creditors' Committee will be released and
discharged from all duties and obligations arising from or related to the
Reorganization Cases. The Professionals retained by each of the Creditors'
Committees and the members thereof will not be entitled to assert any Fee Claim
for any services rendered or expenses incurred after the Effective Date, except
for services rendered and expenses incurred in connection with any applications
for allowance of compensation and reimbursement of expenses pending on the
Effective Date or Filed and served after the Effective Date pursuant to Section
III.A.1.f.ii.A.
2. CLAIMS RESOLUTION COMMITTEE
a. FUNCTION AND COMPOSITION OF THE COMMITTEE
On the Effective Date, the Claims Resolution Committee will be
established. Its sole function will be to monitor the Reorganized Debtors'
progress in (i) reconciling and resolving Disputed Claims in Reserve Classes and
(ii) making distributions on account of such Claims once resolved. The Claims
Resolution Committee will consist of up to three holders of Claims who will be
chosen as follows: (i) the Institutional Lenders' Committee may designate one of
its members to serve on the Claims Resolution Committee; (ii) the Trade
Creditors' Committee may designate one of its members to serve on the Claims
Resolution Committee; and (iii) the Creditors' Committees may jointly select a
member of either Creditors' Committee to serve on the Claims Resolution
Committee.
b. COMMITTEE PROCEDURES
The Claims Resolution Committee will adopt by-laws that will
control its functions. These by-laws, unless modified by the Claims Resolution
Committee, will provide the following: (i) a majority of the Claims Resolution
Committee will constitute a quorum; (ii) one member of the Claims Resolution
Committee will be designated by the majority of its members as its chairperson;
(iii) meetings of the Claims Resolution Committee will be called by its
chairperson on such notice and in such manner as its chairperson may deem
advisable; and (iv) the Claims Resolution Committee will function by decisions
made by a majority of its members in attendance at any meeting.
c. EMPLOYMENT OF PROFESSIONALS BY THE COMMITTEE AND
REIMBURSEMENT OF COMMITTEE MEMBERS
The Claims Resolution Committee will be authorized to retain
and employ one law firm as counsel. The Claims Resolution Committee also will be
authorized to retain and employ one accounting firm; provided, however, that the
Claims Resolution Committee must deliver a written notice to the Reorganized
Debtors before each request for substantial services from its accountants, which
notice will describe the services to be requested, an estimate of the cost for
such services, and the reason why such services are necessary and reasonable.
The role of the Claims Resolution Committee's professionals will be strictly
limited to assisting the committee in its functions as set forth herein. The
Claims Resolution Committee will use its best faith efforts to limit the amount
of its professionals' fees and expenses. The Reorganized Debtors will pay the
actual, necessary, reasonable, and documented fees and expenses of the
professionals retained by the Claims Resolution Committee, as well as the
actual, necessary, reasonable, and documented expenses incurred by each
committee member in the performance of its duties, in accordance with
Reorganized Elder-Beerman's normal business practices for compensating and
reimbursing professionals. Other than as specified in the preceding sentence,
the members of the Claims Resolution Committee will serve without compensation.
If there is any unresolved dispute between the Reorganized Debtors and the
<PAGE> 44
36
Claims Resolution Committee, its professionals, or a member thereof as to any
fees or expenses, such dispute will be submitted to the Bankruptcy Court for
resolution.
d. DISSOLUTION OF THE COMMITTEE
Subject to further order of the Bankruptcy Court, the Claims
Resolution Committee will dissolve on the six-month anniversary of the Effective
Date. The professionals retained by the Claims Resolution Committee and the
members of the committee will not be entitled to compensation or reimbursement
of expenses for any services rendered after the date of dissolution of the
committee.
B. LIMITATION OF LIABILITY
The Debtors, the Reorganized Debtors, and their respective
directors, officers, employees, and Professionals, acting in such capacity, and
the Creditors' Committees and the ESOP Committee and their respective members
and Professionals, acting in such capacity, will neither have nor incur any
liability to any entity for any act taken or omitted to be taken in connection
with or related to the formulation, preparation, dissemination, implementation,
Confirmation, or consummation of the Plan, the Disclosure Statement, or any
contract, instrument, release, or other agreement or document created or entered
into, or any other act taken or omitted to be taken in connection with the Plan;
provided, however, that the foregoing provisions of this Section XII.B will have
no effect on: (1) the liability of any entity that would otherwise result from
the failure to perform or pay any obligation or liability under the Plan or any
contract, instrument, release, or other agreement or document to be delivered or
distributed in connection with the Plan or (2) the liability of any entity that
would otherwise result from any such act or omission to the extent that such act
or omission is determined in a Final Order to have constituted gross negligence
or willful misconduct.
C. MODIFICATION OF THE PLAN
Subject to the restrictions on modifications set forth in
section 1127 of the Bankruptcy Code, the Debtors or Reorganized Debtors, as
applicable, reserve the right to alter, amend, or modify the Plan before its
substantial consummation.
D. REVOCATION OF THE PLAN
The Debtors reserve the right to revoke or withdraw the Plan as
to any or all of the Debtors prior to the Confirmation Date. If the Debtors
revoke or withdraw the Plan as to any or all of the Debtors, or if Confirmation
as to any or all of the Debtors does not occur, then, with respect to such
Debtors, the Plan will be null and void in all respects, and nothing contained
in the Plan will: (1) constitute a waiver or release of any claims by or
against, or any Interests in, such Debtors or (2) prejudice in any manner the
rights of any such Debtors.
E. SEVERABILITY OF PLAN PROVISIONS
If, prior to Confirmation, any term or provision of the Plan is
held by the Bankruptcy Court to be invalid, void, or unenforceable, the
Bankruptcy Court will have the power to alter and interpret such term or
provision to make it valid or enforceable to the maximum extent practicable,
consistent with the original purpose of the term or provision held to be
invalid, void, or unenforceable, and such term or provision will then be
applicable as altered or interpreted. Notwithstanding any such holding,
alteration, or interpretation, the remainder of the terms and provisions of the
Plan will remain in full force and effect and will in no way be affected,
impaired, or invalidated by such holding, alteration, or interpretation. The
Confirmation Order will constitute a judicial determination and will provide
that each term and provision of the Plan, as it may have been altered or
interpreted in accordance with the foregoing, is valid and enforceable pursuant
to its terms.
F. SUCCESSORS AND ASSIGNS
The rights, benefits, and obligations of any entity named or
referred to in the Plan will be binding on, and will inure to the benefit of,
any heir, executor, administrator, successor, or assign of such entity.
<PAGE> 45
37
G. SERVICE OF CERTAIN PLAN EXHIBITS AND DISCLOSURE STATEMENT EXHIBITS
Because the Exhibits to the Plan are voluminous, the Exhibits
are not being served with copies of the Plan and the Disclosure Statement. Any
party in interest may review the Plan Exhibits during normal business hours
(9:00 a.m. to 4:30 p.m.) in the Document Reviewing Centers.
H. SERVICE OF DOCUMENTS
Any pleading, notice, or other document required by the Plan or
Confirmation Order to be served on or delivered to the Debtors, the Reorganized
Debtors, the Creditors' Committees, the ESOP Committee, the DIP Lender, or
Beerman-Peal, must be sent by overnight delivery service, facsimile
transmission, courier service, or messenger to:
<TABLE>
<CAPTION>
<S> <C>
THE ELDER-BEERMAN STORES CORP. Kevin E. Irwin, Esq.
3155 El-Bee Road KEATING, MUETHING & KLEKAMP
Dayton, Ohio 45439 1800 Provident Tower
(937) 296-2700 One East Fourth Street
Attn: General Counsel Cincinnati, Ohio 45402
(513) 579-6427
Richard M. Cieri, Esq.
JONES, DAY, REAVIS & POGUE (Counsel to the ESOP Committee)
North Point
901 Lakeside Avenue Marcia L. Goldstein, Esq.
Cleveland, Ohio 44114 Weil, Gotshal & Manges LLP
(216) 586-3939 767 Fifth Avenue
New York, New York 10153-0119
(Counsel to the Debtors and Reorganized Debtors)
(Counsel to the DIP Lender)
Alan R. Lepene, Esq.
THOMPSON, HINE & FLORY LLP Shawn M. Riley, Esq.
3900 Society Center McDONALD, HOPKINS, BURKE & HABER CO.
127 Public Square LPA
Cleveland, Ohio 44114 600 Superior Avenue, NE
(216) 566-5520 2100 Bank One Center
Cleveland, Ohio 44114
(Counsel to the Institutional Lenders' Committee) (216) 348-5400
Lawrence C. Gottlieb, Esq. (Counsel to the Beerman Entities)
SIEGEL, SOMMERS & SCHWARTZ L.L.P.
470 Park Avenue, South Alexander G. Barkan, Esq.
16th Floor OFFICE OF THE UNITED STATES TRUSTEE
New York, New York 10016 170 N. High Street, Suite 200
(212) 889-7570 Columbus, Ohio 43215-2403
(614) 569-7411
(Counsel to the Trade Creditors' Committee)
Dated: November 17, 1997 Respectfully submitted,
THE ELDER-BEERMAN STORES CORP.
(for itself and on behalf of the Elder-Beerman
Subsidiary Debtors)
By: /s/ Max Gutmann
------------------------------------------
Name: Max Gutmann
Title: Chairman of the Board
</TABLE>
<PAGE> 46
38
Counsel:
RICHARD M. CIERI (0032464)
JONES, DAY, REAVIS & POGUE
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
(216) 586-3939
SCOTT J. DAVIDO (Pa. Atty. No. 75565)
JONES, DAY, REAVIS & POGUE
One Mellon Bank Center, 31st Floor
500 Grant Street
Pittsburgh, Pennsylvania 15219
(412) 391-3939
ATTORNEYS FOR DEBTORS AND DEBTORS IN
POSSESSION
<PAGE> 1
EXHIBIT 3(A)
AMENDED ARTICLES OF INCORPORATION
OF
THE ELDER-BEERMAN STORES CORP.
ARTICLE I
---------
The name of the corporation is The Elder-Beerman Stores Corp.
(the "Corporation").
ARTICLE II
----------
The place in the State of Ohio where the Corporation's principal office
is located is the City of Moraine, Montgomery County.
ARTICLE III
-----------
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be formed under Sections 1701.01 to 1701.98,
inclusive, of the Ohio Revised Code.
ARTICLE IV
----------
A. AUTHORIZED CAPITAL STOCK. The Corporation is authorized to issue
30,000,000 shares of capital stock, consisting of 25,000,000 shares of common
stock, without par value ("Common Stock"), and 5,000,000 shares of preferred
stock, without par value ("Preferred Stock").
B. PREFERRED STOCK. The Board of Directors shall have authority to
issue Preferred Stock from time to time in one or more classes or series. The
express terms of shares of a different series of any particular class shall be
identical except for such variations as may be permitted by law. Without
limiting the generality of the foregoing, the initial classes of Preferred Stock
shall be designated Class A Preferred Stock, Class B Preferred Stock, and Class
C Preferred Stock. Subject to such express terms as may hereafter be adopted by
the Board of Directors, the voting rights of Class A Preferred Stock, Class B
Preferred Stock and Class C Preferred Stock shall be follows:
1. Each holder of Class A Preferred Stock shall be entitled to 100
votes per share and, except as otherwise required by law, shall vote together
with the
<PAGE> 2
Common Stock as a single class on all matters properly submitted to a vote at a
meeting of the shareholders.
2. Each holder of Class B Preferred Stock shall be entitled to one vote
per share and, except as otherwise required by law, shall vote together with the
Common Stock as a single class on all matters properly submitted to a vote at a
meeting of shareholders.
3. Holders of Class C Preferred Stock shall have no voting rights.
ARTICLE V
---------
The Board of Directors shall be authorized hereby to exercise all
powers now or hereafter permitted by law providing rights to the Board of
Directors to adopt amendments to these Amended Articles of Incorporation to fix
or change the express terms of any unissued or treasury shares of any class,
including, without limiting the generality of the foregoing: division of such
shares into series and the designation and authorized number of shares of each
series; voting rights of such shares (to the extent now or hereafter permitted
by law); dividend or distribution rate; dates of payment of dividends or
distributions and the dates from which they are cumulative; liquidation price;
redemption rights and price; sinking fund requirements; conversion rights; and
restrictions on the issuance of shares of the same series or any other class or
series; all as may be established by resolution of the Board of Directors from
time to time (collectively, a "Preferred Stock Designation").
ARTICLE VI
----------
Except as may be provided in any Preferred Stock Designation, holders
of shares of capital stock of the Corporation shall not be entitled to
cumulative voting rights in the election of directors.
ARTICLE VII
-----------
Except as may be provided in any Preferred Stock Designation, no holder
of any shares of capital stock of the Corporation shall have any preemptive
right to acquire any shares of unissued capital stock of any class or series,
now or hereafter authorized, or any treasury shares or securities convertible
into such shares or carrying a right to subscribe to or acquire such shares of
capital stock.
ARTICLE VIII
------------
The Corporation may from time to time, pursuant to authorization by the
Board of Directors and without action by the shareholders, purchase or otherwise
acquire capital stock of the Corporation of any class or classes in such manner,
upon such terms and in such amounts as the
- 2 -
<PAGE> 3
Board of Directors shall determine; subject, however, to such limitation or
restriction, if any, as is contained in any Preferred Stock Designation at the
time of such purchase or acquisition.
ARTICLE IX
----------
Except as may be provided in any Preferred Stock Designation, the Board
of Directors shall consist of not less than nine nor more than 11 directors, as
shall be fixed from time to time in the manner provided in the Amended Code of
Regulations of the Corporation. The directors, other than those who may be
expressly elected by virtue of the terms of any Preferred Stock Designation,
will be classified with respect to the time for which they severally hold office
into three classes, as nearly equal in size as possible and consisting of not
less than three directors in each class, designated Class I, Class II, and Class
III. The directors first appointed to Class I will hold office for a term
expiring at the annual meeting of shareholders to be held in 1999; the directors
first appointed to Class II will hold office for a term expiring at the annual
meeting of shareholders to be held in 2000; and the directors first appointed to
Class III will hold office for a term expiring at the annual meeting of
shareholders to be held in the year 2001, with the members of each class to hold
office until their successors are elected. Except as may be otherwise provided
in any Preferred Stock Designation, at each annual meeting of shareholders of
the Corporation, the successors of the class of directors whose terms expire at
that meeting shall be elected by plurality vote of all votes cast at such
meeting to hold office for a term expiring at the annual meeting of shareholders
held in the third year following the year of their election. Except as provided
otherwise in any Preferred Stock Designation, directors may be elected by the
shareholders only (i) at an annual meeting of shareholders or (ii) at a special
meeting of shareholders called for that purpose if (a) no annual meeting is
held, (b) an annual meeting is held but directors are not elected at such annual
meeting, or (c) the shareholders increase the number of directors. Neither the
holding of a special meeting of shareholders nor the election of directors at a
special meeting of shareholders will, by itself, shorten the term of any
incumbent director. No decrease in the number of directors constituting the
Board of Directors may shorten the term of any incumbent director. Election of
directors of the Corporation need not be by written ballot unless requested by
the presiding officer or by the holders of a majority of the voting power of the
Corporation present in person or represented by proxy at a meeting of
shareholders at which directors are to be elected. For purposes of these Amended
Articles of Incorporation, "voting power of the Corporation" means the aggregate
voting power of (1) all the outstanding shares of Common Stock of the
Corporation and (2) all the outstanding shares of any class or series of capital
stock of the Corporation that has (i) rights to distributions senior to those of
the Common Stock including, without limitation, any relative, participating,
optional, or other special rights and privileges of, and any qualifications,
limitations or restrictions on, such shares and (ii) voting rights entitling
such shares to vote generally in the election of directors.
ARTICLE X
---------
Notwithstanding anything to the contrary contained in these Amended
Articles of Incorporation, the affirmative vote of the holders of at least 72%
of the voting power of the Corporation, voting together as a single class, shall
be required to amend or repeal, or adopt any provision inconsistent with,
Article VI, Article VII, Article VIII, Article IX or this Article X;
- 3 -
<PAGE> 4
PROVIDED, HOWEVER, that this Article X shall not alter the voting entitlement of
shares that, by virtue of any Preferred Stock Designation, are expressly
entitled to vote on any amendment to these Amended Articles of Incorporation.
ARTICLE XI
----------
Notwithstanding anything to the contrary in these Amended Articles of
Incorporation, the Corporation shall not issue any nonvoting equity securities
to the extent prohibited by Section 1123 of the United States Bankruptcy Code as
in effect on the effective date of the Plan of Reorganization of the Corporation
and certain of its affiliated debtors, duly confirmed by the Bankruptcy Court in
Jointly Administered Case No. 95-33643; PROVIDED, HOWEVER, that this Article XI
(a) shall have no further force and effect beyond that required under Section
1123 of the United States Bankruptcy Code, (b) shall have such force and effect,
if any, only for so long as such Section is in effect and applicable to the
Corporation, and (c) in all events may be amended or eliminated in accordance
with applicable law as from time to time in effect.
ARTICLE XII
-----------
Any and every statute of the State of Ohio hereafter enacted, whereby
the rights, powers or privileges of corporations or of the shareholders of
corporations organized under the laws of the State of Ohio are increased or
diminished or in any way affected, or whereby effect is given to the action
taken by any number, less than all, of the shareholders of any such corporation,
shall apply to the Corporation and shall be binding not only upon the
Corporation but upon every shareholder of the Corporation to the same extent as
if such statute had been in force at the date of filing these Amended Articles
of Incorporation in the office of the Secretary of State of Ohio.
ARTICLE XIII
------------
These Amended Articles of Incorporation supersede the Corporation's
existing Articles of Incorporation and all prior amendments thereto.
- 4 -
<PAGE> 1
EXHIBIT 3(b)
================================================================================
THE ELDER-BEERMAN STORES CORP.
Amended Code of Regulations
As Adopted and in
Effect on __________, 1997
================================================================================
<PAGE> 2
THE ELDER-BEERMAN STORES CORP.
Amended Code of Regulations
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
SHAREHOLDER MEETINGS..............................................................................................1
1. Time and Place of Meetings......................................................................1
2. Annual Meeting..................................................................................1
3. Special Meetings................................................................................1
4. Notice of Meetings..............................................................................1
5. Quorum..........................................................................................1
6. Voting..........................................................................................2
7. Order of Business...............................................................................2
DIRECTORS.........................................................................................................4
8. Function........................................................................................4
9. Number, Election, and Terms of Directors........................................................4
10. Newly Created Directorships and Vacancies.......................................................4
11. Removal.........................................................................................4
12. Nominations of Directors; Election..............................................................4
13. Resignation.....................................................................................5
14. Regular Meetings................................................................................5
15. Special Meetings................................................................................6
16. Quorum and Vote.................................................................................6
17. Participation in Meetings by Communications Equipment...........................................6
18. Committees......................................................................................6
19. Compensation....................................................................................6
20. Bylaws..........................................................................................6
OFFICERS .........................................................................................................7
21. Generally.......................................................................................7
22. Authority and Duties of Officers................................................................7
23. Compensation....................................................................................7
24. Succession......................................................................................7
STOCK .........................................................................................................7
25. Transfer and Registration of Certificates.......................................................7
26. Substituted Certificates........................................................................7
27. Voting Of Shares Held by the Corporation........................................................8
28. Record Dates and Owners.........................................................................8
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
INDEMNIFICATION AND INSURANCE.....................................................................................8
29. Indemnification.................................................................................8
30. Insurance.......................................................................................9
31. Agreements......................................................................................9
GENERAL .........................................................................................................9
32. Fiscal Year.....................................................................................9
33. Seal............................................................................................9
34. Amendments......................................................................................9
</TABLE>
ii
<PAGE> 4
SHAREHOLDER MEETINGS
--------------------
1. TIME AND PLACE OF MEETINGS. All meetings of the shareholders for the
election of directors or for any other purpose will be held at such time and
place, within or without the State of Ohio, as may be designated by the Board of
Directors or, in the absence of a designation by the Board of Directors, the
Chairman of the Board of Directors, if any (the "Chairman"), the President, or
the Secretary, and stated in the notice of meeting. The Board of Directors may
postpone, for up to thirty days, any previously scheduled annual or special
meeting of the shareholders.
2. ANNUAL MEETING. Commencing with the year 1999, an annual meeting of
the shareholders will be held during the month of May on such date and at such
time as may be designated by the Board of Directors, at which meeting the
shareholders will elect directors to succeed those directors whose terms expire
at such meeting and will transact such other business as may be brought properly
before the meeting in accordance with Regulation 7.
3. SPECIAL MEETINGS. (a) Special meetings of shareholders may be called
by (i) the Chairman, (ii) the President, (iii) a majority of the Board of
Directors acting with or without a meeting, or (iv) any person or persons who
hold not less than 50% of all the shares outstanding and entitled to be voted at
such meeting. Holders of shares that are entitled to call a special meeting of
shareholders by virtue of any Preferred Stock Designation may call such meetings
in the manner and for the purposes provided in the applicable terms of such
Preferred Stock Designation. For purposes of this Amended Code of Regulations,
"Preferred Stock Designation" shall have the meaning specified in the Amended
Articles of Incorporation.
(b) Upon written request by any person or persons entitled to call a
meeting of shareholders delivered in person or by registered mail to the
Chairman, the President or the Secretary, such officer shall forthwith cause
notice of the meeting to be given to the shareholders entitled to notice of such
meeting in accordance with Regulation 4. If such notice shall not be given
within 60 days after the delivery or mailing of such request, the person or
persons requesting the meeting may fix the time of the meeting and give, or
cause to be given, notice in the manner provided in Regulation 4.
4. NOTICE OF MEETINGS. Written notice of every meeting of the
shareholders called in accordance with this Amended Code of Regulations, stating
the time, place, and purposes for which the meeting is called, will be given by
or at the direction of the President, a Vice President, the Secretary or an
Assistant Secretary (or in case of their failure to give any required notice,
the other persons entitled to give notice under Regulation 3). Such notice will
be given not less than 7 nor more than 60 calendar days before the date of the
meeting to each shareholder of record entitled to notice of such meeting. If
such notice is mailed, it shall be addressed to the shareholders at their
respective addresses as they appear on the records of the Corporation, and
notice shall be deemed to have been given on the day so mailed. Notice of
adjournment of a meeting need not be given if the time and place to which it is
adjourned are fixed and announced at such meeting.
5. QUORUM. To constitute a quorum at any meeting of shareholders, there
shall be present in person or by proxy shareholders of record entitled to
exercise not less than a majority of
<PAGE> 5
the voting power of the Corporation in respect of any one of the purposes for
which the meeting is called, unless a greater or lesser number is expressly
provided for in any applicable Preferred Stock Designation. Except as may be
otherwise provided in any Preferred Stock Designation, the holders of a majority
of the voting power of the Corporation represented in person or by proxy at a
meeting of shareholders, whether or not a quorum be present, may adjourn the
meeting from time to time. For purposes of this Amended Code of Regulations,
"voting power of the Corporation" shall have the meaning specified in the
Amended Articles of Incorporation.
6. VOTING. Except as otherwise expressly required by law, the Amended
Articles of Incorporation or this Amended Code of Regulations, at any meeting of
shareholders at which a quorum is present, a majority of the votes cast, whether
in person or by proxy, on any matter properly brought before such meeting in
accordance with Regulation 7 will be the act of the shareholders. An abstention
shall not represent a vote cast. Every proxy must be duly executed and filed
with the Secretary. A shareholder may revoke any proxy that is not irrevocable
by attending the meeting and voting in person or by filing with the Secretary
written notice of revocation or a later appointment. The vote upon any question
brought before a meeting of the shareholders may be by voice vote, unless
otherwise required by law, the Amended Articles of Incorporation or this Amended
Code of Regulations or unless the presiding officer otherwise determines.
7. ORDER OF BUSINESS. (a) The Chairman, or such other officer of the
Corporation designated by a majority of the total number of directors that the
Corporation would have if there were no vacancies on the Board of Directors
(such number being referred to as the "Whole Board"), will call meetings of
shareholders to order and will act as presiding officer thereof. Unless
otherwise determined by the Board of Directors prior to the meeting, the
presiding officer of the meeting of shareholders will also determine the order
of business and have the authority in his or her sole discretion to regulate the
conduct of any such meeting including, without limitation, by (i) imposing
restrictions on the persons (other than shareholders of the Corporation or their
duly appointed proxies) who may attend any such shareholders' meeting, (ii)
ascertaining whether any shareholder or his proxy may be excluded from any
meeting of shareholders based upon any determination by the presiding officer,
in his sole discretion, that any such person has unduly disrupted or is likely
to disrupt the proceedings of the meeting, (iii) determining the circumstances
in which any person may make a statement or ask questions at any meeting of
shareholders, and (iv) establishing such other procedures as the presiding
officer, in his sole discretion, may deem appropriate for the orderly conduct of
business.
(b) At an annual meeting of the shareholders, only such business will
be conducted or considered as is properly brought before the meeting. To be
properly brought before an annual meeting, business must be (i) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the President, a Vice President, the Secretary or an Assistant Secretary in
accordance with Regulation 4, (ii) otherwise properly brought before the meeting
by the presiding officer or by or at the direction of a majority of the Whole
Board, or (iii) otherwise properly requested to be brought before the meeting by
a shareholder of the Corporation in accordance with Regulation 7(c).
(c) For business to be properly requested by a shareholder to be
brought before an annual meeting, the shareholder must (i) be a shareholder of
the Corporation of record at the time of the
2
<PAGE> 6
giving of the notice for such annual meeting provided for in this Amended Code
of Regulations, (ii) be entitled to vote at such meeting, and (iii) have given
timely notice thereof in writing to the Secretary. To be timely, a shareholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 60 nor more than 90 calendar days prior
to the annual meeting; PROVIDED, HOWEVER, that in the event public announcement
of the date of the annual meeting is not made at least 105 calendar days prior
to the date of the annual meeting, notice by the shareholder to be timely must
be so received not later than the close of business on the tenth calendar day
following the day on which public announcement is first made of the date of the
annual meeting. A shareholder's notice to the Secretary must set forth as to
each matter the shareholder proposes to bring before the annual meeting (A) a
description in reasonable detail of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting, (B) the name and address, as they appear on the Corporation's books, of
the shareholder proposing such business and of the beneficial owner, if any, on
whose behalf the proposal is made, (C) the class and number of shares of the
Corporation that are owned beneficially and of record by the shareholder
proposing such business and by the beneficial owner, if any, on whose behalf the
proposal is made, and (D) any material interest of such shareholder proposing
such business and the beneficial owner, if any, on whose behalf the proposal is
made in such business. Notwithstanding the foregoing provisions of this Amended
Code of Regulations, a shareholder must also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder with respect to the matters set forth in this
Regulation 7(c). For purposes of this Regulation 7(c) and Regulation 12, "public
announcement" means disclosure in a press release reported by the Dow Jones News
Service, Associated Press, or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Sections 13, 14, or 15(d) of the Securities Exchange Act of 1934, as
amended, or publicly filed by the Corporation with any national securities
exchange or quotation service through which the Corporation's stock is listed or
traded, or furnished by the Corporation to its shareholders. Nothing in this
Regulation 7(c) will be deemed to affect any rights of shareholders to request
inclusion of proposals in the Corporation's proxy statement pursuant to Rule
14a-8 under the Securities Exchange Act of 1934, as amended.
(d) At a special meeting of shareholders, only such business may be
conducted or considered as is properly brought before the meeting. To be
properly brought before a special meeting, business must be (i) specified in the
notice of the meeting (or any supplement thereto) given by or at the direction
of the President, a Vice President, the Secretary or an Assistant Secretary (or
in case of their failure to give any required notice, the other persons entitled
to give notice) in accordance with Regulation 4 or (ii) otherwise brought before
the meeting by the presiding officer or by or at the direction of a majority of
the Whole Board.
(e) The determination of whether any business sought to be brought
before any annual or special meeting of the shareholders is properly brought
before such meeting in accordance with this Regulation 7 will be made by the
presiding officer of such meeting. If the presiding officer determines that any
business is not properly brought before such meeting, he or she will so declare
to the meeting and any such business will not be conducted or considered.
3
<PAGE> 7
DIRECTORS
---------
8. FUNCTION. Except where the law, the Amended Articles of
Incorporation, or this Amended Code of Regulations requires action to be
authorized or taken by the shareholders, all of the authority of the Corporation
shall be exercised by or under the direction of the Board of Directors.
9. NUMBER, ELECTION, AND TERMS OF DIRECTORS. Except as may be provided
in any Preferred Stock Designation and subject to the minimum and maximum number
of authorized directors provided in the Amended Articles of Incorporation, the
size of the Board of Directors shall be established from time to time only (i)
by a vote of a majority of the Whole Board, or (ii) by the affirmative vote of
the holders of at least 72% of the voting power of the Corporation, voting
together as a single class. The directors, other than those who may be expressly
elected by virtue of the terms of any Preferred Stock Designation, shall be
elected and classified with respect to the time for which they severally hold
office as provided in the Amended Articles of Incorporation.
10. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Except as may be
otherwise provided in any Preferred Stock Designation, any vacancy (including
newly created directorships resulting from any increase in the number of
directors and any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal, or other cause) may be filled only (i)
by the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors, or by a sole remaining
director or (ii) by the affirmative vote of the shareholders after a vote to
increase the number of directors at a meeting called for that purpose in
accordance with this Amended Code of Regulations. Any director elected in
accordance with the preceding sentence to fill a vacancy created by the death,
resignation, disqualification or removal of an incumbent director will hold
office for the remainder of the term of the class of directors in which the
vacancy occurred and until such director's successor has been elected. If the
authorized number of directors is increased, the newly created directorship or
directorships resulting from such increase will be placed in the class of
directors the term of which expires at the next annual meeting of shareholders,
subject to the requirement in the Amended Articles of Incorporation that each of
the classes of directors be as nearly equal in size as possible. If adding the
newly created directorship or directorships to the class of directors the term
of which expires at the next annual meeting of shareholders is inconsistent with
such requirement in the Amended Articles of Incorporation, the newly created
directorship or directorships will be added to the class of directors the term
of which expires at the next earliest annual meeting of shareholders that is
consistent with such requirement.
11. REMOVAL. Except as may be otherwise provided in any Preferred Stock
Designation, directors may be removed from the Board of Directors by the
shareholders only for cause. For purposes of this Regulation 11, cause for
removal shall exist only if it is proved by clear and convincing evidence in a
court of competent jurisdiction that a director's action or failure to act
involved an act or omission undertaken with deliberate intent to cause injury to
the Corporation or undertaken with reckless disregard for the best interests of
the Corporation.
12. NOMINATIONS OF DIRECTORS; ELECTION. (a) Except as may be otherwise
provided in any Preferred Stock Designation, only persons who are nominated in
accordance with this Regulation 12 will be eligible for election at a meeting of
shareholders to be members of the Board of Directors.
4
<PAGE> 8
(b) Nominations of persons for election as directors of the Corporation
may be made only at an annual meeting of shareholders (i) by or at the direction
of the Board of Directors or a committee thereof or (ii) by any shareholder who
is a shareholder of record at the time of giving of notice provided for in this
Regulation 12, who is entitled to vote for the election of directors at such
meeting, and who complies with the procedures set forth in this Regulation 12.
All nominations by shareholders must be made pursuant to timely notice in proper
written form to the Secretary.
(c) To be timely, a shareholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
60 nor more than 90 calendar days prior to the annual meeting of shareholders;
PROVIDED, HOWEVER, that in the event that public announcement of the date of the
annual meeting is not made at least 105 calendar days prior to the date of the
annual meeting, notice by the shareholder to be timely must be so received not
later than the close of business on the tenth calendar day following the day on
which public announcement is first made of the date of the annual meeting. To be
in proper written form, such shareholder's notice must set forth or include: (i)
the name and address, as they appear on the Corporation's books, of the
shareholder giving the notice and of the beneficial owner, if any, on whose
behalf the nomination is made; (ii) a representation that the shareholder giving
the notice is a holder of record of stock of the Corporation entitled to vote at
such annual meeting and intends to appear in person or by proxy at the annual
meeting to nominate the person or persons specified in the notice; (iii) the
class and number of shares of stock of the Corporation owned beneficially and of
record by the shareholder giving the notice and by the beneficial owner, if any,
on whose behalf the nomination is made; (iv) a description of all arrangements
or understandings between or among any of (A) the shareholder giving the notice,
(B) the beneficial owner on whose behalf the notice is given, (C) each nominee,
and (D) any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the shareholder giving the
notice; (v) such other information regarding each nominee proposed by the
shareholder giving the notice as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated, or proposed to be nominated, by the
Board of Directors; and (vi) the signed consent of each nominee to serve as a
director of the Corporation if so elected. The presiding officer of any annual
meeting may, if the facts warrant, determine that a nomination was not made in
accordance with this Regulation 12, and if he or she should so determine, he or
she will so declare to the meeting, and the defective nomination will be
disregarded. Notwithstanding the foregoing provisions of this Regulation 12, a
shareholder must also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in this Regulation 12.
13. RESIGNATION. Any director may resign at any time by giving written
notice of his resignation to the Chairman or the Secretary. Any resignation will
be effective upon actual receipt by any such person or, if later, as of the date
and time and upon occurrence of the conditions specified in such written notice.
14. REGULAR MEETINGS. Regular meetings of the Board of Directors may be
held immediately after the annual meeting of the shareholders and at such other
time and place either within or without the State of Ohio as may from time to
time be determined by a majority of the Whole Board. Notice of regular meetings
of the Board of Directors need not be given.
5
<PAGE> 9
15. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by the Chairman or the President on one day's notice to each director by
whom such notice is not waived, given either personally or by mail, telephone,
telegram, telex, facsimile, or similar medium of communication, and will be
called by the Chairman or the President, in like manner and on like notice, on
the written request of not less than one-third of the Whole Board. Special
meetings of the Board of Directors may be held at such time and place either
within or without the State of Ohio as is determined by a majority of the Whole
Board or specified in the notice of any such meeting.
16. QUORUM AND VOTE. At all meetings of the Board of Directors, a
majority of the total number of directors then in office will constitute a
quorum for the transaction of business. Except for the designation of committees
as hereinafter provided and except for actions required by this Amended Code of
Regulations to be taken by a majority of the Whole Board, the act of a majority
of the directors present at any meeting at which a quorum is present will be the
act of the Board of Directors. If a quorum is not present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time to another time or place, without notice other than announcement at
the meeting, until a quorum is present.
17. PARTICIPATION IN MEETINGS BY COMMUNICATIONS EQUIPMENT. Meetings of
the Board of Directors or of any committee of the Board of Directors may be held
through any means of communications equipment if all persons participating can
hear each other, and such participation will constitute presence in person at
such meeting.
18. COMMITTEES. The Board of Directors may from time to time create an
executive committee or any other committee or committees of directors to act in
the intervals between meetings of the Board of Directors and may delegate to
such committee or committees any of its authority other than that of filling
vacancies among the Board of Directors or in any committee of the Board of
Directors. No committee shall consist of less than three directors. The Board of
Directors may appoint one or more directors as alternate members of any such
committee to take the place of absent committee members at meetings of such
committee. Unless otherwise ordered by the Board of Directors, a majority of the
members of any committee appointed by the Board of Directors pursuant to this
Regulation 18 shall constitute a quorum at any meeting thereof, and the act of a
majority of the members present at a meeting at which a quorum is present shall
be the act of such committee. Action may be taken by any such committee without
a meeting by a writing or writings signed by all of its members. Any such
committee shall prescribe its own rules for calling and holding meetings and its
own procedures, subject to any rules prescribed by the Board of Directors, and
will keep a written record of all action taken by it.
19. COMPENSATION. The Board of Directors may establish the compensation
and expense reimbursement policies for directors in exchange for membership on
the Board of Directors and on committees of the Board of Directors, attendance
at meetings of the Board of Directors or committees of the Board of Directors,
and for other services by directors to the Corporation or any of its
subsidiaries.
20. BYLAWS. The Board of Directors may adopt Bylaws for the conduct of
its meetings and those of any committees of the Board of Directors that are not
inconsistent with the Amended Articles of Incorporation or this Amended Code of
Regulations.
6
<PAGE> 10
OFFICERS
--------
21. GENERALLY. The Corporation may have a Chairman, who shall be
elected by the directors from among their number, and shall have a President, a
Secretary and a Treasurer. The Corporation may also have one or more Vice
Presidents and such other officers and assistant officers as the Board of
Directors may deem appropriate. If the Board of Directors so desires, it may
elect a Chief Executive Officer to manage the affairs of the Corporation,
subject to the direction and control of the Board of Directors. All of the
officers shall be elected by the Board of Directors. Notwithstanding the
foregoing, by specific action, the Board of Directors may authorize the Chairman
or the President to appoint any person to any office other than Chairman,
President, Secretary, or Treasurer. Any number of offices may be held by the
same person, and no two offices must be held by the same person. Any of the
offices may be left vacant from time to time as the Board of Directors may
determine. In case of the absence or disability of any officer of the
Corporation or for any other reason deemed sufficient by a majority of the Board
of Directors, the Board of Directors may delegate the absent or disabled
officer's powers or duties to any other officer or to any director.
22. AUTHORITY AND DUTIES OF OFFICERS. The officers of the Corporation
shall have such authority and shall perform such duties as are customarily
incident to their respective offices, or as may be specified from time to time
by the Board of Directors regardless of whether such authority and duties are
customarily incident to such office.
23. COMPENSATION. The compensation of all officers and agents of the
Corporation who are also members of the Board of Directors of the Corporation
will be fixed by the Board of Directors or by a committee of the Board of
Directors. The Board of Directors may fix, or delegate the power to fix, the
compensation of the other officers and agents of the Corporation to the Chief
Executive Officer or any other officer of the Corporation.
24. SUCCESSION. The officers of the Corporation will hold office until
their successors are elected. Any officer may be removed at any time by the
affirmative vote of a majority of the Whole Board. Any vacancy occurring in any
office of the Corporation may be filled by the Board of Directors or by the
Chairman or President as provided in Regulation 21.
STOCK
-----
25. TRANSFER AND REGISTRATION OF CERTIFICATES. The Board of Directors
shall have authority to make such rules and regulations as they deem expedient
concerning the issuance, transfer and registration of certificates for shares
and the shares represented thereby and may appoint transfer agents and
registrars thereof.
26. SUBSTITUTED CERTIFICATES. Any person claiming a certificate for
shares to have been lost, stolen or destroyed shall make an affidavit or
affirmation of that fact, shall give the Corporation and its registrar or
registrars and its transfer agent or agents a bond of indemnity satisfactory to
the Board of Directors or a committee thereof or to the President or a Vice
President and the Secretary
7
<PAGE> 11
or the Treasurer, whereupon a new certificate may be executed and delivered of
the same tenor and for the same number of shares as the one alleged to have been
lost, stolen or destroyed.
27. VOTING OF SHARES HELD BY THE CORPORATION. Unless otherwise ordered
by the Board of Directors, the President in person or by proxy or proxies
appointed by him shall have full power and authority on behalf of the
Corporation to vote, act and consent with respect to any shares issued by other
corporations which the Corporation may own.
28. RECORD DATES AND OWNERS. (a) In order that the Corporation may
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, the Board of Directors may fix a record
date, which will not be less than 7 nor more than 60 calendar days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining shareholders entitled to notice of or to vote at a
meeting of shareholders will be the date next preceding the day on which notice
is given, or, if notice is waived, at the date next preceding the day on which
the meeting is held.
(b) The Corporation will be entitled to treat the person in whose name
shares are registered on the books of the Corporation as the absolute owner
thereof, and will not be bound to recognize any equitable or other claim to, or
interest in, such share on the part of any other person, whether or not the
Corporation has knowledge or notice thereof, except as expressly provided by
applicable law.
INDEMNIFICATION AND INSURANCE
-----------------------------
29. INDEMNIFICATION. The Corporation shall indemnify, to the full
extent then permitted by law, any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was a member of the Board of Directors or an officer
of the Corporation, or is or was serving at the request of the Corporation as a
director, trustee, officer, employee or agent of another corporation,
partnership, limited liability company, joint venture, trust or other
enterprise. The Corporation shall pay, to the full extent then required by law,
expenses, including attorney's fees, incurred by a member of the Board of
Directors in defending any such action, suit or proceeding as they are incurred,
in advance of the final disposition thereof, and may pay, in the same manner and
to the full extent then permitted by law, such expenses incurred by any other
person. The indemnification and payment of expenses provided hereby shall not be
exclusive of, and shall be in addition to, any other rights granted to those
seeking indemnification under any law, the Amended Articles of Incorporation,
any agreement, vote of shareholders or disinterested members of the Board of
Directors, or otherwise, both as to action in official capacities and as to
action in another capacity while he or she is a member of the Board of Directors
or an officer of the Corporation, and shall continue as to a person who has
ceased to be a member of the Board of Directors or an officer of the Corporation
or as to a person who has served at the request of the Corporation as a
director, trustee, officer, employee or agent of another corporation, and shall
inure to the benefit of the heirs, executors, and administrators of such
persons.
8
<PAGE> 12
30. INSURANCE. The Corporation may, to the full extent then permitted
by law and authorized by the Board of Directors, purchase and maintain insurance
or furnish similar protection, including but not limited to trust funds, letters
of credit or self-insurance, on behalf of or for any persons described in
Regulation 29 against any liability asserted against and incurred by any such
person in any such capacity, or arising out of his status as such, whether or
not the Corporation would have the power to indemnify such person against such
liability. Insurance may be purchased from or maintained with a person in which
the Corporation has a financial interest.
31. AGREEMENTS. The Corporation, upon approval by the Board of
Directors, may enter into agreements with any persons whom the Corporation may
indemnify under this Amended Code of Regulations or under law and undertake
thereby to indemnify such persons and to pay the expenses incurred by them in
defending any action, suit or proceeding against them, whether or not the
Corporation would have the power under law or this Amended Code of Regulations
to indemnify any such person.
GENERAL
-------
32. FISCAL YEAR. The fiscal year of the Corporation will end on
Saturday nearest to the last day of January (and whether before or after such
date) in each calendar year or such other date as may be fixed from time to time
by the Board of Directors.
33. SEAL. The Board of Directors may adopt a corporate seal and use the
same by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
34. AMENDMENTS. Except as otherwise provided by law or by the Amended
Articles of Incorporation or this Amended Code of Regulations, this Amended Code
of Regulations or any Regulations may be amended in any respect or repealed at
any time at any meeting of shareholders, provided that any amendment or
supplement proposed to be acted upon at any such meeting has been described or
referred to in the notice of such meeting. Except as otherwise provided by law
or by the Amended Articles of Incorporation or this Amended Code of Regulations,
the shareholders shall not take any action without a meeting to alter or amend
this Amended Code of Regulations. Notwithstanding the first sentence of this
Regulation 34 or anything to the contrary contained in the Amended Articles of
Incorporation or this Amended Code of Regulations, Regulations 1, 3(a), 7, 9,
10, 11, 12 and 34 may not be amended or repealed by the shareholders, and no
provision inconsistent therewith may be adopted by the shareholders, without the
affirmative vote of the holders of at least 72% of the voting power of the
Corporation, voting together as a single class. Notwithstanding the foregoing
provisions of this Regulation 34, no amendment to Regulations 29, 30 or 31 will
be effective to eliminate or diminish the rights of persons specified in those
Regulations existing at the time immediately preceding such amendment.
9
<PAGE> 1
EXHIBIT 4(b)
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of this [_____] day of [__________], 1997, between THE ELDER-BEERMAN STORES
CORP., an Ohio corporation (the "Company"), and [_______________] ("Holder").
WHEREAS, on October 17, 1995, each of the Company and six of its
subsidiaries, The El-Bee Chargit Corp., The Bee-Gee Shoe Corp., Margo's LaMode,
Inc., McCook Wholesale Corp., E-B Community Urban Redevelopment Corp. and EBA,
Inc. filed with the United States Bankruptcy Court for the Southern District of
Ohio, Western Division (the "Bankruptcy Court") voluntary petitions for relief
under chapter 11 of the United States Bankruptcy Code;
WHEREAS, the execution and delivery of this Agreement is contemplated
by the Joint Plan of Reorganization of The Elder-Beerman Stores Corp. and Its
Subsidiaries, confirmed by an order entered by the Bankruptcy Court on
[__________], 1997 (the "Plan"); and
WHEREAS, to further the purposes of the Plan, the Company has agreed to
provide the registration rights set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. DEFINITIONS. In addition to the terms that are defined above,
capitalized terms not defined herein shall have the meanings ascribed thereto in
the Plan and the following terms shall have the following meanings as used in
this Agreement:
"Affiliate" shall mean any Person that directly or indirectly
controls, is controlled by, or is under common control with, such
Person. A Person shall be deemed to control another Person if such
Person owns 10% or more of any equity interest in the "controlled"
Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the "controlled"
Person, whether through ownership of stock or partnership interests, by
contract, agreement or understanding (whether oral or written), or
otherwise.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Form S-3" shall mean a Registration Statement on Form S-3 as
promulgated by the SEC or any successor form that is substantially
similar thereto.
"Holders" shall mean Holder, any Affiliate of Holder (other
than the Company) and any transferees of Holder who are holders of
record of any Registrable Shares, and any combination of them.
<PAGE> 2
"NASD" shall have the meaning set forth in Section 5(a)(xv)
hereof.
"New Common Stock" shall mean the New Common Stock, par value
$[_____] per share, of the Company.
"Other Holders" shall mean Persons who are holders of record
of equity securities of the Company who, subsequent to the date hereof,
acquire outstanding shares of New Common Stock pursuant to a
transaction with the Company and to whom the Company grants
registration rights pursuant to a written agreement and in accordance
with the terms hereof.
"Person" shall mean any individual, corporation, association,
partnership, group (as defined in Section 13(d)(3) of the Exchange
Act), limited liability company, joint venture, business trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.
"Prospectus" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of
the Registrable Shares covered by such Registration Statement and all
other amendments and supplements to the prospectus, including
post-effective amendments and all material incorporated by reference in
such prospectus.
"Registrable Shares" shall mean: (i) any New Common Stock
issued to Holder pursuant to the Plan; and (ii) any equity securities
of the Company issued or distributed after the date hereof in respect
of the New Common Stock referred to in clause (i) above by way of any
stock dividend, stock split or other distribution, recapitalization or
reclassification, and any equity securities of the Company acquired by
a Holder upon exercise or conversion of any such securities. As to any
particular Registrable Share, such Registrable Share shall cease to be
a Registrable Share when (A) it shall have been sold, transferred or
otherwise disposed of or exchanged pursuant to a Registration Statement
under the Securities Act or (B) it shall have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the
Securities Act.
"Registration Expenses" shall have the meaning set forth in
Section 7(b) hereof.
"Registration Statement" shall mean any appropriate
Registration Statement, including, without limitation, and subject to
the terms and provisions contained herein, a Registration Statement on
Form S-1, Form S-2 or Form S-3 or any successor form thereto, of the
Company in a registration that covers the sale of any of the
Registrable Shares pursuant to the provisions of Sections 2 or 4 of
this Agreement, including the Prospectus, amendments and supplements to
such Registration Statement, post-effective amendments, all exhibits
and all material incorporated by reference in such Registration
Statement.
"SEC" shall mean the Securities and Exchange Commission or
any successor agency thereto.
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<PAGE> 3
"Securities Act" shall mean the Securities Act of 1933, as
amended.
2. INCIDENTAL REGISTRATIONS
(a) RIGHT TO INCLUDE REGISTRABLE SHARES. Each time the Company
shall determine to file a registration statement under the Securities Act in
connection with the proposed offer and sale for cash of any New Common Stock
(other than registration statements on Form S-8, Form S-4 or Form S-3 relating
to a dividend reinvestment plan) either by it or by any holders of its
outstanding New Common Stock, the Company will give prompt written notice of its
determination to each Holder and of such Holder's rights under this Section 2,
at least [30] days prior to the anticipated filing date of such Registration
Statement. Upon the written request of each Holder made within [21] days after
the receipt of any such notice from the Company, (which request shall specify
the Registrable Shares intended to be disposed of by such Holder), the Company
will use its best efforts to effect the registration under the Securities Act of
all Registrable Shares which the Company has been so requested to register by
the Holders thereof; provided, however, that (i) if, at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the Registration Statement filed in connection with such
registration, the Company shall determine for any reason not to proceed with the
proposed registration of the securities to be sold by it, the Company may, at
its election, give written notice of such determination to each Holder of
Registrable Shares and thereupon shall be relieved of its obligation to register
any Registrable Shares in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith); and (ii)
if such registration involves an underwritten offering, all Holders of
Registrable Shares requesting to be included in the Company's registration must
sell their Registrable Shares to the underwriters on the same terms and
conditions as apply to the Company, with such differences, including any with
respect to indemnification and liability insurance, as may be customary or
appropriate in combined primary and secondary offerings. If a registration
requested pursuant to this Section 2(a) involves an underwritten offering, any
Holder of Registrable Shares requesting to be included in such registration may
elect, in writing prior to the effective date of the Registration Statement
filed in connection with such registration, not to register such securities in
connection with such registration. No registration effected under this Section 2
shall relieve the Company of its obligations to effect registrations upon
request under Section 4 hereof.
(b) PRIORITY IN INCIDENTAL REGISTRATION. If a registration
pursuant to this Section 2 involves an underwritten offering and the managing
underwriter or underwriters in good faith advises the Company in writing that,
in its opinion, the number of securities requested and otherwise proposed to be
included in such registration exceeds the largest number which can be sold in
such offering without having an adverse effect on such offering (including the
price at which such securities can be sold), the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering (i) if the registration is a primary registration on
behalf of the Company, (A) first, the securities proposed to be registered by
the Company, and (B) second, the Registrable Shares and the securities held by
other Persons requested to be included in such registration pro rata in
accordance with the numbers of securities requested to be included by all
Holders of Registrable Shares and other Persons requesting to be included; and
(ii) if the registration is a secondary registration on behalf of other Persons,
the Registrable Shares and securities of the other Persons included in such
registration pro rata in accordance with the
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<PAGE> 4
numbers of securities requested to be included by the holders of Registrable
Shares and the numbers of other securities proposed to be registered by the
other Persons. The Company will not grant any registration rights having
priorities that conflict or are otherwise inconsistent with this Section 2(b).
3. HOLDBACK AGREEMENTS.
(a) If any registration of Registrable Shares shall be in
connection with an underwritten public offering, the Holders agree not to effect
any public sale or distribution (except in connection with such public
offering), of any equity securities of the Company, or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company (in each case, other than as part of such underwritten public offering),
during the [90]-day period (or such lesser period as the managing underwriter or
underwriters may permit) beginning on the effective date of such registration,
if, and to the extent, the managing underwriter or underwriters of any such
offering determines such action is necessary or desirable to effect such
offering; provided, however, that each Holder has received the written notice
required by Section 2(a) hereof; and provided, further, that each Holder shall
not be obligated to comply with such restrictions arising as a result of an
underwritten public offering subject to Section 2 hereof more than once in any
twelve-month period.
(b) If any registration of Registrable Shares shall be in
connection with any underwritten public offering, the Company agrees not to
effect any public sale or distribution (except in connection with such public
offering) of any of its equity securities or of any security convertible into or
exchangeable or exercisable for any of its equity securities (in each case other
than as part of such underwritten public offering) during the [90]-day period
(or such lesser period as the managing underwriter or underwriters may permit)
beginning on the effective date of such registration, and the Company also
agrees to use reasonable efforts to cause each member of the management of the
Corporation who holds any equity security and each other holder of [5]% or more
of the outstanding shares of any equity security, or of any security convertible
into or exchangeable or exercisable for any equity security, of the Company
purchased from the Company (at any time other than in a public offering) to
agree not to effect any public sale or distribution of any equity securities of
the Company (except in connection with such offering) or any security
convertible into or exchangeable or exercisable for any equity security of the
Company (in each case, other than as part of such underwritten offering), during
the [90]-day period (or such lesser period as the managing underwriter or
underwriters may permit) beginning on the effective date of such registration.
4. REGISTRATION ON REQUEST.
(a) REQUEST BY HOLDERS. At such time that the Company
qualifies for the use of Form S-3 and upon the written request of the Holders of
at least [25]% of the Registrable Shares that the Company effect the
registration under the Securities Act of all or part of such Holders'
Registrable Shares, and specifying the amount (which shall not be less than
[50]% of the outstanding Registrable Shares held by each Holder that requests
registration) and intended method of disposition thereof, the Company will
promptly give notice of such requested registration to all other Holders of
Registrable Shares and, as expeditiously as possible, use its best efforts to
effect the registration under the Securities Act of: (i) the Registrable Shares
which the Company has been so requested to register by Holders of at least [25]%
of the Registrable Shares; and (ii) all other
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<PAGE> 5
Registrable Shares which the Company has been requested to register by any other
Holder thereof by written request received by the Company within 21 days after
the giving of such written notice by the Company (which request shall specify
the intended method of disposition of such Registrable Shares); provided,
however, that the Company shall not be required to effect more than one
registration during any twelve-month period pursuant to this Section 4; and
provided, further, that the Company shall not be obligated to file a
Registration Statement relating to a registration request under this Section 4
within a period of three months after the effective date of any other
Registration Statement of the Company; and provided, further, that in no event
shall the Company be required to effect more than three registrations pursuant
to this Section 4. Promptly after the expiration of the [21]-day period referred
to in clause (ii) above, the Company will notify all the Holders to be included
in the registration of the other Holders and the number of shares of Registrable
Shares requested to be included therein. The Holders initially requesting a
registration pursuant to this Section 4 may, at any time prior to the effective
date of the Registration Statement relating to such registration, revoke such
request by providing a written notice to the Company revoking such request;
provided, however, that, in the event the Holders shall have made a written
request for a demand registration (i) which is subsequently withdrawn by the
Holders after the Company has filed a Registration Statement with the SEC in
connection therewith which has been declared effective by the SEC or (ii) which
is not declared effective solely as a result of the failure of Holders to take
all actions reasonably required in order to have the registration and the
related Registration Statement declared effective by the SEC, then, in any such
event, such demand registration shall be counted as a demand registration for
purposes of this Section 4(a).
(b) EFFECTIVE REGISTRATION STATEMENT. A registration requested
pursuant to this Section 4 will not be deemed to have been effected unless it
has become effective under the Securities Act and has remained effective for 90
days or such shorter period as all the Registrable Shares included in such
registration have actually been sold thereunder. In addition, if within 60 days
after it has become effective, the offering of Registrable Shares pursuant to
such registration is interfered with by any stop order, injunction or other
order or requirement of the SEC or other governmental agency or court, such
registration will be deemed not to have been effected for purposes of this
Section 4.
(c) PRIORITY IN REQUESTED REGISTRATIONS. If a requested
registration pursuant to this Section 4 involves an underwritten offering and
the managing underwriter or underwriters in good faith advises the Company in
writing that, in its opinion, the number of securities requested to be included
in such registration (including securities of the Company which are not
Registrable Shares) exceeds the largest number of securities which can be sold
in such offering without having an adverse effect on such offering (including
the price at which such securities can be sold), then the Company will include
in such registration to the extent of the number which the Company is so advised
can be sold in such offering (i) first, Registrable Shares requested to be
included in such registration by any Holder and the securities held by other
Persons requested to be included in such registration pro rata among such
Holders and other Persons on the basis of the number of securities requested to
be included by such Holders and other Persons and (ii) second, securities of the
Company proposed by the Company to be sold for its own account.
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<PAGE> 6
5. REGISTRATION PROCEDURES.
(a) If and whenever the Company is required by the provisions
of Sections 2 or 4 hereof to use its best efforts to effect or cause the
registration of Registrable Shares, the Company shall as expeditiously as
possible:
(i) prepare and, in any event within [60] days after
the end of the period within which a request for registration may be
given to the Company, file with the SEC a Registration Statement with
respect to such Registrable Shares and use its best efforts to cause
such Registration Statement to become effective; provided, however,
that before filing such Registration Statement, the Company will
furnish to one counsel selected by the Holders of a majority of the
Registrable Shares covered by such Registration Statement copies of the
Registration Statement;
(ii) prepare and file with the SEC such amendments
and supplements to such Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep such Registration
Statement effective for a period not in excess of 90 days and to comply
with the provisions of the Securities Act, the Exchange Act and the
rules and regulations promulgated thereunder with respect to the
disposition of all the securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the Holders thereof set forth in such Registration
Statement; provided, however, that (A) before filing any such
amendments or supplements thereto, the Company will furnish to one
counsel selected by the Holders of a majority of the Registrable Shares
covered by such Registration Statement copies of all documents proposed
to be filed and (B) the Company will notify each Holder of Registrable
Shares covered by such Registration Statement of any stop order issued
or threatened by the SEC, any other order suspending the use of any
preliminary prospectus or of the suspension of the qualification of the
Registration Statement for offering or sale in any jurisdiction, and
take all reasonable actions required to prevent the entry of such stop
order, other order or suspension or to remove it if entered;
(iii) furnish to each Holder and each underwriter, if
applicable, of Registrable Shares covered by such Registration
Statement such number of copies of the Registration Statement and of
each amendment and supplement thereto (in each case including all
exhibits), such number of copies of the Prospectus included in such
Registration Statement, in conformity with the requirements of the
Securities Act, and such other documents as each Holder of Registrable
Shares covered by such Registration Statement may reasonably request in
order to facilitate the disposition of the Registrable Shares by such
Holder;
(iv) use its best efforts to register or qualify such
Registrable Shares covered by such resignation statement under the
state securities or blue sky laws of such jurisdictions as each Holder
of Registrable Shares covered by such Registration Statement and, if
applicable, each underwriter, may reasonably request, and do any and
all other acts and things which may be reasonably necessary to
consummate the disposition in such jurisdictions of the Registrable
Shares owned by such Holder (provided, however, that the
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<PAGE> 7
Company will not be required to (A) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify
but for this clause (iv), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction);
(v) use its best efforts to cause such Registrable
Shares covered by such Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the Holders thereof to consummate the disposition
of such Registrable Shares;
(vi) if, at any time when a Prospectus relating to
the Registrable Shares is required to be delivered under the Securities
Act, any event shall have occurred as the result of which any such
Prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading,
immediately give written notice thereof to each Holder and the managing
underwriter or underwriters, if any, of such Registrable Shares and
prepare and furnish to each such Holder a reasonable number of copies
of an amended or supplemental Prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such Registrable Shares,
such Prospectus shall not include an untrue statement of material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(vii) use its best efforts to list such Registrable
Shares on any securities exchange on which similar securities of the
Company are then listed, and enter into customary agreements including
a listing application and indemnification agreement in customary form,
provided that the applicable listing requirements are satisfied, and
provide a transfer agent and registrar for such Registrable Shares
covered by such Registration Statement not later than the effective
date of such Registration Statement;
(viii) enter into such customary agreements
(including an underwriting agreement in customary form) and take such
other actions as each Holder of Registrable Shares being sold or the
underwriter or underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable Shares,
including customary indemnification and opinions;
(ix) use its best efforts to obtain a "cold comfort"
letter or letters from the Company's independent public accountants in
customary form and covering matters of the type customarily covered by
"cold comfort" letters as the Holders of at least [25]% of the
Registrable Shares being sold or the underwriters retained by such
Holders shall reasonably request;
(x) make available for inspection by representatives
of any Holder of Registrable Shares covered by such Registration
Statement, by any underwriter participating in any disposition to be
effected pursuant to such Registration Statement and by any attorney,
accountant or other agent retained by such Holders or any such
underwriter, all financial and other records, pertinent corporate
documents and properties of the Company and its
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<PAGE> 8
subsidiaries' officers, directors and employees to supply all
information and respond to all inquiries reasonably requested by such
Holders or any such representative, underwriter, attorney, accountant
or agent in connection with such Registration Statement;
(xi) promptly prior to the filing of any document
which is to be incorporated by reference into the Registration
Statement or the Prospectus (after initial filing of the Registration
Statement), provide copies of such document to counsel to the Holders
of Registrable Shares covered by such Registration Statement and to the
managing underwriter or underwriters, if any any make the Company's
representatives available for discussion of such document;
(xii) otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC, and make available to
its security holders, as soon as reasonably practicable after the
effective date of the Registration Statement, an earnings statement
which shall satisfy the provisions of Section 11(a) of the Securities
Act and the rules and regulations promulgated thereunder;
(xiii) use its best efforts to provide a CUSIP number
for all Registrable Shares not later than the effective date of the
applicable Registration Statement, and provide the applicable transfer
agents with printed certificates for the Registrable Shares which are
in a form eligible for deposit with the Depository Trust Company;
(xiv) notify counsel for the Holders of Registrable
Shares included in such Registration Statement and the managing
underwriter or underwriters, if any, immediately and confirm the notice
in writing, (A) when the Registration Statement, or any post-effective
amendment to the Registration Statement, shall have become effective,
or any supplement to the Prospectus or any amendment Prospectus shall
have been filed, (B) of the receipt of any comments from the SEC and
(C) of any request of the SEC to amend the Registration Statement or
amend or supplement the Prospectus or for additional information;
(xv) cooperate with each seller of Registrable Shares
and each underwriter, if any, participating in the disposition of such
Registrable Shares and their respective counsel in connection with any
filings required to be made with the National Association of Securities
Dealers, Inc. (the "NASD"); and
(xvi) during the period when the Prospectus is
required to be delivered under the 1933 Act, promptly file all
documents required to be filed with the SEC pursuant to Section 13(a),
13(c), 14 or 15(d) of the 1934 Act.
(b) Each Holder of Registrable Shares hereby agrees that, upon
receipt of any notice from the Company of the happening of any event of the type
described in Section 5(a)(vi) hereof, such Holder shall forthwith discontinue
disposition of such Registrable Shares covered by such Registration Statement or
related Prospectus until such Holder's receipt of the copies of the supplemental
or amended Prospectus contemplated by Section 5(a)(vi) hereof, and, if so
directed by the Company, such Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such
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<PAGE> 9
Registrable Shares at the time of receipt of such notice. In the event the
Company shall give any such notice, the period mentioned in Section 5(a)(ii)
hereof shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to Section 5(a)(vi)
hereof and including the date when such Holder shall have received the copies of
the supplemental or amended Prospectus contemplated by Section 5(a)(vi) hereof.
If for any other reason the effectiveness of any Registration Statement filed
pursuant to Section 4 hereof is suspended or interrupted prior to the expiration
of the time period regarding the maintenance of the effectiveness of such
Registration Statement required by Section 5(a)(ii) hereof so that Registrable
Shares may not be sold pursuant thereto, the applicable time period shall be
extended by the number of days equal to the number of days during the period
beginning with the date of such suspension or interruption to and ending with
the date when the sale of Registrable Shares pursuant to such Registration
Statement may be recommenced.
(c) Each Holder hereby agrees to provide the Company, upon
receipt of its request, with such information about such Holder to enable the
Company to comply with the requirements of the Securities Act and to execute
such certificates as the Company may reasonably request in connection with such
information and otherwise to satisfy any requirements of law.
6. UNDERWRITTEN REGISTRATIONS. Subject to the provisions of Sections 2,
3 and 4 hereof, any of the Registrable Shares covered by a Registration
Statement may be sold in an underwritten offering at the discretion of the
Holder thereof. In the case of an underwritten offering pursuant to Section 2
hereof, the managing underwriter or underwriters that will administer the
offering shall be selected by the Company. In the case of any underwritten
offering pursuant to Section 4 hereof, the managing underwriter or underwriters
that will administer the offering shall be selected by the Holders of a majority
of the Registrable Shares to be registered, provided, that such underwriter or
underwriters are reasonably satisfactory to the Company.
7. EXPENSES.
(a) The fees, costs and expenses of all registrations in
accordance with Section 2 and Section 4 hereof shall be borne by the Company,
subject to the provisions of Section 7(b) hereof.
(b) The fees, costs and expenses of registration to be borne
as provided in Section 7(a) hereof shall include, without limitation, all
expenses incident to the Company's performance of or compliance with this
Agreement, including without limitation all SEC and stock exchange or NASD
registration and filing fees and expenses, reasonable fees and expenses of any
"qualified independent underwriter" and its counsel as may be required by the
rules of the NASD, fees and expenses of compliance with securities or blue sky
laws (including without limitation reasonable fees and disbursements of counsel
for the underwriters, if any, or for the selling Holders, in connection with
blue sky qualifications of the Registrable Shares), rating agency fees, printing
expenses (including expenses of printing certificates for Registrable Shares and
Prospectuses), messenger, telephone and delivery expenses, the fees and expenses
incurred in connection with the listing of the securities to be registered on
each securities exchange or national market system on which similar securities
issued by the Company are then listed, fees and disbursements of counsel for the
Company and all independent certified public accountants (including the expenses
of any annual audit, special audit and "cold comfort" letters required by or
incident to such performance
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<PAGE> 10
and compliance), securities laws liability insurance (if the Company in its sole
discretation decides to obtain such insurance), the fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (including,
without limitation, expenses relating to "road shows" and other marketing
activities), the reasonable fees of one counsel for the Holders in connection
with each such registration retained by the Holders of a majority of the
Registrable Shares being registered, the reasonable fees and expenses of any
special experts retained by the Company in connection with such registration,
and fees and expenses of other persons retained by the Company (but not
including any underwriting discounts or commissions or transfer taxes, if any,
attributable to the sale of Registrable Shares by such Holders) (collectively,
"Registration Expenses").
8. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any
registration of any securities of the Company under the Securities Act pursuant
to Sections 2 or 4 hereof, the Company will, and it hereby does, indemnify and
hold harmless, to the extent permitted by law, each of the Holders of any
Registrable Shares covered by such Registration Statement, each Affiliate of
such Holder and their respective directors and officers or general and limited
partners (and the directors, officers, general and limited partners, affiliates
and controlling Persons thereof), each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such Holder or any such underwriter within the meaning of the
Securities Act (collectively, the "Indemnified Parties"), against any and all
losses, claims, damages or liabilities, joint or several, and expenses
(including any amounts paid in any settlement effected with the Company's
consent) to which any Indemnified Party may become subject under the Securities
Act, state securities or blue sky laws, common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof, whether or not such Indemnified Party is a party thereto) or expenses
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement under
which such securities were registered under the Securities Act, any preliminary,
final or summary Prospectus contained therein, or any amendment or supplement
thereto; (ii) any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; or (iii) any violation by the Company of any federal, state or
common law rule or regulation applicable to the Company and relating to action
required of or inaction by the Company in connection with any such registration,
and the Company will reimburse such Indemnified Party for any legal or any other
expenses reasonably incurred by it in connection with investigating or defending
any such loss, claim, liability, action or proceeding; provided, however, that
the Company shall not be liable to any Indemnified Party in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
Registration Statement or amendment or supplement thereto or in any such
preliminary, final or summary Prospectus in reliance upon and in conformity with
written information with respect to such Holder furnished to the Company by such
Holder for use in the preparation thereof; provided, further, however, that the
Company shall not be liable to any Indemnified Party in any such case to the
extent any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon the failure of an
Indemnified Party to deliver any amendment or supplement to a Registration
Statement which corrects any untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement to which such
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<PAGE> 11
amendment or supplement pertains. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Holder or
any Indemnified Party and shall survive the transfer of such securities by such
Holder.
(b) INDEMNIFICATION BY THE HOLDERS AND UNDERWRITERS. The
Company may require, as a condition to including any Registrable Shares in any
Registration Statement filed in accordance with Sections 2 or 4 hereof, that the
Company shall have received an undertaking reasonably satisfactory to it from
the Holders of such Registrable Shares or any underwriter to indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section 8(a)
hereof) the Company with respect to any statement or alleged statement in or
omission or alleged omission from such Registration Statement, any preliminary,
final or summary Prospectus contained therein, or any amendment or supplement,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with information with respect to the Holders
of the Registrable Shares being registered or such underwriter furnished to the
Company by such Holders or such underwriter for use in the preparation of such
Registration Statement, preliminary, final or summary Prospectus or amendment or
supplement, or a document incorporated by reference into any of the foregoing.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any of the Holders, or any
of their respective Affiliates, directors, officers or controlling Persons, and
shall survive the transfer of such securities by such Holder.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 8, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided, however, that the failure
of the indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 8, except to the extent
that the indemnifying party is actually materially prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party will be entitled to participate in and to assume the
defense thereof, with counsel satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation; provided, however, that the indemnified party shall have the
right to employ counsel to represent the indemnified party and its respective
controlling persons, directors, officers, general or limited partners, employees
or agents who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the indemnified party against such indemnifying
party under this Section 8 if: (i) the employment of such counsel shall have
been authorized in writing by such indemnifying party in connection with the
defense of such action; (ii) the indemnifying party shall not have within a
reasonable time employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action or counsel; or (iii) any indemnified
party shall have reasonably concluded based upon written advice of counsel that
there may be defenses available to such indemnified party or its respective
controlling persons, directors, officers, employees or agents which are in
conflict with those available to an indemnifying party; provided, however, that
the indemnifying party shall not be obligated to pay for more than the expenses
of one firm of separate
11
<PAGE> 12
counsel for the indemnified party (in addition to the reasonable fees and
expenses of one firm serving as local counsel). No indemnifying party will
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 8 shall for any reason be unavailable to any indemnified party under
Section 8(a) or 8(b) hereof or is insufficient to hold it harmless in respect of
any loss, claim, damage or liability, or any action in respect of any loss,
claim, damage or liability, or any action in respect thereof referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the indemnified party
and indemnifying party or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) but also the relative
fault of the indemnified party and indemnifying party with respect to the
statements or omissions which resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. Notwithstanding any other provision of this Section 8(d), no
Holder of Registrable Shares shall be required to contribute an amount greater
than the dollar amount of the net proceeds received by such Holder with respect
to the sale of any such Registrable Shares. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding subdivisions of this Section 8 (with appropriate
modifications) shall be given by the Company and each Holder of Registrable
Shares with respect to any required registration or other qualification of
securities under any federal or state law or regulation or governmental
authority other than the Securities Act.
9. RULE 144. The Company covenants that it will file in a timely manner
the reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations promulgated thereunder (or, if the Company is
not required to file such reports, it will, upon the request of any Holder of
Registrable Shares, make publicly available such information), and it will take
such further action as any Holder of Registrable Shares may reasonably request,
all to the extent required from time to time to enable such Holder to sell
Registrable Shares without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
as such Rule may be amended from time to time or (ii) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of any Holder of
Registrable Shares, the Company will deliver to such Holder a written statement
as to whether it has complied with such requirements.
10. LIMITED LIABILITY. Notwithstanding any other provision of this
Agreement, neither the general partners, limited partners or managing directors,
or any directors or officers of any general or limited partners, nor any future
general partners, limited partners or managing directors, if any, of the Holders
shall have any personal liability for performance of any obligation of the
Holders under this Agreement.
12
<PAGE> 13
11. ASSIGNABILITY. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. In addition, and whether or not any express assignment shall
have been made, the provisions of this Agreement which are for the benefit of
the parties hereto other than the Company shall also be for the benefit of and
enforceable by any subsequent Holder of any Registrable Shares. The Company may
not assign any of its rights or delegate any of its duties under this Agreement
without the prior written consent of the Holders of a majority of the
Registrable Shares. Any purported assignment in violation of this Section 11
shall be void.
12. NOTICES. Any and all notices, designations, consents, offers,
acceptances or any other communication shall be in writing and shall be
delivered by certified or registered mail (first class postage prepaid),
guaranteed overnight delivery or confirmed by facsimile:
(a) If to the Company, at:
The Elder-Beerman Stores Corp.
[ADDRESS]
Attention:
Telephone:
Facsimile:
With a copy to:
Jones, Day, Reavis & Pogue
[ADDRESS]
Attention:
Telephone:
Facsimile:
(b) If to any Holder, to the address appearing on the books of
the Company or of the transfer agent and registrar for its New Common Stock.
All such notices and communications shall be deemed to have been duly
given and effective: when delivered by hand, if personally delivered; two
business days after being deposited in the mail, postage prepaid, if mailed; and
when receipt acknowledged, if telecopied.
13. NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with the
rights granted to the Holders in this Agreement.
14. RELATIONSHIP TO PLAN. The principal purpose of this Agreement is to
aid in the implementation of the Plan and, therefore, this Agreement
incorporates and is subject to, the provisions of the Plan and the Confirmation
Order. To that end, the Company shall have full power and authority to take any
action consistent with the purpose and provisions of the Plan and the
Confirmation Order. In the event that any provisions of this Agreement are found
to be inconsistent with the provisions of the Plan or the Confirmation Order,
the provisions of the Plan or the
13
<PAGE> 14
Confirmation Order shall control; provided, however, that provisions of this
Agreement adopted by amendment following substantial consummation (as such term
is used in Section 1127(b) of the Bankruptcy Code) of the Plan shall control
over provisions of the Plan or the Confirmation Order.
15. SPECIFIC PERFORMANCE. The Company acknowledges that the rights
granted to the Holders in this Agreement are of a special, unique and
extraordinary character, and that any breach of this Agreement by the Company
could not be compensated for by damages. Accordingly, if the Company breaches
its obligations under this Agreement, the Holders shall be entitled, in addition
to any other remedies that they may have, to enforcement of this Agreement by a
decree of specific performance requiring the Company to fulfill its obligations
under this Agreement.
16. ENFORCEMENT OF WARRANT. All disputes arising in connection with
this Warrant shall be brought before and finally determined by The United States
District Court for the Southern District of Ohio. The Company consents to
personal jurisdiction in any action arising in connection with this Warrant
brought in the United States District Court for the Southern District of Ohio
and to service of process upon it in the manner set forth in Section 12 hereof.
17. SEVERABILITY. If any provision of this Agreement or any portion
thereof is finally determined to be unlawful or unenforceable, such provision or
portion thereof shall be deemed not to be a part of this Agreement and any
portion of such invalidated provision that is not invalidated by such a
determination, shall remain in full force and effect.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which,
together, shall constitute one and the same instrument.
19. DEFAULTS. A default by any party to this Agreement in such party's
compliance with any of the conditions or covenants hereof or performance of any
of the obligations of such party hereunder shall not constitute a default by any
other party.
20. AMENDMENTS, WAIVERS. This Agreement may not be amended, modified or
supplemented and no waivers of or consents to departures from the provisions
hereof may be given unless consented to in writing by the Company and the
holders of a majority of the Registrable Shares; provided, however, that no such
amendment, supplement, modification or waiver shall deprive any Holder of any
rights under Sections 2 or 4 hereof without the consent of such Holder.
21. CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
22. ATTORNEYS' FEES. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the successful party shall be entitled to recover reasonable
attorneys' fees in addition to any other available remedy.
23. ENTIRE AGREEMENT. This Agreement contains the entire agreement
among the parties hereto with respect to the transactions contemplated herein
and understandings among the parties relating to the subject matter hereof. Any
and all previous agreements and understandings between
14
<PAGE> 15
or among the parties hereto regarding the subject matter hereof are, whether
written or oral, superseded by this Agreement.
24. GOVERNING LAW. This Agreement is made pursuant to and shall be
construed in accordance with the laws of the State of Ohio, without regard to
that state's conflicts of laws principles. The parties hereto submit to the
non-exclusive jurisdiction of the courts of the State of Ohio in any action or
proceeding arising out of or relating to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date aforesaid.
THE ELDER-BEERMAN STORES CORP.
By:
------------------------------------
Name:
Title:
[---------------]
By:
------------------------------------
Name:
Title:
15
<PAGE> 1
EXHIBIT 4(c)
------------
================================================================================
RIGHTS AGREEMENT
Dated as of [INSERT EFFECTIVE DATE]
By and Between
THE ELDER-BEERMAN STORES CORP.
and
[RIGHTS AGENT],
as Rights Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Certain Definitions......................................................................................1
2. Appointment of Rights Agent..............................................................................5
3. Issue of Right Certificates..............................................................................5
4. Form of Right Certificates...............................................................................6
5. Countersignature and Registration........................................................................6
6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates.............................................................7
7. Exercise of Rights; Purchase Price; Expiration Date of Rights............................................7
8. Cancellation and Destruction of Right Certificates.......................................................9
9. Company Covenants Concerning Securities and Rights.......................................................9
10. Record Date.............................................................................................10
11. Adjustment of Purchase Price, Number and Kind of Securities or Number of Rights
.......................................................................................................11
12. Certificate of Adjusted Purchase Price or Number of Securities..........................................19
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power....................................19
14. Fractional Rights and Fractional Securities.............................................................21
15. Rights of Action........................................................................................23
16. Agreement of Rights Holders.............................................................................23
17. Right Certificate Holder Not Deemed a Stockholder.......................................................24
18. Concerning the Rights Agent.............................................................................24
19. Merger or Consolidation or Change of Name of Rights Agent...............................................24
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C>
20. Duties of Rights Agent..................................................................................25
21. Change of Rights Agent..................................................................................26
22. Issuance of New Right Certificates......................................................................27
23. Redemption..............................................................................................28
24. Exchange................................................................................................29
25. Notice of Certain Events................................................................................29
26. Notices.................................................................................................30
27. Supplements and Amendments..............................................................................31
28. Successors; Certain Covenants...........................................................................31
29. Benefits of This Agreement..............................................................................31
30. Governing Law...........................................................................................32
31. Severability............................................................................................32
32. Descriptive Headings, Etc...............................................................................32
33. Determinations and Actions by the Board.................................................................32
34. Counterparts............................................................................................33
Exhibit A.......................................................................................................A-1
Exhibit B.......................................................................................................B-1
Exhibit C.......................................................................................................C-1
</TABLE>
(ii)
<PAGE> 4
RIGHTS AGREEMENT
----------------
This RIGHTS AGREEMENT, dated as of [INSERT EFFECTIVE DATE] (this
"Agreement"), is made and entered into by and between The Elder-Beerman Stores
Corp., an Ohio corporation (the "Company"), and [RIGHTS AGENT] (the "Rights
Agent").
RECITALS
--------
WHEREAS, pursuant to the final confirmation order entered by the
Bankruptcy Court in Jointly Administered Case No. 95-33643 on [INSERT EFFECTIVE
DATE], the Company has effected a distribution of one right (a "Right") for each
Common Share (as hereinafter defined) outstanding as of the Close of Business
(as hereinafter defined) on [INSERT RECORD DATE] (the "Record Date"), each Right
initially representing the right to purchase one one-hundredth of a Preferred
Share (as hereinafter defined), on the terms and subject to the conditions
herein set forth, and further authorized and directed the issuance of one Right
(subject to adjustment as provided herein) with respect to each Common Share
issued or delivered by the Company (whether originally issued or delivered from
the Company's treasury) after the Record Date but prior to the earlier of the
Distribution Date (as hereinafter defined) and the Expiration Date (as
hereinafter defined) or as provided in Section 22.
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms have the meanings indicated:
(a) "ACQUIRING PERSON" means any Person (other than the Company or any
Related Person) who or which, together with all Affiliates and Associates of
such Person, is the Beneficial Owner of 20% or more of the then-outstanding
Common Shares; PROVIDED, HOWEVER, that a Person will not be deemed to have
become an Acquiring Person solely as a result of a reduction in the number of
Common Shares outstanding unless and until such time as (i) such Person or any
Affiliate or Associate of such Person thereafter becomes the Beneficial Owner of
additional Common Shares representing 1% or more of the then-outstanding Common
Shares, other than as a result of a stock dividend, stock split or similar
transaction effected by the Company in which all holders of Common Shares are
treated equally, or (ii) any other Person who is the Beneficial Owner of Common
Shares representing 1% or more of the then-outstanding Common Shares thereafter
becomes an Affiliate or Associate of such Person; PROVIDED FURTHER, HOWEVER,
that a Person (other than the Company or any Related Person) who or which,
together with all Affiliates and Associates of such Person, was, at the time of
the public announcement by the Company on [INSERT EFFECTIVE DATE] of the
distribution of the Rights, the Beneficial Owner of 20% or more of the
then-outstanding Common Shares shall not be deemed to have become an Acquiring
Person unless and until such time as (A) such Person or any Affiliate or
Associate of such Person thereafter becomes the Beneficial Owner of additional
Common Shares representing 1% or more of the then-outstanding Common Shares
other than as a result of a stock dividend, stock split or similar transaction
effected by the Company in which all holders of Common Shares are treated
equally or (B) any other Person who is the
<PAGE> 5
Beneficial Owner of Common Shares representing 1% or more of the
then-outstanding Common Shares thereafter becomes an Affiliate or Associate of
such Person. Notwithstanding the foregoing, if the Board of Directors of the
Company determines in good faith that a Person who would otherwise be an
"Acquiring Person" as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of Common Shares so that such Person
would no longer be an "Acquiring Person" as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be an
"Acquiring Person" for any purposes of this Agreement.
(b) "AFFILIATE" and "ASSOCIATE" will have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect on the date of this Agreement.
(c) A Person will be deemed the "BENEFICIAL OWNER" of, and to
"BENEFICIALLY OWN," any securities:
(i) the beneficial ownership of which such Person or any of
such Person's Affiliates or Associates, directly or indirectly, has the
right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing), or upon the exercise of
conversion rights, exchange rights, warrants, options or other rights
(in each case, other than upon exercise or exchange of the Rights);
PROVIDED, HOWEVER, that a Person will not be deemed the Beneficial
Owner of, or to Beneficially Own, securities tendered pursuant to a
tender or exchange offer made by or on behalf of such Person or any of
such Person's Affiliates or Associates until such tendered securities
are accepted for purchase or exchange; or
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has or shares the right to vote or
dispose of, including pursuant to any agreement, arrangement or
understanding (whether or not in writing); or
(iii) of which any other Person is the Beneficial Owner, if
such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement, or understanding (whether or not in writing)
with such other Person (or any of such other Person's Affiliates or
Associates) with respect to acquiring, holding, voting or disposing of
any securities of the Company;
PROVIDED, HOWEVER, that a Person will not be deemed the Beneficial Owner of, or
to Beneficially Own, any security (A) if such Person has the right to vote such
security pursuant to an agreement, arrangement or understanding (whether or not
in writing) which (1) arises solely from a revocable proxy given to such Person
in response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations of the Exchange Act and
(2) is not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report), or (B) if such beneficial ownership arises
solely as a result of such Person's status as a "clearing agency," as defined in
Section 3(a)(23) of the Exchange Act; PROVIDED FURTHER, HOWEVER, that nothing in
this paragraph (c) will cause a Person engaged in business as an underwriter of
securities to be the Beneficial Owner of, or to Beneficially Own, any securities
acquired through such Person's
2
<PAGE> 6
participation in good faith in an underwriting syndicate until the expiration of
40 calendar days after the date of such acquisition, or such later date as the
Board of Directors of the Company may determine in any specific case.
(d) "BUSINESS DAY" means any day other than a Saturday, Sunday or a day
on which banking institutions in the State of Ohio (or such other state in which
the principal office of the Rights Agent is located) are authorized or obligated
by law or executive order to close.
(e) "CLOSE OF BUSINESS" on any given date means 5:00 P.M., Eastern
time, on such date; PROVIDED, HOWEVER, that if such date is not a Business Day
it means 5:00 P.M., Eastern time, on the next succeeding Business Day.
(f) "COMMON SHARES" when used with reference to the Company means the
shares of common stock, without par value, of the Company; PROVIDED, HOWEVER,
that, if the Company is the continuing or surviving corporation in a transaction
described in Section 13(a)(ii), "Common Shares" when used with reference to the
Company means shares of the capital stock or units of the equity interests with
the greatest aggregate voting power of the Company. "Common Shares" when used
with reference to any corporation or other legal entity other than the Company,
including an Issuer, means shares of the capital stock or units of the equity
interests with the greatest aggregate voting power of such corporation or other
legal entity.
(g) "DISTRIBUTION DATE" means the earlier of: (i) the Close of Business
on the Share Acquisition Date, or (ii) the Close of Business on the tenth
Business Day (or, unless the Distribution Date shall have previously occurred,
such later date as may be specified by the Board of Directors of the Company)
after the date of the commencement of a tender or exchange offer by any Person
(other than the Company or any Related Person), if upon the consummation thereof
such Person would be the Beneficial Owner of 20% or more of the then-outstanding
Common Shares.
(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(i) "EXPIRATION DATE" means the earliest of (i) the Close of Business
on the Final Expiration Date, (ii) the time at which the Rights are redeemed as
provided in Section 23 or exchanged as provided in Section 24, and (iii) the
time at which all exercisable Rights are exchanged as provided in Section 24.
(j) "FINAL EXPIRATION DATE" means (i) the first anniversary of the
Effective Date or (ii) such later date as the Board of Directors, by resolution
adopted prior to the first anniversary of the Effective Date, may establish, but
not later than the tenth anniversary of the Effective Date.
(k) "FLIP-IN EVENT" means any event described in clauses (A), (B) or
(C) of Section 11(a)(ii).
(l) "FLIP-OVER EVENT" means any event described in clauses (i), (ii) or
(iii) of Section 13(a).
(m) "ISSUER" has the meaning set forth in Section 13(b).
3
<PAGE> 7
(n) "NASDAQ" means The National Association of Securities Dealers'
Automated Quotation System, commonly referred to as "The NASDAQ Stock Market."
(o) "PERSON" means any individual, firm, corporation or other legal
entity, and includes any successor (by merger or otherwise) of such entity.
(p) "PREFERRED SHARES" means shares of Series A Preferred Stock,
without par value, of the Company having the rights and preferences set forth in
the form of Certificate of Designation of Series A Preferred Stock attached as
EXHIBIT A.
(q) "PURCHASE PRICE" means initially $[INSERT INITIAL PURCHASE PRICE]
per one one-hundredth of a Preferred Share, subject to adjustment from time to
time as provided in this Agreement.
(r) "RECORD DATE" has the meaning set forth in the Recitals to this
Agreement.
(s) "REDEMPTION PRICE" means $.01 per Right, subject to adjustment by
resolution of the Board of Directors of the Company to reflect any stock split,
stock dividend or similar transaction occurring after the Record Date.
(t) "RELATED PERSON" means (i) any Subsidiary of the Company or (ii)
any employee benefit or stock ownership plan of the Company or of any Subsidiary
of the Company or any entity holding Common Shares for or pursuant to the terms
of any such plan.
(u) "RIGHT" has the meaning set forth in the Recitals to this
Agreement.
(v) "RIGHT CERTIFICATES" means certificates evidencing the Rights, in
substantially the form attached as EXHIBIT B.
(w) "RIGHTS AGENT" means [RIGHTS AGENT], unless and until a successor
Rights Agent has become such pursuant to the terms of this Agreement, and
thereafter, "Rights Agent" means such successor Rights Agent.
(x) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(y) "SHARE ACQUISITION DATE" means the first date of public
announcement by the Company (by press release, filing made with the Securities
and Exchange Commission or otherwise) that an Acquiring Person has become such.
(z) "SUBSIDIARY" when used with reference to any Person means any
corporation or other legal entity of which a majority of the voting power of the
voting equity securities or equity interests is owned, directly or indirectly,
by such Person; PROVIDED, HOWEVER, that for purposes of Section 13(b),
"Subsidiary" when used with reference to any Person means any corporation or
other legal entity of which at least 20% of the voting power of the voting
equity securities or equity interests is owned, directly or indirectly, by such
Person.
4
<PAGE> 8
(bb) "TRADING DAY" means any day on which the principal national
securities exchange on which the Common Shares are listed or admitted to trading
is open for the transaction of business or, if the Common Shares are not listed
or admitted to trading on any national securities exchange, a Business Day.
(cc) "TRIGGERING EVENT" means any Flip-in Event or Flip-over Event.
2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights
Agent to act as agent for the Company and the holders of the Rights (who, in
accordance with Section 3, will also be, prior to the Distribution Date, the
holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment and hereby
certifies that it complies with the requirements of the New York Stock Exchange
governing transfer agents and registrars. The Company may from time to time act
as co-Rights Agent or appoint such co-Rights Agents as it may deem necessary or
desirable. Any actions which may be taken by the Rights Agent pursuant to the
terms of this Agreement may be taken by any such co-Rights Agent. To the extent
that any co-Rights Agent takes any action pursuant to this Agreement, such
co-Rights Agent will be entitled to all of the rights and protections of, and
subject to all of the applicable duties and obligations imposed upon, the Rights
Agent pursuant to the terms of this Agreement.
3. ISSUE OF RIGHT CERTIFICATES. (a) Until the Distribution Date, (i)
the Rights will be evidenced by the certificates representing Common Shares
registered in the names of the record holders thereof (which certificates
representing Common Shares will also be deemed to be Right Certificates), (ii)
the Rights will be transferable only in connection with the transfer of the
underlying Common Shares, and (iii) the surrender for transfer of any
certificates evidencing Common Shares in respect of which Rights have been
issued will also constitute the transfer of the Rights associated with the
Common Shares evidenced by such certificates. On or as promptly as practicable
after the Record Date, the Company will send by first class, postage prepaid
mail, to each record holder of Common Shares as of the Close of Business on the
Record Date, at the address of such holder shown on the records of the Company
as of such date, a copy of a Summary of Rights to Purchase Preferred Stock in
substantially the form attached as EXHIBIT C.
(b) Rights will be issued by the Company in respect of all Common
Shares (other than Common Shares issued upon the exercise or exchange of any
Right) issued or delivered by the Company (whether originally issued or
delivered from the Company's treasury) after the Record Date but prior to the
earlier of the Distribution Date and the Expiration Date. Certificates
evidencing such Common Shares will have stamped on, impressed on, printed on,
written on, or otherwise affixed to them the following legend or such similar
legend as the Company may deem appropriate and as is not inconsistent with the
provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or transaction reporting system on
which the Common Shares may from time to time be listed or quoted, or to conform
to usage:
This Certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between The
Elder-Beerman Stores Corp. and [RIGHTS AGENT], dated as of [INSERT
EFFECTIVE DATE] (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which
5
<PAGE> 9
is on file at the principal executive offices of The Elder-Beerman
Stores Corp. The Rights are not exercisable prior to the occurrence of
certain events specified in the Rights Agreement. Under certain
circumstances, as set forth in the Rights Agreement, such Rights may be
redeemed, may be exchanged, may expire, may be amended, or may be
evidenced by separate certificates and no longer be evidenced by this
Certificate. The Elder-Beerman Stores Corp. will mail to the holder of
this Certificate a copy of the Rights Agreement, as in effect on the
date of mailing, without charge, promptly after receipt of a written
request therefor. Under certain circumstances as set forth in the
Rights Agreement, Rights that are or were beneficially owned by an
Acquiring Person or any Affiliate or Associate of an Acquiring Person
(as such terms are defined in the Rights Agreement) may become null and
void.
(c) As promptly as practicable after the Distribution Date, the Company
will prepare and execute, the Rights Agent will countersign and the Company will
send or cause to be sent (and the Rights Agent will, if requested, send), by
first class, insured, postage prepaid mail, to each record holder of Common
Shares as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right Certificate evidencing
one Right for each Common Share so held, subject to adjustment as provided
herein. As of and after the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.
(d) In the event that the Company purchases or otherwise acquires any
Common Shares after the Record Date but prior to the Distribution Date, any
Rights associated with such Common Shares will be deemed canceled and retired so
that the Company will not be entitled to exercise any Rights associated with the
Common Shares so purchased or acquired.
4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and the form of
election to purchase and the form of assignment to be printed on the reverse
thereof) will be substantially in the form attached as EXHIBIT B with such
changes and marks of identification or designation, and such legends, summaries
or endorsements printed thereon, as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or transaction
reporting system on which the Rights may from time to time be listed or quoted,
or to conform to usage. Subject to the provisions of Section 22, the Right
Certificates, whenever issued, on their face will entitle the holders thereof to
purchase such number of one one-hundredths of a Preferred Share as are set forth
therein at the Purchase Price set forth therein, but the Purchase Price, the
number and kind of securities issuable upon exercise of each Right and the
number of Rights outstanding will be subject to adjustment as provided herein.
5. COUNTERSIGNATURE AND REGISTRATION. (a) The Right Certificates will
be executed on behalf of the Company by any one or more of its Chairman of the
Board, any Vice Chairman, its President or any Vice President, either manually
or by facsimile signature, and will have affixed thereto the Company's seal or a
facsimile thereof which will be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Right
Certificates will be manually countersigned by the Rights Agent and will not be
valid for any purpose unless so countersigned. In case any officer of the
Company who signed any of the Right
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Certificates ceases to be such officer of the Company before countersignature by
the Rights Agent and issuance and delivery by the Company, such Right
Certificates, nevertheless, may be countersigned by the Rights Agent, and issued
and delivered by the Company with the same force and effect as though the person
who signed such Right Certificates had not ceased to be such officer of the
Company; and any Right Certificate may be signed on behalf of the Company by any
person who, at the actual date of the execution of such Right Certificate, is a
proper officer of the Company to sign such Right Certificate, although at the
date of the execution of this Rights Agreement any such person was not such
officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at the principal office of the Rights Agent designated for
such purpose and at such other offices as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or any transaction reporting system on
which the Rights may from time to time be listed or quoted, books for
registration and transfer of the Right Certificates issued hereunder. Such books
will show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES;
MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. (a) Subject to the
provisions of Sections 7(d) and 14, at any time after the Close of Business on
the Distribution Date and prior to the Expiration Date, any Right Certificate or
Right Certificates representing exercisable Rights may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-hundredths
of a Preferred Share (or other securities, as the case may be) as the Right
Certificate or Right Certificates surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any such Right Certificate
or Right Certificates must make such request in a writing delivered to the
Rights Agent and must surrender the Right Certificate or Right Certificates to
be transferred, split up, combined or exchanged at the principal office of the
Rights Agent designated for such purpose. Thereupon or as promptly as
practicable thereafter, subject to the provisions of Sections 7(d) and 14, the
Company will prepare, execute and deliver to the Rights Agent, and the Rights
Agent will countersign and deliver, one or more new Right Certificates as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, if requested by the Company,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will prepare, execute and
deliver a new Right Certificate of like tenor to the Rights Agent and the Rights
Agent will countersign and deliver such new Right Certificate to the registered
holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
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<PAGE> 11
7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS. (a)
The registered holder of any Right Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date and prior to the Expiration Date, upon surrender of
the Right Certificate, with the form of election to purchase on the reverse side
thereof duly executed, to the Rights Agent at the office or offices of the
Rights Agent designated for such purpose, together with payment in cash, in
lawful money of the United States of America by certified check or bank draft
payable to the order of the Company, equal to the sum of (i) the exercise price
for the total number of securities as to which such surrendered Rights are
exercised and (ii) an amount equal to any applicable transfer tax required to be
paid by the holder of such Right Certificate in accordance with the provisions
of Section 9(d).
(b) Upon receipt of a Right Certificate representing exercisable Rights
with the form of election to purchase duly executed, accompanied by payment as
described above, the Rights Agent will promptly (i) requisition from any
transfer agent of the Preferred Shares (or make available, if the Rights Agent
is the transfer agent) certificates representing the number of one
one-hundredths of a Preferred Share to be purchased (and the Company hereby
irrevocably authorizes and directs its transfer agent to comply with all such
requests), or, if the Company elects to deposit Preferred Shares issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing such number of one
one-hundredths of a Preferred Share as are to be purchased (and the Company
hereby irrevocably authorizes and directs such depositary agent to comply with
all such requests), (ii) after receipt of such certificates (or depositary
receipts, as the case may be), cause the same to be delivered to or upon the
order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder, (iii) when appropriate,
requisition from the Company or any transfer agent therefor (or make available,
if the Rights Agent is the transfer agent) certificates representing the number
of equivalent common shares to be issued in lieu of the issuance of Common
Shares in accordance with the provisions of Section 11(a)(iii), (iv) when
appropriate, after receipt of such certificates, cause the same to be delivered
to or upon the order of the registered holder of such Right Certificate,
registered in such name or names as may be designated by such holder, (v) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of the issuance of fractional shares in accordance with the provisions of
Section 14 or in lieu of the issuance of Common Shares in accordance with the
provisions of Section 11(a)(iii), (vi) when appropriate, after receipt, deliver
such cash to or upon the order of the registered holder of such Right
Certificate, and (vii) when appropriate, deliver any due bill or other
instrument provided to the Rights Agent by the Company for delivery to the
registered holder of such Right Certificate as provided by Section 11(l).
(c) In case the registered holder of any Right Certificate exercises
less than all the Rights evidenced thereby, the Company will prepare, execute
and deliver a new Right Certificate evidencing Rights equivalent to the Rights
remaining unexercised and the Rights Agent will countersign and deliver such new
Right Certificate to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14.
(d) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company will be obligated to undertake any action with
respect to any purported transfer, split up, combination or exchange of any
Right Certificate pursuant to Section 6 or exercise of a Right Certificate as
set forth in this Section 7 unless the registered holder of such Right
Certificate
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has (i) completed and signed the certificate following the form of assignment or
the form of election to purchase, as applicable, set forth on the reverse side
of the Right Certificate surrendered for such transfer, split up, combination,
exchange or exercise and (ii) provided such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company may reasonably request.
8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange will, if surrendered to the Company or to any of its
stock transfer agents, be delivered to the Rights Agent for cancellation or in
canceled form, or, if surrendered to the Rights Agent, will be canceled by it,
and no Right Certificates will be issued in lieu thereof except as expressly
permitted by the provisions of this Agreement. The Company will deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent will so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent will deliver
all canceled Right Certificates to the Company, or will, at the written request
of the Company, destroy such canceled Right Certificates, and in such case will
deliver a certificate of destruction thereof to the Company.
9. COMPANY COVENANTS CONCERNING SECURITIES AND RIGHTS. The Company
covenants and agrees that:
(a) It will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares or any Preferred Shares held
in its treasury, a number of Preferred Shares that will be sufficient
to permit the exercise in full of all outstanding Rights in accordance
with Section 7.
(b) So long as the Preferred Shares (and, following the
occurrence of a Triggering Event, Common Shares and/or other
securities) issuable upon the exercise of the Rights may be listed on a
national securities exchange, or quoted on NASDAQ, it will endeavor to
cause, from and after such time as the Rights become exercisable, all
securities reserved for issuance upon the exercise of Rights to be
listed on such exchange, or quoted on NASDAQ, upon official notice of
issuance upon such exercise.
(c) It will take all such action as may be necessary to ensure
that all Preferred Shares (and, following the occurrence of a
Triggering Event, Common Shares and/or other securities) delivered upon
exercise of Rights, at the time of delivery of the certificates for
such securities, will be (subject to payment of the Purchase Price)
duly authorized, validly issued, fully paid and nonassessable
securities.
(d) It will pay when due and payable any and all federal and
state transfer taxes and charges that may be payable in respect of the
issuance or delivery of the Right Certificates and of any certificates
representing securities issued upon the exercise of Rights; PROVIDED,
HOWEVER, that the Company will not be required to pay any transfer tax
or charge which may be payable in respect of any transfer or delivery
of Right Certificates to a person other than, or the issuance or
delivery of certificates or depositary receipts representing securities
issued upon the exercise of Rights in a name other than that of, the
registered holder of the Right Certificate evidencing Rights
surrendered for exercise, or to issue or
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<PAGE> 13
deliver any certificates or depositary receipts representing securities
issued upon the exercise of any Rights until any such tax or charge has
been paid (any such tax or charge being payable by the holder of such
Right Certificate at the time of surrender) or until it has been
established to the Company's reasonable satisfaction that no such tax
is due.
(e) It will use its best efforts (i) to file on an appropriate
form, as soon as practicable following the later of the Share
Acquisition Date and the Distribution Date, a registration statement
under the Securities Act with respect to the securities issuable upon
exercise of the Rights, (ii) to cause such registration statement to
become effective as soon as practicable after such filing, and (iii) to
cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities and (B) the Expiration Date. The
Company will also take such action as may be appropriate under, or to
ensure compliance with, the securities or "blue sky" laws of the
various states in connection with the exercisability of the Rights. The
Company may temporarily suspend, for a period of time after the date
set forth in clause (i) of the first sentence of this Section 9(e), the
exercisability of the Rights in order to prepare and file such
registration statement and to permit it to become effective. Upon any
such suspension, the Company will issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended,
as well as a public announcement at such time as the suspension is no
longer in effect. In addition, if the Company determines that a
registration statement should be filed under the Securities Act or any
state securities laws following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights in each relevant
jurisdiction until such time as a registration statement has been
declared effective and, upon any such suspension, the Company will
issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement
at such time as the suspension is no longer in effect. Notwithstanding
anything in this Agreement to the contrary, the Rights will not be
exercisable in any jurisdiction if the requisite registration or
qualification in such jurisdiction has not been effected or the
exercise of the Rights is not permitted under applicable law.
(f) Notwithstanding anything in this Agreement to the
contrary, after the later of the Share Acquisition Date and the
Distribution Date it will not take (or permit any Subsidiary to take)
any action if at the time such action is taken it is reasonably
foreseeable that such action will eliminate or otherwise diminish the
benefits intended to be afforded by the Rights.
(g) In the event that the Company is obligated to issue other
securities of the Company and/or pay cash pursuant to Section 11, 13,
14 or 24 it will make all arrangements necessary so that such other
securities and/or cash are available for distribution by the Rights
Agent, if and when appropriate.
10. RECORD DATE. Each Person in whose name any certificate representing
Preferred Shares (or Common Shares and/or other securities, as the case may be)
is issued upon the exercise of Rights will for all purposes be deemed to have
become the holder of record of the Preferred Shares (or Common Shares and/or
other securities, as the case may be) represented thereby on, and
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<PAGE> 14
such certificate will be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the
date of such surrender and payment is a date upon which the transfer books of
the Company for the Preferred Shares (or Common Shares and/or other securities,
as the case may be) are closed, such Person will be deemed to have become the
record holder of such securities on, and such certificate will be dated, the
next succeeding Business Day on which the transfer books of the Company for the
Preferred Shares (or Common Shares and/or other securities, as the case may be)
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Right Certificate will not be entitled to any rights of a holder of any security
for which the Rights are or may become exercisable, including without limitation
the right to vote, to receive dividends or other distributions, or to exercise
any preemptive rights, and will not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SECURITIES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of securities issuable
upon exercise of each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) In the event that the Company at any time after the Record Date
(A) declares a dividend on the Preferred Shares payable in Preferred
Shares, (B) subdivides the outstanding Preferred Shares, (C) combines
the outstanding Preferred Shares into a smaller number of Preferred
Shares, or (D) issues any shares of its capital stock in a
reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a), the Purchase Price in effect
at the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification and/or the
number and/or kind of shares of capital stock issuable on such date
upon exercise of a Right, will be proportionately adjusted so that the
holder of any Right exercised after such time is entitled to receive
upon payment of the Purchase Price then in effect the aggregate number
and kind of shares of capital stock which, if such Right had been
exercised immediately prior to such date and at a time when the
transfer books of the Company for the Preferred Shares were open, the
holder of such Right would have owned upon such exercise (and, in the
case of a reclassification, would have retained after giving effect to
such reclassification) and would have been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification;
PROVIDED, HOWEVER, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par value, if
any, of the shares of capital stock issuable upon exercise of one
Right. If an event occurs which would require an adjustment under both
this Section 11(a)(i) and Section 11(a)(ii) or Section 13, the
adjustment provided for in this Section 11(a)(i) will be in addition
to, and will be made prior to, any adjustment required pursuant to
Section 11(a)(ii) or Section 13.
(ii) Subject to the provisions of Section 24, if:
(A) any Person becomes an Acquiring Person; or
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<PAGE> 15
(B) any Acquiring Person or any Affiliate or Associate of any
Acquiring Person, directly or indirectly, (1) merges into the Company
or otherwise combines with the Company and the Company is the
continuing or surviving corporation of such merger or combination
(other than in a transaction subject to Section 13), (2) merges or
otherwise combines with any Subsidiary of the Company, (3) in one or
more transactions (otherwise than in connection with the exercise,
exchange or conversion of securities exercisable or exchangeable for or
convertible into shares of any class of capital stock of the Company or
any of its Subsidiaries) transfers cash, securities or any other
property to the Company or any of its Subsidiaries in exchange (in
whole or in part) for shares of any class of capital stock of the
Company or any of its Subsidiaries or for securities exercisable or
exchangeable for or convertible into shares of any class of capital
stock of the Company or any of its Subsidiaries, or otherwise obtains
from the Company or any of its Subsidiaries, with or without
consideration, any additional shares of any class of capital stock of
the Company or any of its Subsidiaries or securities exercisable or
exchangeable for or convertible into shares of any class of capital
stock of the Company or any of its Subsidiaries (otherwise than as part
of a pro rata distribution to all holders of shares of any class of
capital stock of the Company, or any of its Subsidiaries), (4) sells,
purchases, leases, exchanges, mortgages, pledges, transfers or
otherwise disposes (in one or more transactions) to, from, with or of,
as the case may be, the Company or any of its Subsidiaries (otherwise
than in a transaction subject to Section 13), any property, including
securities, on terms and conditions less favorable to the Company than
the Company would be able to obtain in an arm's-length transaction with
an unaffiliated third party, (5) receives any compensation from the
Company or any of its Subsidiaries other than compensation as a
director or a regular full-time employee, in either case at rates
consistent with the Company's (or its Subsidiaries') past practices, or
(6) receives the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances, guarantees,
pledges or other financial assistance or any tax credits or other tax
advantage provided by the Company or any of its Subsidiaries; or
(C) during such time as there is an Acquiring Person, there
is any reclassification of securities of the Company (including any
reverse stock split), or any recapitalization of the Company, or any
merger or consolidation of the Company with any of its Subsidiaries, or
any other transaction or series of transactions involving the Company
or any of its Subsidiaries (whether or not with or into or otherwise
involving an Acquiring Person), other than a transaction subject to
Section 13, which has the effect, directly or indirectly, of increasing
by more than 1% the proportionate share of the outstanding shares of
any class of equity securities of the Company or any of its
Subsidiaries, or of securities exercisable or exchangeable for or
convertible into equity securities of the Company or any of its
Subsidiaries, of which an Acquiring Person, or any Affiliate or
Associate of any Acquiring Person, is the Beneficial Owner;
then, and in each such case, proper provision will be made so that each
holder of a Right, except as provided below, will thereafter have the
right to receive, upon exercise thereof in accordance with the terms of
this Agreement at an exercise price per Right equal to the product of
the then-current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the date of the first occurrence of a Flip-in
Event (or, if any other Flip-in Event shall have previously
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<PAGE> 16
occurred, the product of the then-current Purchase Price multiplied by
the number of one one-hundredths of a Preferred Share for which a Right
was exercisable immediately prior to the date of the first occurrence
of a Flip-in Event), in lieu of Preferred Shares, such number of Common
Shares as equals the result obtained by (x) multiplying the
then-current Purchase Price by the number of one one-hundredths of a
Preferred Share for which a Right was exercisable immediately prior to
the date of the occurrence of a Flip-in Event (or, if any other Flip-in
Event shall have previously occurred, multiplying the then-current
Purchase Price by the number of one one-hundredths of a Preferred Share
for which a Right was exercisable immediately prior to the date of the
first occurrence of a Flip-in Event), and dividing that product by (y)
50% of the current per share market price of the Common Shares
(determined pursuant to Section 11(d)) on the date of the first
occurrence of such Flip-in Event. Notwithstanding anything in this
Agreement to the contrary, from and after the first occurrence of a
Flip-in Event, any Rights that are Beneficially Owned by (A) any
Acquiring Person (or any Affiliate or Associate of any Acquiring
Person), (B) a transferee of any Acquiring Person (or any such
Affiliate or Associate) who becomes a transferee after the occurrence
of a Flip-in Event, or (C) a transferee of any Acquiring Person (or any
such Affiliate or Associate) who became a transferee prior to or
concurrently with the occurrence of a Flip-in Event pursuant to either
(1) a transfer from an Acquiring Person to holders of its equity
securities or to any Person with whom it has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (2) a
transfer which the Board of Directors of the Company has determined is
part of a plan, arrangement or understanding which has the purpose or
effect of avoiding the provisions of this Section 11(a)(ii), and
subsequent transferees of any of such Persons, will be void without any
further action and any holder of such Rights will thereafter have no
rights whatsoever with respect to such Rights under any provision of
this Agreement. The Company will use all reasonable efforts to ensure
that the provisions of this Section 11(a)(ii) are complied with, but
will have no liability to any holder of Right Certificates or any other
Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or
transferees hereunder. Upon the occurrence of a Flip-in Event, no Right
Certificate that represents Rights that are or have become void
pursuant to the provisions of this Section 11(a)(ii) will thereafter be
issued pursuant to Section 3 or Section 6, and any Right Certificate
delivered to the Rights Agent that represents Rights that are or have
become void pursuant to the provisions of this Section 11(a)(ii) will
be canceled. Upon the occurrence of a Flip-over Event, any Rights that
shall not have been previously exercised pursuant to this Section
11(a)(ii) shall thereafter be exercisable only pursuant to Section 13
and not pursuant to this Section 11(a)(ii).
(iii) Upon the occurrence of a Flip-in Event, if there are
not sufficient Common Shares authorized but unissued or issued but not
outstanding to permit the issuance of all the Common Shares issuable in
accordance with Section 11(a)(ii) upon the exercise of a Right, the
Board of Directors of the Company will use its best efforts promptly to
authorize and, subject to the provisions of Section 9(e), make
available for issuance additional Common Shares or other equity
securities of the Company having equivalent voting rights and an
equivalent value (as determined in good faith by the Board of Directors
of the Company) to the Common Shares (for purposes of this Section
11(a)(iii), "equivalent common shares"). In the event that equivalent
common shares are so authorized, upon the exercise of a Right
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<PAGE> 17
in accordance with the provisions of Section 7, the registered holder
will be entitled to receive (A) Common Shares, to the extent any are
available, and (B) a number of equivalent common shares, which the
Board of Directors of the Company has determined in good faith to have
a value equivalent to the excess of (x) the aggregate current per share
market value on the date of the occurrence of the most recent Flip-in
Event of all the Common Shares issuable in accordance with Section
11(a)(ii) upon the exercise of a Right (the "Exercise Value") over (y)
the aggregate current per share market value on the date of the first
occurrence of a Flip-in Event of any Common Shares available for
issuance upon the exercise of such Right; PROVIDED, HOWEVER, that if at
any time after 90 calendar days after the latest of the Share
Acquisition Date, the Distribution Date and the date of the first
occurrence of a Flip-in Event, there are not sufficient Common Shares
and/or equivalent common shares available for issuance upon the
exercise of a Right, then the Company will be obligated to deliver,
upon the surrender of such Right and without requiring payment of the
Purchase Price, Common Shares (to the extent available), equivalent
common shares (to the extent available) and then cash (to the extent
permitted by applicable law and any agreements or instruments to which
the Company is a party in effect immediately prior to the Share
Acquisition Date), which securities and cash have an aggregate value
equal to the excess of (1) the Exercise Value over (2) the product of
the then-current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the date of the occurrence of the most recent
Flip-in Event (or, if any other Flip-in Event shall have previously
occurred, the product of the then-current Purchase Price multiplied by
the number of one one-hundredths of a Preferred Share for which a Right
would have been exercisable immediately prior to the date of the
occurrence of such Flip-in Event if no other Flip-in Event had
previously occurred). To the extent that any legal or contractual
restrictions prevent the Company from paying the full amount of cash
payable in accordance with the foregoing sentence, the Company will pay
to holders of the Rights as to which such payments are being made all
amounts which are not then restricted on a pro rata basis and will
continue to make payments on a pro rata basis as promptly as funds
become available until the full amount due to each such Rights holder
has been paid.
(b) In the event that the Company fixes a record date for the issuance
of rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or securities having equivalent
rights, privileges and preferences as the Preferred Shares (for purposes of this
Section 11(b), "equivalent preferred shares")) or securities convertible into
Preferred Shares or equivalent preferred shares at a price per Preferred Share
or equivalent preferred share (or having a conversion price per share, if a
security convertible into Preferred Shares or equivalent preferred shares) less
than the current per share market price of the Preferred Shares (determined
pursuant to Section 11(d)) on such record date, the Purchase Price to be in
effect after such record date will be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which is the number of Preferred Shares outstanding on such record
date plus the number of Preferred Shares which the aggregate offering price of
the total number of Preferred Shares and/or equivalent preferred shares so to be
offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current per share market
price and the denominator of which is the number of Preferred Shares outstanding
on such record date plus the number of additional Preferred Shares and/or
equivalent preferred shares
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<PAGE> 18
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); PROVIDED, HOWEVER, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value, if any, of the shares of capital stock
issuable upon exercise of one Right. In case such subscription price may be paid
in a consideration part or all of which is in a form other than cash, the value
of such consideration will be as determined in good faith by the Board of
Directors of the Company, whose determination will be described in a statement
filed with the Rights Agent. Preferred Shares owned by or held for the account
of the Company will not be deemed outstanding for the purpose of any such
computation. Such adjustment will be made successively whenever such a record
date is fixed, and in the event that such rights, options or warrants are not so
issued, the Purchase Price will be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
(c) In the event that the Company fixes a record date for the making of
a distribution to all holders of Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness, cash (other than a regular periodic cash dividend), assets, stock
(other than a dividend payable in Preferred Shares) or subscription rights,
options or warrants (excluding those referred to in Section 11(b)), the Purchase
Price to be in effect after such record date will be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which is the current per share market price of the
Preferred Shares (as determined pursuant to Section 11(d)) on such record date
or, if earlier, the date on which Preferred Shares begin to trade on an
ex-dividend or when issued basis for such distribution, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination will be described in a statement filed with the Rights
Agent) of the portion of the evidences of indebtedness, cash, assets or stock so
to be distributed or of such subscription rights, options or warrants applicable
to one Preferred Share, and the denominator of which is such current per share
market price of the Preferred Shares; PROVIDED, HOWEVER, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value, if any, of the shares of capital stock issuable upon
exercise of one Right. Such adjustments will be made successively whenever such
a record date is fixed; and in the event that such distribution is not so made,
the Purchase Price will again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of Common Shares on any date will be deemed to be
the average of the daily closing prices per share of such Common Shares
for the 30 consecutive Trading Days immediately prior to such date;
PROVIDED, HOWEVER, that in the event that the current per share market
price of the Common Shares is determined during a period following the
announcement by the issuer of such Common Shares of (A) a dividend or
distribution on such Common Shares payable in such Common Shares or
securities convertible into such Common Shares (other than the Rights)
or (B) any subdivision, combination or reclassification of such Common
Shares, and prior to the expiration of 30 Trading Days after the
ex-dividend date for such dividend or distribution, or the record date
for such subdivision, combination or reclassification, then, and in
each such case, the current per share market price will be
appropriately adjusted to take into account ex-dividend trading or to
reflect the current per share market price per Common Share equivalent.
The closing price for each day will be the
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<PAGE> 19
last sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Shares are not
listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities
exchange on which the Common Shares are listed or admitted to trading
or, if the Common Shares are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system
then in use, or, if on any such date the Common Shares are not quoted
by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in
the Common Shares selected by the Board of Directors of the Company. If
the Common Shares are not publicly held or not so listed or traded, or
are not the subject of available bid and asked quotes, "current per
share market price" will mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose
determination will be described in a statement filed with the Rights
Agent.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares will be
determined in the same manner as set forth above for Common Shares in
Section 11(d)(i), other than the last sentence thereof. If the current
per share market price of the Preferred Shares cannot be determined in
the manner provided above, the "current per share market price" of the
Preferred Shares will be conclusively deemed to be an amount equal to
the current per share market price of the Common Shares multiplied by
one hundred (as such number may be appropriately adjusted to reflect
events such as stock splits, stock dividends, recapitalizations or
similar transactions relating to the Common Shares occurring after the
date of this Agreement). If neither the Common Shares nor the Preferred
Shares are publicly held or so listed or traded, or the subject of
available bid and asked quotes, "current per share market price" of the
Preferred Shares will mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose
determination will be described in a statement filed with the Rights
Agent. For all purposes of this Agreement, the current per share market
price of one one-hundredth of a Preferred Share will be equal to the
current per share market price of one Preferred Share divided by one
hundred.
(e) Except as set forth below, no adjustment in the Purchase Price will
be required unless such adjustment would require an increase or decrease of at
least 1% in such price; PROVIDED, HOWEVER, that any adjustments which by reason
of this Section 11(e) are not required to be made will be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 will be made to the nearest cent or to the nearest one one-millionth
of a Preferred Share or one ten-thousandth of a Common Share or other security,
as the case may be. Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 will be made no later than the
earlier of (i) three years from the date of the transaction which requires such
adjustment and (ii) the Expiration Date.
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<PAGE> 20
(f) If as a result of an adjustment made pursuant to Section 11(a), the
holder of any Right thereafter exercised becomes entitled to receive any
securities of the Company other than Preferred Shares, thereafter the number
and/or kind of such other securities so receivable upon exercise of any Right
(and/or the Purchase Price in respect thereof) will be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Preferred Shares (and the Purchase Price
in respect thereof) contained in this Section 11, and the provisions of Sections
7, 9, 10, 13 and 14 with respect to the Preferred Shares (and the Purchase Price
in respect thereof) will apply on like terms to any such other securities (and
the Purchase Price in respect thereof).
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder will evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share issuable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company has exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price pursuant to Section
11(b) or Section 11(c), each Right outstanding immediately prior to the making
of such adjustment will thereafter evidence the right to purchase, at the
adjusted Purchase Price, that number of one one-hundredths of a Preferred Share
(calculated to the nearest one one-millionth of a Preferred Share) obtained by
(i) multiplying (x) the number of one one-hundredths of a Preferred Share
issuable upon exercise of a Right immediately prior to such adjustment of the
Purchase Price by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect, on or after the date of any adjustment of
the Purchase Price, to adjust the number of Rights in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share issuable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights will be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights will become that number of Rights (calculated
to the nearest one ten-thousandth) obtained by dividing the Purchase Price in
effect immediately prior to adjustment of the Purchase Price by the Purchase
Price in effect immediately after adjustment of the Purchase Price. The Company
will make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. Such record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, will be at least 10 calendar days later than the
date of the public announcement. If Right Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company will, as promptly as practicable, cause to be distributed to holders of
record of Right Certificates on such record date Right Certificates evidencing,
subject to the provisions of Section 14, the additional Rights to which such
holders are entitled as a result of such adjustment, or, at the option of the
Company, will cause to be distributed to such holders of record in substitution
and replacement for the Right Certificates held by such holders prior to the
date of adjustment, and upon surrender thereof if required by the Company, new
Right Certificates evidencing all the Rights to which such holders are entitled
after such adjustment.
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<PAGE> 21
Right Certificates so to be distributed will be issued, executed, and
countersigned in the manner provided for herein (and may bear, at the option of
the Company, the adjusted Purchase Price) and will be registered in the names of
the holders of record of Right Certificates on the record date specified in the
public announcement.
(j) Without respect to any adjustment or change in the Purchase Price
and/or the number and/or kind of securities issuable upon the exercise of the
Rights, the Right Certificates theretofore and thereafter issued may continue to
express the Purchase Price and the number and kind of securities which were
expressed in the initial Right Certificate issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below one one-hundredth of the then par value, if any, of the
Preferred Shares or below the then par value, if any, of any other securities of
the Company issuable upon exercise of the Rights, the Company will take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Preferred Shares or such other securities, as the case may be, at such adjusted
Purchase Price.
(l) In any case in which this Section 11 otherwise requires that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of Preferred Shares or other securities of the Company, if any,
issuable upon such exercise over and above the number of Preferred Shares or
other securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; PROVIDED,
HOWEVER, that the Company delivers to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
Preferred Shares or other securities upon the occurrence of the event requiring
such adjustment.
(m) Notwithstanding anything in this Agreement to the contrary, the
Company will be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in its good faith judgment the Board of Directors of the Company
determines to be advisable in order that any (i) consolidation or subdivision of
the Preferred Shares, (ii) issuance wholly for cash of Preferred Shares at less
than the current per share market price therefor, (iii) issuance wholly for cash
of Preferred Shares or securities which by their terms are convertible into or
exchangeable for Preferred Shares, (iv) stock dividends, or (v) issuance of
rights, options or warrants referred to in this Section 11, hereafter made by
the Company to holders of its Preferred Shares is not taxable to such
stockholders.
(n) Notwithstanding anything in this Agreement to the contrary, in the
event that the Company at any time after the Record Date prior to the
Distribution Date (i) pays a dividend on the outstanding Common Shares payable
in Common Shares, (ii) subdivides the outstanding Common Shares, (iii) combines
the outstanding Common Shares into a smaller number of shares, or (iv) issues
any shares of its capital stock in a reclassification of the outstanding Common
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation), the
number of Rights associated with each Common Share then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, will be
proportionately adjusted so that the number of Rights thereafter associated with
each Common Share
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<PAGE> 22
following any such event equals the result obtained by multiplying the number of
Rights associated with each Common Share immediately prior to such event by a
fraction the numerator of which is the total number of Common Shares outstanding
immediately prior to the occurrence of the event and the denominator of which is
the total number of Common Shares outstanding immediately following the
occurrence of such event. The adjustments provided for in this Section 11(n)
will be made successively whenever such a dividend is paid or such a
subdivision, combination or reclassification is effected.
12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SECURITIES.
Whenever an adjustment is made as provided in Section 11 or Section 13, the
Company will promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Preferred Shares and the
Common Shares a copy of such certificate, and (c) if such adjustment is made
after the Distribution Date, mail a brief summary of such adjustment to each
holder of a Right Certificate in accordance with Section 26.
13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER. (a) In the event that:
(i) at any time after a Person has become an Acquiring
Person, the Company consolidates with, or merges with or into, any
other Person and the Company is not the continuing or surviving
corporation of such consolidation or merger; or
(ii) at any time after a Person has become an Acquiring
Person, any Person consolidates with the Company, or merges with or
into the Company, and the Company is the continuing or surviving
corporation of such merger or consolidation and, in connection with
such merger or consolidation, all or part of the Common Shares is
changed into or exchanged for stock or other securities of any other
Person or cash or any other property; or
(iii) at any time after a Person has become an Acquiring
Person, the Company, directly or indirectly, sells or otherwise
transfers (or one or more of its Subsidiaries sells or otherwise
transfers), in one or more transactions, assets or earning power
(including without limitation securities creating any obligation on the
part of the Company and/or any of its Subsidiaries) representing in the
aggregate more than 50% of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any Person or Persons other
than the Company or one or more of its wholly owned Subsidiaries;
then, and in each such case, proper provision will be made so that from and
after the latest of the Share Acquisition Date, the Distribution Date and the
date of the occurrence of such Flip-over Event (A) each holder of a Right
thereafter has the right to receive, upon the exercise thereof in accordance
with the terms of this Agreement at an exercise price per Right equal to the
product of the then-current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the Share Acquisition Date, such number of duly authorized,
validly issued, fully paid, nonassessable and freely tradeable Common Shares of
the Issuer, free and clear of any liens, encumbrances and other adverse claims
and not subject to any rights of call or first refusal, as equals the result
obtained by (x) multiplying the then-current
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<PAGE> 23
Purchase Price by the number of one one-hundredths of a Preferred Share for
which a Right was exercisable immediately prior to the Share Acquisition Date
and dividing that product by (y) 50% of the current per share market price of
the Common Shares of the Issuer (determined pursuant to Section 11(d)), on the
date of the occurrence of such Flip-over Event; (B) the Issuer will thereafter
be liable for, and will assume, by virtue of the occurrence of such Flip-over
Event, all the obligations and duties of the Company pursuant to this Agreement;
(C) the term "Company" will thereafter be deemed to refer to the Issuer; and (D)
the Issuer will take such steps (including without limitation the reservation of
a sufficient number of its Common Shares to permit the exercise of all
outstanding Rights) in connection with such consummation as may be necessary to
assure that the provisions hereof are thereafter applicable, as nearly as
reasonably may be possible, in relation to its Common Shares thereafter
deliverable upon the exercise of the Rights.
(b) For purposes of this Section 13, "Issuer" means (i) in the case of
any Flip-over Event described in Sections 13(a)(i) or (ii) above, the Person
that is the continuing, surviving, resulting or acquiring Person (including the
Company as the continuing or surviving corporation of a transaction described in
Section 13(a)(ii) above), and (ii) in the case of any Flip-over Event described
in Section 13(a)(iii) above, the Person that is the party receiving the greatest
portion of the assets or earning power (including without limitation securities
creating any obligation on the part of the Company and/or any of its
Subsidiaries) transferred pursuant to such transaction or transactions;
PROVIDED, HOWEVER, that, in any such case, (A) if (1) no class of equity
security of such Person is, at the time of such merger, consolidation or
transaction and has been continuously over the preceding 12-month period,
registered pursuant to Section 12 of the Exchange Act, and (2) such Person is a
Subsidiary, directly or indirectly, of another Person, a class of equity
security of which is and has been so registered, the term "Issuer" means such
other Person; and (B) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, a class of equity security of two or more
of which are and have been so registered, the term "Issuer" means whichever of
such Persons is the issuer of the equity security having the greatest aggregate
market value. Notwithstanding the foregoing, if the Issuer in any of the
Flip-over Events listed above is not a corporation or other legal entity having
outstanding equity securities, then, and in each such case, (x) if the Issuer is
directly or indirectly wholly owned by a corporation or other legal entity
having outstanding equity securities, then all references to Common Shares of
the Issuer will be deemed to be references to the Common Shares of the
corporation or other legal entity having outstanding equity securities which
ultimately controls the Issuer, and (y) if there is no such corporation or other
legal entity having outstanding equity securities, (I) proper provision will be
made so that the Issuer creates or otherwise makes available for purposes of the
exercise of the Rights in accordance with the terms of this Agreement, a kind or
kinds of security or securities having a fair market value at least equal to the
economic value of the Common Shares which each holder of a Right would have been
entitled to receive if the Issuer had been a corporation or other legal entity
having outstanding equity securities; and (II) all other provisions of this
Agreement will apply to the issuer of such securities as if such securities were
Common Shares.
(c) The Company will not consummate any Flip-over Event if, (i) at the
time of or immediately after such Flip-over Event, there are or would be any
rights, warrants, instruments or securities outstanding or any agreements or
arrangements in effect which would eliminate or substantially diminish the
benefits intended to be afforded by the Rights, (ii) prior to, simultaneously
with or immediately after such Flip-over Event, the stockholders of the Person
who constitutes, or
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<PAGE> 24
would constitute, the Issuer for purposes of Section 13(a) shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
or Associates, or (iii) the form or nature of the organization of the Issuer
would preclude or limit the exercisability of the Rights. In addition, the
Company will not consummate any Flip-over Event unless the Issuer has a
sufficient number of authorized Common Shares (or other securities as
contemplated in Section 13(b) above) which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior to such consummation the Company and the Issuer have
executed and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in subsections (a) and (b) of this Section 13 and
further providing that as promptly as practicable after the consummation of any
Flip-over Event, the Issuer will:
(A) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities issuable
upon exercise of the Rights on an appropriate form, and use its best
efforts to cause such registration statement to (1) become effective as
soon as practicable after such filing and (2) remain effective (with a
prospectus at all times meeting the requirements of the Securities Act)
until the Expiration Date;
(B) take all such action as may be appropriate under, or to
ensure compliance with, the securities or "blue sky" laws of the
various states in connection with the exercisability of the Rights; and
(C) deliver to holders of the Rights historical financial
statements for the Issuer and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under
the Exchange Act.
(d) The provisions of this Section 13 will similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Flip-over Event occurs at any time after the occurrence of a Flip-in
Event, except for Rights that have become void pursuant to Section 11(a)(ii),
Rights that shall not have been previously exercised will cease to be
exercisable in the manner provided in Section 11(a)(ii) and will thereafter be
exercisable in the manner provided in Section 13(a).
14. FRACTIONAL RIGHTS AND FRACTIONAL SECURITIES. (a) The Company will
not be required to issue fractions of Rights or to distribute Right Certificates
which evidence fractional Rights. In lieu of such fractional Rights, the Company
will pay as promptly as practicable to the registered holders of the Right
Certificates with regard to which such fractional Rights otherwise would be
issuable, an amount in cash equal to the same fraction of the current market
value of one Right. For the purposes of this Section 14(a), the current market
value of one Right is the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights otherwise would
have been issuable. The closing price for any day is the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not
21
<PAGE> 25
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use, or, if on any such date the Rights are not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Rights selected by the
Board of Directors of the Company. If the Rights are not publicly held or are
not so listed or traded, or are not the subject of available bid and asked
quotes, the current market value of one Right will mean the fair value thereof
as determined in good faith by the Board of Directors of the Company, whose
determination will be described in a statement filed with the Rights Agent.
(b) The Company will not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred Share
may, at the election of the Company, be evidenced by depositary receipts
pursuant to an appropriate agreement between the Company and a depositary
selected by it, provided that such agreement provides that the holders of such
depositary receipts have all the rights, privileges and preferences to which
they are entitled as beneficial owners of the Preferred Shares represented by
such depositary receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-hundredth of a Preferred Share, the Company may
pay to any Person to whom or which such fractional Preferred Shares would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of one Preferred Share. For purposes of this Section 14(b),
the current market value of one Preferred Share is the closing price of the
Preferred Shares (as determined in the same manner as set forth for Common
Shares in the second sentence of Section 11(d)(i)) for the Trading Day
immediately prior to the date of such exercise; PROVIDED, HOWEVER, that if the
closing price of the Preferred Shares cannot be so determined, the closing price
of the Preferred Shares for such Trading Day will be conclusively deemed to be
an amount equal to the closing price of the Common Shares (determined pursuant
to the second sentence of Section 11(d)(i)) for such Trading Day multiplied by
one hundred (as such number may be appropriately adjusted to reflect events such
as stock splits, stock dividends, recapitalizations or similar transactions
relating to the Common Shares occurring after the date of this Agreement);
PROVIDED FURTHER, HOWEVER, that if neither the Common Shares nor the Preferred
Shares are publicly held or listed or admitted to trading on any national
securities exchange, or the subject of available bid and asked quotes, the
current market value of one Preferred Share will mean the fair value thereof as
determined in good faith by the Board of Directors of the Company, whose
determination will be described in a statement filed with the Rights Agent.
(c) Following the occurrence of a Triggering Event, the Company will
not be required to issue fractions of Common Shares or other securities issuable
upon exercise or exchange of the Rights or to distribute certificates which
evidence any such fractional securities. In lieu of issuing any such fractional
securities, the Company may pay to any Person to whom or which such fractional
securities would otherwise be issuable an amount in cash equal to the same
fraction of the current market value of one such security. For purposes of this
Section 14(c), the current market value of one Common Share or other security
issuable upon the exercise or exchange of Rights is the closing price thereof
(as determined in the same manner as set forth for Common Shares in the second
sentence of Section 11(d)(i)) for the Trading Day immediately prior to the date
of such exercise or
22
<PAGE> 26
exchange; PROVIDED, HOWEVER, that if neither the Common Shares nor any such
other securities are publicly held or listed or admitted to trading on any
national securities exchange, or the subject of available bid and asked quotes,
the current market value of one Common Share or such other security will mean
the fair value thereof as determined in good faith by the Board of Directors of
the Company, whose determination will be described in a statement filed with the
Rights Agent.
15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the holder of any Common Shares), may in his own behalf
and for his own benefit enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
his right to exercise the Rights evidenced by such Right Certificate in the
manner provided in such Right Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will therefore be entitled to
specific performance of the obligations under this Agreement, and injunctive
relief against actual or threatened violations of the obligations of any Person
subject to this Agreement.
16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by accepting
the same consents and agrees with the Company and the Rights Agent and with
every other holder of a Right that:
(a) Prior to the Distribution Date, the Rights are
transferable only in connection with the transfer of the Common Shares.
(b) After the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the principal office of the Rights Agent designated for
such purpose, duly endorsed or accompanied by a proper instrument of
transfer.
(c) The Company and the Rights Agent may deem and treat the
person in whose name the Right Certificate (or, prior to the
Distribution Date, the associated Common Share certificate) is
registered as the absolute owner thereof and of the Rights evidenced
thereby (notwithstanding any notations of ownership or writing on the
Right Certificate or the associated Common Share certificate made by
anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent will be
affected by any notice to the contrary.
(d) Such holder expressly waives any right to receive any
fractional Rights and any fractional securities upon exercise or
exchange of a Right, except as otherwise provided in Section 14.
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<PAGE> 27
(e) Notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent will have any
liability to any holder of a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by
reason of any preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by
any governmental authority, prohibiting or otherwise restraining
performance of such obligation; PROVIDED, HOWEVER, that the Company
will use its best efforts to have any such order, decree or ruling
lifted or otherwise overturned as soon as possible.
17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as
such, of any Right Certificate will be entitled to vote, receive dividends, or
be deemed for any purpose the holder of Preferred Shares or any other securities
of the Company which may at any time be issuable upon the exercise of the Rights
represented thereby, nor will anything contained herein or in any Right
Certificate be construed to confer upon the holder of any Right Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of Directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Right Certificate shall
have been exercised in accordance with the provisions of this Agreement or
exchanged pursuant to the provisions of Section 24.
18. CONCERNING THE RIGHTS AGENT. (a) The Company will pay to the Rights
Agent reasonable compensation for all services rendered by it hereunder and,
from time to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company will also indemnify the Rights Agent for, and hold it
harmless against, any loss, liability, suit, action, proceeding or expense,
incurred without negligence, bad faith, or willful misconduct on the part of the
Rights Agent, for anything done or omitted to be done by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability arising
therefrom, directly or indirectly.
(b) The Rights Agent will be protected and will incur no liability for
or in respect of any action taken, suffered, or omitted by it in connection with
its administration of this Agreement in reliance upon any Right Certificate or
certificate evidencing Preferred Shares or Common Shares or other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document believed by it to be genuine and to be
signed, executed, and, where necessary, verified or acknowledged, by the proper
Person or Persons.
19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. (a) Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent is a party, or any corporation succeeding to the corporate trust business
of the Rights Agent or any successor Rights Agent, will be the successor to the
Rights
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<PAGE> 28
Agent under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21. If at the time such successor Rights Agent
succeeds to the agency created by this Agreement any of the Right Certificates
shall have been countersigned but not delivered, any such successor Rights Agent
may adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and if at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates will have the full force provided in the Right Certificates
and in this Agreement.
(b) If at any time the name of the Rights Agent changes and at such
time any of the Right Certificates have been countersigned but not delivered,
the Rights Agent may adopt the countersignature under its prior name and deliver
Right Certificates so countersigned; and if at that time any of the Right
Certificates have not been countersigned, the Rights Agent may countersign such
Right Certificates either in its prior name or in its changed name; and in all
such cases such Right Certificates will have the full force provided in the
Right Certificates and in this Agreement.
20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Right Certificates, by their
acceptance thereof, will be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel will
be full and complete authorization and protection to the Rights Agent
as to any action taken or omitted by it in good faith and in accordance
with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent deems it necessary or desirable that any
fact or matter be proved or established by the Company prior to taking
or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate
signed by any one of the Chairman of the Board, the President, any Vice
President, the Secretary or the Treasurer of the Company and delivered
to the Rights Agent, and such certificate will be full authorization to
the Rights Agent for any action taken or suffered in good faith by it
under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent will be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent will not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement
or in the Right Certificates (except its countersignature thereof) or
be required to verify the same, but all such statements and recitals
are and will be deemed to have been made by the Company only.
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<PAGE> 29
(e) The Rights Agent will not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution and delivery hereof by the Rights
Agent) or in respect of the validity or execution of any Right
Certificate (except its countersignature thereof); nor will it be
responsible for any breach by the Company of any covenant contained in
this Agreement or in any Right Certificate; nor will it be responsible
for any adjustment required under the provisions of Sections 11 or 13
(including any adjustment which results in Rights becoming void) or
responsible for the manner, method or amount of any such adjustment or
the ascertaining of the existence of facts that would require any such
adjustment (except with respect to the exercise of Rights evidenced by
Right Certificates after actual notice of any such adjustment); nor
will it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of stock
or other securities to be issued pursuant to this Agreement or any
Right Certificate or as to whether any shares of stock or other
securities will, when issued, be duly authorized, validly issued, fully
paid and nonassessable.
(f) The Company will perform, execute, acknowledge and deliver
or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from any one of the Chairman of the Board, the President, any
Vice President, the Secretary or the Treasurer of the Company, and to
apply to such officers for advice or instructions in connection with
its duties, and it will not be liable for any action taken or suffered
to be taken by it in good faith in accordance with instructions of any
such officer.
(h) The Rights Agent and any stockholder, director, officer,
or employee of the Rights Agent may buy, sell, or deal in any of the
Rights or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested,
or contract with or lend money to the Company or otherwise act as fully
and freely as though it were not Rights Agent under this Agreement.
Nothing herein precludes the Rights Agent from acting in any other
capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and the Rights
Agent will not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, default, neglect or
misconduct, provided reasonable care was exercised in the selection and
continued employment thereof. The Rights Agent will not be under any
duty or responsibility to ensure compliance with any applicable federal
or state securities laws in connection with the issuance, transfer or
exchange of Right Certificates.
(j) If, with respect to any Right Certificate surrendered to
the Rights Agent for exercise, transfer, split up, combination or
exchange, either (i) the certificate attached to the form of assignment
or form of election to purchase, as the case may be, has either not
been
26
<PAGE> 30
completed or indicates an affirmative response to clause 1 or 2
thereof, or (ii) any other actual or suspected irregularity exists, the
Rights Agent will not take any further action with respect to such
requested exercise, transfer, split up, combination or exchange without
first consulting with the Company, and will thereafter take further
action with respect thereto only in accordance with the Company's
written instructions.
21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon 30
calendar days' notice in writing mailed to the Company and to each transfer
agent of the Preferred Shares or the Common Shares by registered or certified
mail, and to the holders of the Right Certificates by first class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon 30
calendar days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Preferred Shares
and the Common Shares by registered or certified mail, and to the holders of the
Right Certificates by first class mail. If the Rights Agent resigns or is
removed or otherwise becomes incapable of acting, the Company will appoint a
successor to the Rights Agent. If the Company fails to make such appointment
within a period of 30 calendar days after giving notice of such removal or after
it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who will, with such notice, submit his Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
will be a corporation or other legal entity organized and doing business under
the laws of the United States or of the State of New York (or of any other state
of the United States so long as such corporation is authorized to do business as
a banking institution in the State of New York), in good standing, having a
principal office in the State of New York, which is authorized under such laws
to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million. After appointment, the successor Rights Agent will be vested
with the same powers, rights, duties, and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent will deliver and transfer to the successor Rights Agent
any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act, or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company will file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Preferred Shares or the Common Shares, and mail a notice thereof in writing
to the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, will not affect
the legality or validity of the resignation or removal of the Rights Agent or
the appointment of the successor Rights Agent, as the case may be.
22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price per share and the number or kind of securities issuable upon
exercise of the Rights made in accordance with the provisions of this Agreement.
In addition, in connection with the issuance or sale by the Company of Common
Shares following the Distribution Date and prior to the Expiration Date, the
Company (a) will, with respect to Common
27
<PAGE> 31
Shares so issued or sold pursuant to the exercise, exchange or conversion of
securities (other than Rights) issued prior to the Distribution Date which are
exercisable or exchangeable for, or convertible into Common Shares, and (b) may,
in any other case, if deemed necessary, appropriate or desirable by the Board of
Directors of the Company, issue Right Certificates representing an equivalent
number of Rights as would have been issued in respect of such Common Shares if
they had been issued or sold prior to the Distribution Date, as appropriately
adjusted as provided herein as if they had been so issued or sold; PROVIDED,
HOWEVER, that (i) no such Right Certificate will be issued if, and to the extent
that, in its good faith judgment the Board of Directors of the Company
determines that the issuance of such Right Certificate could have a material
adverse tax consequence to the Company or to the Person to whom or which such
Right Certificate otherwise would be issued and (ii) no such Right Certificate
will be issued if, and to the extent that, appropriate adjustment otherwise has
been made in lieu of the issuance thereof.
23. REDEMPTION. (a) Prior to the Expiration Date, the Board of
Directors of the Company may, at its option, redeem all but not less than all of
the then-outstanding Rights at the Redemption Price at any time prior to the
Close of Business on the Share Acquisition Date. Any such redemption will be
effective immediately upon the action of the Board of Directors of the Company
ordering the same, unless such action of the Board of Directors of the Company
expressly provides that such redemption will be effective at a subsequent time
or upon the occurrence or nonoccurrence of one or more specified events (in
which case such redemption will be effective in accordance with the provisions
of such action of the Board of Directors of the Company).
(b) Immediately upon the effectiveness of the redemption of the Rights
as provided in Section 23(a), and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights will be to receive the Redemption Price,
without interest thereon. Promptly after the effectiveness of the redemption of
the Rights as provided in Section 23(a), the Company will publicly announce such
redemption and, within 10 calendar days thereafter, will give notice of such
redemption to the holders of the then-outstanding Rights by mailing such notice
to all such holders at their last addresses as they appear upon the registry
books of the Company; PROVIDED, HOWEVER, that the failure to give, or any defect
in, any such notice will not affect the validity of the redemption of the
Rights. Any notice that is mailed in the manner herein provided will be deemed
given, whether or not the holder receives the notice. The notice of redemption
mailed to the holders of Rights will state the method by which the payment of
the Redemption Price will be made. The Company may, at its option, pay the
Redemption Price in cash, Common Shares (based upon the current per share market
price of the Common Shares (determined pursuant to Section 11(d)) at the time of
redemption), or any other form of consideration deemed appropriate by the Board
of Directors of the Company (based upon the fair market value of such other
consideration, determined by the Board of Directors of the Company in good
faith) or any combination thereof. The Company may, at its option, combine the
payment of the Redemption Price with any other payment being made concurrently
to holders of Common Shares and, to the extent that any such other payment is
discretionary, may reduce the amount thereof on account of the concurrent
payment of the Redemption Price. If legal or contractual restrictions prevent
the Company from paying the Redemption Price (in the form of consideration
deemed appropriate by the Board of Directors) at the time of redemption, the
Company will pay the Redemption Price, without interest, promptly after such
time as the Company ceases to be so prevented from paying the Redemption Price.
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<PAGE> 32
(c) At any time following the Share Acquisition Date, the Board of
Directors of the Company may relinquish the right to redeem the Rights under
this Section 23 by duly adopting a resolution to that effect. Immediately upon
adoption of such resolution, the rights of the Board of Directors of the Company
to redeem the Rights will terminate without further action and without any
notice. Promptly after adoption of such a resolution, the Company will publicly
announce such action; PROVIDED, HOWEVER, that the failure to give, or any defect
in, any such notice will not affect the validity of the action of the Board of
Directors of the Company.
24. EXCHANGE. (a) The Board of Directors of the Company may, at its
option, at any time after the Share Acquisition Date, exchange all or part of
the then-outstanding and exercisable Rights (which will not include Rights that
have become void pursuant to the provisions of Section 11(a)(ii)) for Common
Shares at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the Record Date (such exchange ratio being hereinafter referred
to as the "Exchange Ratio"). Any such exchange will be effective immediately
upon the action of the Board of Directors of the Company ordering the same,
unless such action of the Board of Directors of the Company expressly provides
that such exchange will be effective at a subsequent time or upon the occurrence
or nonoccurrence of one or more specified events (in which case such exchange
will be effective in accordance with the provisions of such action of the Board
of Directors of the Company). Notwithstanding the foregoing, the Board of
Directors of the Company will not be empowered to effect such exchange at any
time after any Person (other than the Company or any Related Person), who or
which, together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the then-outstanding Common Shares.
(b) Immediately upon the effectiveness of the exchange of any Rights as
provided in Section 24(a), and without any further action and without any
notice, the right to exercise such Rights will terminate and the only right with
respect to such Rights thereafter of the holder of such Rights will be to
receive that number of Common Shares equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. Promptly after the effectiveness
of the exchange of any Rights as provided in Section 24(a), the Company will
publicly announce such exchange and, within 10 calendar days thereafter, will
give notice of such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent; PROVIDED,
HOWEVER, that the failure to give, or any defect in, such notice will not affect
the validity of such exchange. Any notice that is mailed in the manner herein
provided will be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of the
Common Shares for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
will be effected pro rata based on the number of Rights (other than Rights which
have become void pursuant to the provisions of Section 11(a)(ii)) held by each
holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute for any Common Share exchangeable for a Right (i)
equivalent common shares (as such term is used in Section 11(a)(iii)), (ii)
cash, (iii) debt securities of the Company, (iv) other assets, or (v) any
combination of the foregoing, in any event having an aggregate value, as
determined in good faith by the Board of Directors of the Company (whose
determination will be described in a statement filed with the Rights Agent),
equal to the current market value of one Common Share
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<PAGE> 33
(determined pursuant to Section 11(d)) on the Trading Day immediately preceding
the date of the effectiveness of the exchange pursuant to this Section 24.
25. NOTICE OF CERTAIN EVENTS. (a) If, after the Distribution Date, the
Company proposes (i) to pay any dividend payable in stock of any class to the
holders of Preferred Shares or to make any other distribution to the holders of
Preferred Shares (other than a regular periodic cash dividend), (ii) to offer to
the holders of Preferred Shares rights, options or warrants to subscribe for or
to purchase any additional Preferred Shares or shares of stock of any class or
any other securities, rights, or options, (iii) to effect any reclassification
of its Preferred Shares (other than a reclassification involving only the
subdivision of outstanding Preferred Shares), (iv) to effect any consolidation
or merger into or with, or to effect any sale or other transfer (or to permit
one or more of its Subsidiaries to effect any sale or other transfer), in one or
more transactions, of assets or earning power (including without limitation
securities creating any obligation on the part of the Company and/or any of its
Subsidiaries) representing more than 50% of the assets and earning power of the
Company and its Subsidiaries, taken as a whole, to any other Person or Persons
other than the Company or one or more of its wholly owned Subsidiaries, (v) to
effect the liquidation, dissolution or winding up of the Company, or (vi) to
declare or pay any dividend on the Common Shares payable in Common Shares or to
effect a subdivision, combination or reclassification of the Common Shares then,
in each such case, the Company will give to each holder of a Right Certificate,
to the extent feasible and in accordance with Section 26, a notice of such
proposed action, which specifies the record date for the purposes of such stock
dividend, distribution or offering of rights, options or warrants, or the date
on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of the Common Shares and/or Preferred
Shares, if any such date is to be fixed, and such notice will be so given, in
the case of any action covered by clause (i) or (ii) above, at least 10 calendar
days prior to the record date for determining holders of the Preferred Shares
for purposes of such action, and, in the case of any such other action, at least
10 calendar days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Shares and/or
Preferred Shares, whichever is the earlier.
(b) In case any Triggering Event occurs, then, in any such case, the
Company will as soon as practicable thereafter give to the Rights Agent and each
holder of a Right Certificate, in accordance with Section 26, a notice of the
occurrence of such event, which specifies the event and the consequences of the
event to holders of Rights.
26. NOTICES. (a) Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company will be sufficiently given or made if sent by first class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
The Elder-Beerman Stores Corp.
3155 El-Bee Road
Dayton, Ohio 45439
Attention: Executive Vice President -
Administration
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<PAGE> 34
(b) Subject to the provisions of Section 21 hereof, any notice or
demand authorized by this Agreement to be given or made by the Company or by the
holder of any Right Certificate to or on the Rights Agent will be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Company) as follows:
[TO COME]
Attention:
(c) Notices or demands authorized by this Agreement to be given or made
by the Company or the Rights Agent to the holder of any Right Certificate (or,
if prior the Distribution Date, to the holder of any certificate evidencing
Common Shares) will be sufficiently given or made if sent by first class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
27. SUPPLEMENTS AND AMENDMENTS. Prior to the time at which the Rights
cease to be redeemable pursuant to Section 23, and subject to the last sentence
of this Section 27, the Company may in its sole and absolute discretion, and the
Rights Agent will if the Company so directs, supplement or amend any provision
of this Agreement in any respect without the approval of any holders of Rights
or Common Shares. From and after the time at which the Rights cease to be
redeemable pursuant to Section 23, and subject to the last sentence of this
Section 27, the Company may, and the Rights Agent will if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights or Common Shares in order (a) to cure any ambiguity, (b) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (c) to shorten or lengthen any time period
hereunder, or (d) to supplement or amend the provisions hereunder in any manner
which the Company may deem desirable; provided that no such supplement or
amendment shall adversely affect the interests of the holders of Rights as such
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person), and no such supplement or amendment shall cause the Rights again to
become redeemable or cause this Agreement again to become supplementable or
amendable otherwise than in accordance with the provisions of this sentence.
Without limiting the generality or effect of the foregoing, this Agreement may
be supplemented or amended to provide for such voting powers for the Rights and
such procedures for the exercise thereof, if any, as the Board of Directors of
the Company may determine to be appropriate. Upon the delivery of a certificate
from an officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
will execute such supplement or amendment; PROVIDED, HOWEVER, that the failure
or refusal of the Rights Agent to execute such supplement or amendment will not
affect the validity of any supplement or amendment adopted by the Board of
Directors of the Company, any of which will be effective in accordance with the
terms thereof. Notwithstanding anything in this Agreement to the contrary, no
supplement or amendment may be made which decreases the stated Redemption Price
to an amount less than $0.01 per Right.
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<PAGE> 35
28. SUCCESSORS; CERTAIN COVENANTS. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent will be
binding on and inure to the benefit of their respective successors and assigns
hereunder.
29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement will be
construed to give to any Person other than the Company, the Rights Agent, and
the registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or claim under
this Agreement. This Agreement will be for the sole and exclusive benefit of the
Company, the Rights Agent, and the registered holders of the Right Certificates
(or prior to the Distribution Date, the Common Shares).
30. GOVERNING LAW. This Agreement, each Right and each Right
Certificate issued hereunder will be deemed to be a contract made under the
internal substantive laws of the State of Ohio and for all purposes will be
governed by and construed in accordance with the internal substantive laws of
such State applicable to contracts to be made and performed entirely within such
State.
31. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement will remain in full force and
effect and will in no way be affected, impaired or invalidated; PROVIDED,
HOWEVER, that nothing contained in this Section 31 will affect the ability of
the Company under the provisions of Section 27 to supplement or amend this
Agreement to replace such invalid, void or unenforceable term, provision,
covenant or restriction with a legal, valid and enforceable term, provision,
covenant or restriction.
32. DESCRIPTIVE HEADINGS, ETC. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and will not
control or affect the meaning or construction of any of the provisions hereof.
Unless otherwise expressly provided, references herein to Sections, paragraphs
and Exhibits are to Sections, paragraphs and Exhibits of or to this Agreement.
33. DETERMINATIONS AND ACTIONS BY THE BOARD. For all purposes of this
Agreement, any calculation of the number of Common Shares outstanding at any
particular time, including for purposes of determining the particular percentage
of such outstanding Common Shares of which any Person is the Beneficial Owner,
will be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act. The Board of Directors of
the Company will have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board of Directors of the Company or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including without limitation
the right and power to (a) interpret the provisions of this Agreement and (b)
make all determinations deemed necessary or advisable for the administration of
this Agreement (including any determination as to whether particular Rights
shall have become void). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (ii) below, any omission with
respect to any of the foregoing) which are done or made by the Board of
Directors of the Company in good faith will (i) be final, conclusive and binding
on the Company, the Rights
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<PAGE> 36
Agent, the holders of the Rights and all other parties and (ii) not subject the
Board of Directors of the Company to any liability to any Person, including
without limitation the Rights Agent and the holders of the Rights.
34. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts will for all purposes be deemed to be
an original, and all such counterparts will together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
[SEAL]
Attest: THE ELDER-BEERMAN STORES CORP.
By:
- --------------------------- ---------------------------
[NAME] [NAME]
[TITLE] [TITLE]
[SEAL]
Attest: [RIGHTS AGENT]
By:
- --------------------------- ---------------------------
[NAME] [NAME]
[TITLE] [TITLE]
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<PAGE> 37
'
EXHIBIT A
---------
CERTIFICATE OF ADOPTION
OF AMENDMENT
TO AMENDED ARTICLES OF INCORPORATION
OF
THE ELDER-BEERMAN STORES CORP.
We, John A. Muskovich, President, and Scott J. Davido, Secretary, of
The Elder-Beerman Stores Corp., an Ohio corporation (the "Company"), do hereby
certify that pursuant to the final confirmation order entered by the Bankruptcy
Court in Jointly Administered Case No. 95-33643 on [INSERT EFFECTIVE DATE], the
Company has duly and validly caused the adoption of the following resolution to
amend the Amended Articles of Incorporation of the Company to establish the
express terms of the Series A Preferred Stock:
RESOLVED, that Article IV of the Amended Articles of
Incorporation of this Company be, and it hereby is, amended by adding after
Division B of Article IV of the Amended Articles of Incorporation a new Division
B, Part A as set forth below:
DIVISION B, PART A
SERIES A PREFERRED STOCK
Section 1. The Series A Preferred Stock (hereinafter sometimes
called this "Series" or the "Series A Preferred Shares") shall have the express
terms set forth in this Division B, Part A.
Section 2. The number of shares of this Series shall be
250,000.
Section 3. (a) The holders of record of Series A Preferred
Shares shall be entitled to receive, when and as declared by the Directors in
accordance with the terms hereof, out of funds legally available for the
purpose, cumulative quarterly dividends payable in cash on the first day of
January, April, July and October in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a Series A Preferred
Share or fraction of a Series A Preferred Share in an amount per share (rounded
to the nearest cent) equal to the greater of (i) $1.00 per share or (ii) subject
to the provision for adjustment hereinafter set forth, 100 times the aggregate
per share amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions (other
than a dividend payable in shares or Common Stock, or a subdivision of the
outstanding Common Stock (by reclassification or otherwise)), declared on the
Common Stock since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any Series A Preferred Share or fraction
A-1
<PAGE> 38
of a Series A Preferred Share. In the event the Company shall at any time
declare or pay any dividend on the Common Stock payable in Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount to which holders of Series A Preferred Shares were
entitled immediately prior to such event under clause (ii) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) Dividends shall begin to accrue and be cumulative on
outstanding Series A Preferred Shares from the Quarterly Dividend Payment Date
next preceding the date of issue of such Series A Preferred Shares, unless the
date of issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issues is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Shares entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. No dividends shall be paid upon or declared and set apart for
any Series A Preferred Shares for any dividend period unless at the same time a
dividend for the same dividend period, ratably in proportion to the respective
annual dividend rates fixed therefor, shall be paid upon or declared and set
apart for all Serial Preferred Stock of all series then outstanding and entitled
to receive such dividend. The Board of Directors may fix a record date for the
determination of holders of Series A Preferred Shares entitled to receive
payment of a dividend or distribution declared thereon, which record date shall
be no more than 40 days prior to the date fixed for the payment thereof.
Section 4. The Series A Preferred Shares are not redeemable.
Section 5. (a) As provided in the Amended Articles of
Incorporation, subject to the provision for adjustment hereinafter set forth,
each Series A Preferred Share will entitle the holder thereof to one hundred
votes on all matters submitted to a vote of the shareholders of the Company. In
the event the Company at any time (i) declares a dividend on the outstanding
shares of Common Stock payable in shares of Common Stock, (ii) subdivides the
outstanding shares of Common Stock, (iii) combines the outstanding shares of
Common Stock into a smaller number of shares, or (iv) issues any shares of its
capital stock in a reclassification of the outstanding shares of Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), then,
in each such case and regardless of whether any Series A Preferred Shares are
then issued or outstanding, the number of votes per share to which holders of
Series A Preferred Shares would otherwise be entitled immediately prior to such
event will be adjusted by multiplying such number by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
A-2
<PAGE> 39
(b) Except as otherwise provided herein, in any other
Preferred Stock Designation creating a series of Preferred Stock or any similar
stock, or by law, the holders of Series A Preferred Shares and the holders of
shares of Common Stock and any other capital stock of the Company having general
voting rights will vote together as one class on all matters submitted to a vote
of shareholders of the Company.
(c) Except as set forth in the Amended Articles of
Incorporation or herein, or as otherwise provided by law, holders of Series A
Preferred Shares will have no voting rights.
Section 6. (a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company
(hereinafter referred to as a "Liquidation"), no distribution shall be made to
the holders of shares of stock ranking junior (either as to dividends or upon
Liquidation) to the Series A Preferred Shares, unless, prior thereto, the
holders of Series A Preferred Shares shall have received at least an amount per
share equal to one hundred times the then applicable Purchase Price as defined
in the Rights Agreement, as the same may be from time to time amended in
accordance with its terms (which Purchase Price is $[ ] as of [INSERT EFFECTIVE
DATE]), subject to adjustment from time to time as provided in the Rights
Agreement, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not earned or declared, to the date of such
payment, provided that the holders of shares of Series A Preferred Shares shall
be entitled to receive at least an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the aggregate
amount to be distributed per share to holders of Common Stock (the "Series A
Preferred Shares Liquidation Preference").
(b) In the event, however, that the net assets of the Company
are not sufficient to pay in full the amount of the Series A Preferred Shares
Liquidation Preference and the liquidation preferences of all other series of
Serial Preferred Stock, if any, which rank on a parity with the Series A
Preferred Shares as to distribution of assets in Liquidation, all shares of this
Series and of such other series of Serial Preferred Stock shall share ratably in
the distribution of assets (or proceeds thereof) in Liquidation in proportion to
the full amounts to which they are respectively entitled.
(c) In the event the Company shall at any time declare or pay
any dividend on the Common Stock payable in consolidation of the outstanding
Common Stock (by reclassification or otherwise than by payment of a dividend in
Common Stock) into a greater or lesser number of shares of Common Stock, then in
each such case the amount to which holders of Series A Preferred Shares were
entitled immediately prior to such event pursuant to the proviso set forth in
paragraph (a) above, shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(d) The merger or consolidation of the Company into or with
any other corporation, or the merger of any other corporation into it, or the
sale, lease or conveyance of all or substantially all the property or business
of the Company, shall not be deemed to be a Liquidation for the purpose of this
Section 6.
A-3
<PAGE> 40
Section 7. The Series A Preferred Shares shall not be
convertible into Common Stock.
IN WITNESS WHEREOF, John A. Muskovich, President, and Scott J.
Davido, Secretary, of The Elder-Beerman Stores Corp., acting for and on behalf
of the Company, have hereunto subscribed their names this __th day of _______,
1997.
/s/ John A. Muskovich
-----------------------------------------
John A. Muskovich
President
/s/ Scott J. Davido
-----------------------------------------
Scott J. Davido
Secretary
A-4
<PAGE> 41
FORM OF RIGHT CERTIFICATE
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER [INSERT FINAL EXPIRATION DATE] (SUBJECT TO
POSSIBLE EXTENSION AT THE OPTION OF THE COMPANY) OR EARLIER IF
REDEEMED, EXCHANGED OR AMENDED. THE RIGHTS ARE SUBJECT TO REDEMPTION,
EXCHANGE AND AMENDMENT AT THE OPTION OF THE COMPANY, ON THE TERMS SET
FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN
THE RIGHTS AGREEMENT, RIGHTS THAT ARE OR WERE BENEFICIALLY OWNED BY AN
ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON
(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR A TRANSFEREE
THEREOF MAY BECOME NULL AND VOID.
Right Certificate
THE ELDER-BEERMAN STORES CORP.
This certifies that _______________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions, and conditions of the
Rights Agreement, dated as of [INSERT EFFECTIVE DATE] (the "Rights Agreement"),
between The Elder-Beerman Stores Corp., an Ohio corporation (the "Company"), and
[RIGHTS AGENT] (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to 5:00 P.M. (Eastern time) on the Expiration Date (as such term is
defined in the Rights Agreement) at the principal office or offices of the
Rights Agent designated for such purpose, one one-hundredth of a fully paid
nonassessable share of Series A Preferred Stock, without par value (the
"Preferred Shares"), of the Company, at a purchase price of $[INSERT INITIAL
PURCHASE PRICE] per one one-hundredth of a Preferred Share (the "Purchase
Price"), upon presentation and surrender of this Right Certificate with the Form
of Election to Purchase and related Certificate duly executed. If this Right
Certificate is exercised in part, the holder will be entitled to receive upon
surrender hereof another Right Certificate or Right Certificates for the number
of whole Rights not exercised. The number of Rights evidenced by this Right
Certificate (and the number of one one-hundredths of a Preferred Share which may
be purchased upon exercise thereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of the date of the Rights
Agreement, based on the Preferred Shares as constituted at such date.
B-1
<PAGE> 42
As provided in the Rights Agreement, the Purchase Price and/or the
number and/or kind of securities issuable upon the exercise of the Rights
evidenced by this Right Certificate are subject to adjustment upon the
occurrence of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities of the Rights Agent,
the Company and the holders of the Right Certificates, which limitations of
rights include the temporary suspension of the exercisability of the Rights
under the circumstances specified in the Rights Agreement. Copies of the Rights
Agreement are on file at the above-mentioned office of the Rights Agent and can
be obtained from the Company without charge upon written request therefor. Terms
used herein with initial capital letters and not defined herein are used herein
with the meanings ascribed thereto in the Rights Agreement.
Pursuant to the Rights Agreement, from and after the first occurrence
of a Flip-in Event, any Rights that are Beneficially Owned by (i) any Acquiring
Person (or any Affiliate or Associate of any Acquiring Person), (ii) a
transferee of any Acquiring Person (or any such Affiliate or Associate) who
becomes a transferee after the occurrence of a Flip-in Event, or (iii) a
transferee of any Acquiring Person (or any such Affiliate or Associate) who
became a transferee prior to or concurrently with the occurrence of a Flip-in
Event pursuant to either (a) a transfer from an Acquiring Person to holders of
its equity securities or to any Person with whom it has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (b)
a transfer which the Board of Directors of the Company has determined is part of
a plan, arrangement or understanding which has the purpose or effect of avoiding
certain provisions of the Rights Agreement, and subsequent transferees of any of
such Persons, will be void without any further action and any holder of such
Rights will thereafter have no rights whatsoever with respect to such Rights
under any provision of the Rights Agreement. From and after the occurrence of a
Flip-in Event, no Right Certificate will be issued that represents Rights that
are or have become void pursuant to the provisions of the Rights Agreement, and
any Right Certificate delivered to the Rights Agent that represents Rights that
are or have become void pursuant to the provisions of the Rights Agreement will
be canceled.
This Right Certificate, with or without other Right Certificates, may
be transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates entitling the holder to purchase a like number of one
one-hundredths of a Preferred Share (or other securities, as the case may be) as
the Right Certificate or Right Certificates surrendered entitled such holder (or
former holder in the case of a transfer) to purchase, upon presentation and
surrender hereof at the principal office of the Rights Agent designated for such
purpose, with the Form of Assignment (if appropriate) and the related
Certificate duly executed.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a redemption
price of $.01 per Right or may be exchanged in whole or in part. The Rights
Agreement may be supplemented and amended by the Company, as provided therein.
B-2
<PAGE> 43
The Company is not required to issue fractions of Preferred Shares
(other than fractions which are integral multiples of one one-hundredth of a
Preferred Share, which may, at the option of the Company, be evidenced by
depositary receipts) or other securities issuable upon the exercise of any Right
or Rights evidenced hereby. In lieu of issuing such fractional Preferred Shares
or other securities, the Company may make a cash payment, as provided in the
Rights Agreement.
No holder of this Right Certificate, as such, will be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable upon the exercise of the Right or Rights represented hereby, nor will
anything contained herein or in the Rights Agreement be construed to confer upon
the holder hereof, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate have been exercised in accordance with the
provisions of the Rights Agreement.
This Right Certificate will not be valid or obligatory for any purpose
until it has been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of __________, ____.
[SEAL]
ATTEST: THE ELDER-BEERMAN STORES CORP.
By: /s/ John A. Muscovich
- ------------------------------------ ---------------------------
[ASSISTANT] Secretary John A. Muscovich
President
Countersigned:
[RIGHTS AGENT]
By:
---------------------------------
Authorized Signature
B-3
<PAGE> 44
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED, _______________ hereby sells, assigns and transfers
unto
---------------------------------------------------------------------
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: __________, ____
------------------------
Signature
Signature Guaranteed:
B-4
<PAGE> 45
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being sold, assigned, transferred, split up, combined or exchanged by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Person (as such terms are defined in the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: __________, ____
-----------------------------
Signature
B-5
<PAGE> 46
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate)
To The Elder-Beerman Stores Corp.:
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Right Certificate to purchase the one one-hundredths of a
Preferred Share or other securities issuable upon the exercise of such Rights
and requests that certificates for such securities be issued in the name of and
delivered to:
Please insert social security
or other identifying number:
---------------------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
If such number of Rights is not all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
will be registered in the name of and delivered to:
Please insert social security
or other identifying number:
---------------------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
Dated: __________, ____
-------------------------------
Signature
Signature Guaranteed:
B-6
<PAGE> 47
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Person (as such terms are defined pursuant
to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was, or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: __________, ____
-----------------------------------
Signature
NOTICE
SIGNATURES ON THE FOREGOING FORM OF ASSIGNMENT AND FORM OF ELECTION TO
PURCHASE AND IN THE RELATED CERTIFICATES MUST CORRESPOND TO THE NAME AS WRITTEN
UPON THE FACE OF THIS RIGHT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED MEDALLION SIGNATURE PROGRAM) PURSUANT TO RULE 17Ad-15
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
B-7
<PAGE> 48
EXHIBIT C
---------
SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
On [INSERT EFFECTIVE DATE], pursuant to the final confirmation order
entered by the Bankruptcy Court in Jointly Administered Case No. 95-33643, The
Elder-Beerman Stores Corp. (the "Company") effected a distribution of one right
(a "Right") for each outstanding share of Common Stock, without par value (the
"Common Shares"), of the Company. The distribution is payable on [INSERT RECORD
DATE] (the "Record Date") to the stockholders of record as of the close of
business on the Record Date. Each Right entitles the registered holder thereof
to purchase from the Company one one-hundredth of a share of Series A Preferred
Stock, without par value (the "Preferred Shares"), of the Company at a price
(the "Purchase Price") of $[INSERT INITIAL PURCHASE PRICE] per one one-hundredth
of a Preferred Share, subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement, dated as of [INSERT EFFECTIVE DATE]
(the "Rights Agreement"), between the Company and [RIGHTS AGENT] as Rights Agent
(the "Rights Agent").
Under the Rights Agreement, the Rights will be evidenced by the
certificates evidencing Common Shares until the earlier (the "Distribution
Date") of: (i) the close of business on the first date (the "Share Acquisition
Date") of public announcement by the Company that a person (other than a person
that has maintained beneficial ownership of at least 20% of the outstanding
Common Shares since the adoption of the Rights Agreement, the Company, a
subsidiary or employee benefit or stock ownership plan of the Company or any of
its affiliates or associates), together with its affiliates and associates, has
acquired beneficial ownership of 20% or more of the outstanding Common Shares
(any such person or group being hereinafter called an "Acquiring Person") or
(ii) the close of business on the tenth business day (or such later date as may
be specified by the Company's Board of Directors (the "Board")) following the
commencement of a tender offer or exchange offer by any person (other than the
Company, a subsidiary or employee benefit or stock ownership plan of the Company
or any of its affiliates or associates), the consummation of which would result
in beneficial ownership by such person 20% or more of the outstanding Common
Shares.
The Rights Agreement provides that, until the Distribution Date, the
Rights may be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights), any
certificate evidencing Common Shares of the Company issued upon transfer or new
issuance of the Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates
evidencing Common Shares will also constitute the transfer of the Rights
associated with such certificates. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Rights
Certificates") will be mailed to holders of record of Common Shares as of the
close of business on the Distribution Date and such separate Rights Certificates
alone will evidence the Rights. No Right is exercisable at any time prior to the
Distribution Date. The Rights will expire on the first anniversary of the
Effective Date or such later date as the Board of Directors, by resolution
adopted prior to the first anniversary of the Effective Date, may establish, but
not later than the tenth anniversary of the Effective Date (the "Final
Expiration Date") unless earlier redeemed, exchanged or amended by the Company
as described below. Until a Right is exercised, the holder thereof, as such,
will have no rights as a stockholder of the Company, including the right to vote
or to receive dividends.
C-1
<PAGE> 49
The Purchase Price payable, and the number of the Preferred Shares or
other securities issuable, upon exercise of the Rights will be subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of Preferred Shares of certain rights or
warrants to subscribe for or purchase the Preferred Shares at a price, or
securities convertible into the Preferred Shares with a conversion price, less
than the then-current market price of the Preferred Shares, or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness,
cash (excluding regular periodic cash dividends), assets, stock (excluding
dividends payable in the Preferred Shares) or subscription rights or warrants
(other than those referred to above). The number of outstanding Rights and the
number of one one-hundredths of the Preferred Shares issuable upon exercise of
each Right will be subject to adjustment in the event of a stock dividend on the
Common Shares payable in Common Shares or a subdivision, combination or
reclassification of Common Shares occurring, in any such case, prior to the
Distribution Date.
The Preferred Shares issuable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled, in connection with the
declaration of a dividend on the Common Shares, to a preferential dividend
payment equal to the greater of (i) $1.00 per share and (ii) an amount equal to
100 times the related dividend declared per Common Share. Subject to customary
anti-dilution provisions, in the event of liquidation, the holders of Preferred
Shares will be entitled to a preferential liquidation payment equal to the
greater of (a) $100 per share and (b) an amount equal to 100 times the
liquidation payment made per Common Share. Because of the nature of the
Preferred Shares' dividend, voting and liquidation rights, the value of the one
one-hundredth interest in a Preferred Share purchasable upon exercise of a Right
should approximate the value of one Common Share.
Rights will be exercisable to purchase Preferred Shares only after the
Distribution Date occurs and prior to the occurrence of a Flip-in Event as
described below. A Distribution Date resulting from the commencement of a tender
offer or exchange offer described in clause (ii) of the second paragraph of this
summary could precede the occurrence of a Flip-in Event and thus result in the
Rights being exercisable to purchase Preferred Shares. A Distribution Date
resulting from any occurrence described in clause (i) of the second paragraph of
this summary would necessarily follow the occurrence of a Flip-in Event and thus
result in the Rights being exercisable to purchase Common Shares or other
securities as described below.
Under the Rights Agreement, in the event (a "Flip-in Event") that (i)
any person or group, together with its affiliates and associates, becomes an
Acquiring Person, (ii) any Acquiring Person or any affiliate or associate
thereof merges into or combines with the Company and the Company is the
surviving corporation, (iii) any Acquiring Person or any affiliate or associate
thereof effects certain other transactions with the Company, or (iv) during such
time as there is an Acquiring Person the Company effects certain transactions,
in each case as described in the Rights Agreement, then, in each such case,
proper provision will be made so that from and after the later of the
Distribution Date and the date of the occurrence of such Flip-in Event each
holder of a Right, other than Rights that are or were owned beneficially by an
Acquiring Person (which, from and after the date of a Flip-in Event, will be
void), will have the right to receive, upon exercise thereof at the then-current
exercise price of the Right, that number of Common Shares (or, under certain
circumstances, an
C-2
<PAGE> 50
economically equivalent security or securities of the Company) that at the time
of such Flip-in Event have a market value of two times the exercise price of the
Right.
In the event (a "Flip-over Event") that, at any time after a person has
become an Acquiring Person, (i) the Company merges with or into any person and
the Company is not the surviving corporation, (ii) any person merges with or
into the Company and the Company is the surviving corporation, but all or part
of the Common Shares are changed or exchanged for stock or other securities of
any other person or cash or any other property, or (iii) 50% or more of the
Company's assets or earning power, including securities creating obligations of
the Company, are sold, in each case as described in the Rights Agreement, then,
and in each such case, proper provision will be made so that each holder of a
Right, other than Rights which have become void, will thereafter have the right
to receive, upon the exercise thereof at the then-current exercise price of the
Right, that number of shares of common stock (or, under certain circumstances,
an economically equivalent security or securities) of such other person that at
the time of such Flip-over Event have a market value of two times the exercise
price of the Right.
From and after the later of the Share Acquisition Date and the
Distribution Date, Rights (other than any Rights that have become void) will be
exercisable to purchase Common Shares as described above, upon payment of the
aggregate exercise price in cash. In addition, at any time after the Share
Acquisition Date and prior to the acquisition by any person or group of
affiliated or associated persons of 50% or more of the outstanding Common
Shares, the Company may exchange the Rights (other than any rights that have
become void), in whole or in part, at an exchange ratio of one Common Share per
Right (subject to adjustment).
For all purposes of the Rights Agreement, any person that, at the time
of the public announcement by the Company on [INSERT EFFECTIVE DATE] of the
distribution of the Rights, has beneficial ownership of 20% or more of the
then-outstanding Common Shares, or that becomes the beneficial owner of 20% or
more of the then-outstanding Common Shares solely as a result of a reduction in
the number of Common Shares outstanding, will not be deemed to have become an
Acquiring Person unless and until such time as (i) such person, or any affiliate
or associate of such person, thereafter becomes the beneficial owner of
additional Common Shares representing 1% or more of the then-outstanding Common
Shares or (ii) any other person that is the beneficial owner of Common Shares
representing 1% or more of the then-outstanding Common Shares thereafter becomes
an affiliate or associate of such person.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment in the Purchase
Price of at least 1%. The Company will not be required to issue fractional
Preferred Shares (other than fractions that are integral multiples of one
one-hundredth of a Preferred Share, which may, at the option of the Company, be
evidenced by depositary receipts) or fractional Common Shares or other
securities issuable upon the exercise of Rights. In lieu of issuing such
securities, the Company may make a cash payment, as provided in the Rights
Agreement.
The Company may, at its option, redeem the Rights in whole, but not in
part, at a price of $.01 per Right, subject to adjustment (the "Redemption
Price"), at any time prior to the close of business on the Share Acquisition
Date. Immediately upon any redemption of the Rights, the right
C-3
<PAGE> 51
to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
The Rights Agreement may be amended by the Company without the approval
of any holders of Right Certificates, including amendments that increase or
decrease the Purchase Price, that add other events requiring adjustment to the
Purchase Price payable and the number of the Preferred Shares or other
securities issuable upon the exercise of the Rights or that modify procedures
relating to the redemption of the Rights, except that no amendment may be made
that decreases the stated Redemption Price to an amount less than $.01 per
Right.
The Board will have the exclusive power and authority to administer the
Rights Agreement and to exercise all rights and powers specifically granted to
the Board or to the Company therein, or as may be necessary or advisable in the
administration of the Rights Agreement, including without limitation the right
and power to interpret the provisions of the Rights Agreement and to make all
determinations deemed necessary or advisable for the administration of the
Rights Agreement (including any determination to redeem or not redeem the Rights
or to amend or not amend the Rights Agreement). All such actions, calculations,
interpretations and determinations (including any omission with respect to any
of the foregoing) which are done or made by the Board in good faith will be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties and will not subject the Board to any liability
to any person, including without limitation the Rights Agent and the holders of
the Rights.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an exhibit to a Registration Statement on Form 10. A copy
of the Rights Agreement is available free of charge from the Company.
This summary description of the Rights is as of the Record Date, does
not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by this reference.
C-4
<PAGE> 1
EXHIBIT 4(d)
------------
================================================================================
WARRANT AGREEMENT
by and between
[HOLDER]
and
THE ELDER-BEERMAN STORES CORP.
Dated as of [_________], 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1. GRANT OF WARRANT................................................................................1
1.1 Grant...........................................................................................1
1.2 Shares To Be Issued; Reservation of Shares......................................................1
ARTICLE 2. ADJUSTMENTS TO WARRANT RIGHTS...................................................................1
2.1 Stock Combinations..............................................................................1
2.2 Reorganizations.................................................................................2
2.3 Adjustment Upon Changes in Capitalization.......................................................2
2.4 Notice..........................................................................................3
2.5 Fractional Interests............................................................................3
2.6 Effect of Alternate Securities..................................................................4
2.7 Successive Application..........................................................................4
2.8 Minimum Exercise Price for Adjustment...........................................................4
ARTICLE 3. EXERCISE........................................................................................4
3.1 Exercise of Warrant.............................................................................4
3.2 Issuance of Warrant Shares......................................................................4
ARTICLE 4. RIGHTS OF HOLDER................................................................................4
ARTICLE 5. MISCELLANEOUS...................................................................................5
5.1 Amendments......................................................................................5
5.2 Notices.........................................................................................5
5.3 Waiver By Consent...............................................................................6
5.4 No Implied Waiver; Rights Are Cumulative........................................................6
5.5 Governing Law...................................................................................6
5.6 Severability....................................................................................6
5.7 Captions........................................................................................6
5.8 Entire Agreement................................................................................6
</TABLE>
-i-
<PAGE> 3
WARRANT AGREEMENT
This WARRANT AGREEMENT (the "Warrant") is being entered into
this [_____] day of [__________], 1997, by and between The Elder-Beerman Stores
Corp., an Ohio corporation (together with its successors and permitted assigns,
the "Company") and [____________________], a [__________] corporation (together
with his successors and permitted assigns, the "Holder").
RECITALS
WHEREAS, on October 17, 1995, each of the Company and six of
its subsidiaries filed voluntary petitions for relief under Chapter 11 of the
United States Bankruptcy Code with the United States Bankruptcy Court for the
Southern District of Ohio, Western Division (the "Bankruptcy Court"); and
WHEREAS, this Warrant is contemplated by the Joint Plan of
Reorganization of the Company and Its Subsidiaries confirmed by an order entered
by the Bankruptcy Court on [__________], 1997 (the "Plan").
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE 1. GRANT OF WARRANT
1.1 GRANT. The Company hereby grants to Holder this Warrant,
which, subject to the terms and conditions of the Plan, is exercisable as
provided herein, in whole or in part, at any time and from time to time during
the period commencing on the date hereof (the "Effective Date") and ending on
the fifth anniversary of the Effective Date at 11:59 p.m., local time in Dayton,
Ohio (the "Exercise Period"), to purchase an aggregate of up to
[_______________] of the outstanding shares of common stock (the "Warrant
Shares"), at an exercise price of [__________] dollars ($[_____]) per share (as
it may be hereinafter adjusted, the "Exercise Price").
1.2 SHARES TO BE ISSUED; RESERVATION OF SHARES. The Company
covenants and agrees that all Warrant Shares will, upon issuance, be duly
authorized, validly issued and outstanding, fully paid and non-assessable, and
free from all taxes, liens and charges with respect to the issuance thereof,
except as otherwise provided in the Plan. The Company further covenants and
agrees that it will from time to time take all actions required to assure that
the par value per share of the New Common Stock is at all times equal to or less
than the effective Exercise Price. The Company further covenants and agrees
that, during the Exercise Period, the Company will at all times have authorized
and reserved sufficient shares of New Common Stock to provide for the exercise
of this Warrant in full.
ARTICLE 2. ADJUSTMENTS TO WARRANT RIGHTS
2.1 STOCK COMBINATIONS. If the Company combines all of the
outstanding New Common Stock proportionately into a smaller number of shares,
the Exercise Price per Warrant
<PAGE> 4
Share hereunder in effect immediately prior to such combination shall be
proportionately increased and the number of Warrant Shares issuable to the
Holder upon exercise of this Warrant shall be proportionately decreased, as of
the effective date of such combination, as follows: (a) the number of Warrant
Shares purchasable upon the exercise of the Warrant immediately prior to the
effective date of such combination, shall be adjusted so that the Holder of the
Warrant exercised after that date shall be entitled to receive the number and
kind of Warrant Shares which the Holder of the Warrant would have owned and been
entitled to receive as a result of the combination had the Warrants been
exercised immediately prior to that date, and (b) the Exercise Price in effect
immediately prior to such adjustment shall be adjusted by multiplying such
Exercise Price by a fraction, the numerator of which is the aggregate number of
shares of New Common Stock purchasable upon exercise of the Warrants immediately
prior to such adjustment, and the denominator of which is the aggregate number
of shares of New Common Stock purchasable upon exercise of the Warrants
immediately thereafter.
2.2 REORGANIZATIONS. If any of the following transactions
(each, a "Special Transaction") occurs after the Effective Date; (i) a capital
reorganization or reclassification of the capital stock of the Company, (ii) a
consolidation or merger of the Company with and into another entity, or (iii) a
sale or conveyance of all or substantially all of the Company's assets, then, as
a condition of any such Special Transaction, lawful and adequate provision shall
be made whereby the Holder shall thereafter have the right to purchase and
receive, at any time after the consummation of such Special Transaction until
the expiration of the Exercise Period, upon the basis and upon the terms and
conditions specified herein, and in lieu of the Warrant Shares immediately
theretofore issuable upon exercise of this Warrant for the aggregate Exercise
Price in effect immediately prior to such consummation, such shares of stock,
other securities, cash or other assets as may be issued or payable in and
pursuant to the terms of such Special Transaction with respect to or in exchange
for a number of outstanding shares of New Common Stock equal to the number of
Warrant Shares immediately theretofore issuable upon exercise of this Warrant
had such Special Transaction not taken place (pro rated in the case of any
partial exercises). In connection with any Special Transaction, appropriate
provision shall be made with respect to the rights and interests of the Holder
to the end that the provisions of this Warrant (including without limitation
provisions for adjustment of the Exercise Price and the number of Warrant Shares
issuable upon the exercise of the Warrant), shall thereafter be applicable, as
nearly as may be, to any shares of stock, other securities, cash or other assets
thereafter deliverable upon the exercise of this Warrant. The Company shall not
effect any Special Transaction unless prior to or simultaneously with the
closing the successor entity (if other than the Company), if any, resulting from
such consolidation or merger or the entity acquiring such assets shall assume by
a written instrument executed and mailed by certified mail or delivered to the
Holder at the address of the Holder appearing on the books of the Company, the
obligation of the Company or such successor corporation to deliver to such
Holder such shares of stock, securities, cash or other assets as, in accordance
with the foregoing provisions, such Holder has rights to purchase.
2.3 ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of
any change in the New Common Stock by reason of stock dividends, stock splits,
recapitalizations or reclassifications, the type and number of Warrant Shares
issuable upon exercise of this Warrant, and the Exercise Price, as the case may
be, shall be adjusted as follows: (a) the number of Warrant Shares purchasable
upon the exercise of the Warrant immediately prior to the record date for such
2
<PAGE> 5
dividend or distribution, or the effective date of such recapitalization or
reclassification shall be adjusted so that the holder of the Warrant exercised
after that date shall be entitled to receive the number and kind of Warrant
Shares which the holder of the Warrant would have owned and been entitled to
receive as a result of the dividend, distribution, recapitalization or
reclassification had the Warrants been exercised immediately prior to that date,
and (b) the Exercise Price in effect immediately prior to such adjustment shall
be adjusted by multiplying such Exercise Price by a fraction, the numerator of
which is the aggregate number of shares of New Common Stock purchasable upon
exercise of the Warrants immediately prior to such adjustment, and the
denominator of which is the aggregate number of shares of New Common Stock
purchasable upon exercise of the Warrants immediately thereafter. No such
adjustment shall be made on account of any dividend payable other than in
securities of the Company.
2.4 NOTICE. Whenever this Warrant or the number of Warrant
Shares issuable hereunder is to be adjusted as provided herein or a dividend or
distribution (in cash, stock or otherwise and including, without limitation, any
liquidating distributions) is to be declared by the Company, or a definitive
agreement with respect to a Special Transaction has been entered into, the
Company shall forthwith cause to be sent to the Holder at the last address of
the Holder shown on the books of the Company, by first-class mail, postage
prepaid, at least ten (10) days prior to the record date specified in (A) below
or at least twenty (20) days before the date specified in (B) below, a notice
stating in reasonable detail the relevant facts and any resulting adjustments
and the calculation thereof, if applicable, and stating (if applicable):
(A) the date to be used to determine (i) which
holders of New Common Stock will be entitled to receive notice of such dividend,
distribution, subdivision or combination (the "Record Date"), and (ii) the date
as of which such dividend, distribution, subdivision or combination shall be
made; or, if a record is not to be taken, the date as of which the holders of
New Common Stock of record to be entitled to such dividend, distribution,
subdivision or combination are to be determined (provided, that in the event the
Company institutes a policy of declaring cash dividends on a periodic basis, the
Company need only provide the relevant information called for in this clause (A)
with respect to the first cash dividend payment to be made pursuant to such
policy and thereafter provide only notice of any changes in the amount or the
frequency of any subsequent dividend payments), or
(B) the date on which a Special Transaction is
expected to become effective, and the date as of which it is expected that
holders of New Common Stock of record shall be entitled to exchange their shares
of New Common Stock for securities or other property deliverable upon
consummation of the Special Transaction (the "Exchange Date").
2.5 FRACTIONAL INTERESTS. The Company shall not be required to
issue fractions of shares of New Common Stock on the exercise of this Warrant.
If any fraction of a share of New Common Stock would, except for the provisions
of this Section 2.5, be issuable upon the exercise of this Warrant, the Company
shall, upon such issuance, purchase such fraction for an amount in cash equal to
the current value of such fraction, computed on the basis of the last reported
close price of the New Common Stock on the National Association of Securities
Dealers Automated Quotation System or the principal market on which the New
Common Stock is then traded on the last business day prior to the date of
exercise upon which such a sale shall have been effected, or, if the New
3
<PAGE> 6
Common Stock is not publicly traded, as the Board of Directors of the Company
may in good faith determine.
2.6 EFFECT OF ALTERNATE SECURITIES. If at any time, as a
result of an adjustment made pursuant to this Section 2, the Holder of the
Warrants shall thereafter become entitled to receive any securities of the
Company other than shares of New Common Stock, then the number of such other
securities receivable upon exercise of an Warrant shall be subject to adjustment
from time to time on terms as nearly equivalent as practicable to the provisions
with respect to shares of New Common Stock contained in this Section 2.
2.7 SUCCESSIVE APPLICATION. The provisions of this Section 2
shall similarly apply to successive events covered by this Section.
2.8 MINIMUM EXERCISE PRICE FOR ADJUSTMENT. No adjustment in
the Exercise Price in accordance with this Article 2 need be made if such
adjustment would amount to a change in such Exercise Price of less than $.001;
provided, however, that the amount by which any adjustment is not made by reason
of the provisions of this Section 2.8 shall be carried forward and taken into
account at the time of any subsequent adjustment.
ARTICLE 3. EXERCISE
3.1 EXERCISE OF WARRANT. (a) The Holder may exercise this
Warrant by (i) surrendering this Warrant, with the form of exercise notice
attached hereto as EXHIBIT "A" duly executed by Holder, and (ii) making payment
to the Company of the aggregate Exercise Price for the applicable Warrant Shares
in cash, by certified check or bank check or by wire transfer to an account
designated by the Company. Upon any partial exercise of this Warrant, the
Company, at its expense, shall forthwith issue to the Holder for its surrendered
warrant a replacement Warrant identical in all respects to this Warrant, except
that the number of Warrant Shares shall be reduced accordingly.
(b) RECORD DATE FOR OWNERSHIP OF WARRANT SHARES. Each person
in whose name any Warrant Share certificate is issued upon exercise of the
Warrant shall for all purposes been deemed to have become the holder of record
of the Warrant Shares for which such Warrant was exercised, and such Warrant
Share certificate shall be dated the date upon which the Warrant exercise notice
was duly surrendered and payment of the Exercise Price was tendered to the
Company.
3.2 ISSUANCE OF WARRANT SHARES. The Warrant Shares purchased
shall be issued to the Holder exercising this Warrant as of the close of
business on the date on which all actions and payments required to be taken or
made by Holder, pursuant to Section 3.1, shall have been so taken or made.
Certificates for the Warrant Shares so purchased shall be delivered to the
Holder within a reasonable time, not exceeding ten (10) days after this Warrant
is surrendered.
4
<PAGE> 7
ARTICLE 4. RIGHTS OF HOLDER
Holder shall not, solely by virtue of this Warrant and prior
to the issuance of the Warrant Shares upon due exercise thereof, be entitled to
any rights of a shareholder in the Company.
ARTICLE 5. MISCELLANEOUS
5.1 AMENDMENTS. The parties may, from time to time, enter into
written amendments, supplements or modifications hereto for the purpose of
adding any provisions to this Warrant or changing in any manner the rights of
either of the parties hereunder. No amendment, supplement or modification shall
be binding on either party unless made in writing and signed by a duly
authorized representative of each party.
5.2 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or confirmed facsimile transmission, which transmission is confirmed:
(a) if to the Company to:
The Elder-Beerman Stores Corp.
3155 El-Bee Road
Dayton, Ohio 45439
Attention: John A. Muskovich
Telecopy: (936) 296-4625
with a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114-1190
Attention: Richard M. Cieri, Esq.
Telecopy: (216) 579-0212
(b) if to Holder to:
[NAME]
[ADDRESS]
Attention:
Telecopy:
5
<PAGE> 8
with a copy to:
[NAME]
[ADDRESS]
Attention:
Telecopy:
(c) or, in each case, at such other address or to such other
person as may be specified in writing to the other party.
5.3 WAIVER BY CONSENT. The Holder may execute and deliver to
the Company a written instrument waiving, on such terms and conditions as the
Holder may specify in such instrument, any of the requirements of this Warrant.
5.4 NO IMPLIED WAIVER; RIGHTS ARE CUMULATIVE. The failure to
exercise or the delay in exercising by either party of any right, remedy, power
or privilege under this Warrant, shall not operate as a waiver thereof. The
single or partial exercise of any right, remedy, power or privilege under this
Warrant shall not preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
5.5 GOVERNING LAW. This Warrant and rights and obligations of
the parties hereunder shall be governed by, construed and interpreted in
accordance with the laws of the State of Ohio applicable to agreements executed
by residents of that state, and fully to be performed, in that state.
5.6 SEVERABILITY. If any provision of this Warrant is found to
be unenforceable for any reason whatsoever, such provision shall be deemed null
and void to the extent of such unenforceability but shall be deemed separable
from and shall not invalidate any other provision of this Warrant.
5.7 CAPTIONS. Captions to the various paragraphs of this
Agreement are provided for convenience only and shall not be used to construe
the provisions of this Warrant.
5.8 ENTIRE AGREEMENT. This Warrant and the Plan constitute the
entire understanding of the parties with respect to the subject matter of the
Warrant and supersedes all prior discussions, agreements and representations,
whether oral or written, concerning the subject matter hereof and whether or not
executed by Holder and the Company.
6
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this
Warrant to be duly executed and delivered by the proper and duly authorized
officers as of the day and year first above written.
THE ELDER-BEERMAN STORES CORP.
By:
-----------------------------------------
Name:
Title:
[HOLDER]
By:
-----------------------------------------
Name:
Title:
7
<PAGE> 10
EXHIBIT "A"
-----------
[To be signed only upon exercise of Warrant]
To The Elder-Beerman Stores Corp.:
The undersigned, the Holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, _____________ shares of the common stock, par
value $[_____] per share, of The Elder-Beerman Stores Corp. and herewith makes
payment of $___________ therefor, and requests that the certificates for such
shares be issued in the name of, and be delivered to, ______________ whose
address is ___________________________.
Dated: --------------------------------------------------
(Signature must conform in all respects to name of
Holder as specified on the face of the Warrant)
--------------------------------------------------
Address
<PAGE> 1
EXHIBIT 10(c)
-------------
FORM OF EMPLOYMENT AGREEMENT
----------------------------
FOR SENIOR VICE PRESIDENTS
--------------------------
THIS AGREEMENT, dated as of the _____ day of _________, 1997,
between The Elder-Beerman Stores Corp., an Ohio corporation (the "Employer"),
and __________________ (the "Executive").
R E C I T A L S :
1. On October 17, 1995, Employer and its subsidiaries
(collectively, the "Debtors") filed voluntarily petitions for relief under
chapter 11 of the Bankruptcy Code, 11 U.S.C. Sections 101-1330 (the "Bankruptcy
Code"). The Debtors continue to manage and operate their businesses as debtors
in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.
Employer's chapter 11 case is pending in the United States Bankruptcy Court for
the Southern District of Ohio, Western Division (the "Bankruptcy Court").
2. Employer has determined that it is critical to the success
of its efforts to reorganize under chapter 11 that it select the most qualified
person to serve as Senior Vice President - [_______] for Employer upon the
Effective Date (as defined in Debtors' Second Amended Joint Plan of
Reorganization) of a plan of reorganization.
3. Employer wants to enter into this Agreement with Executive
based on its belief that Executive is uniquely qualified to assume the role of
Senior Vice President - [ ] upon the Effective Date, subject to the terms and
conditions set forth below.
<PAGE> 2
4. Executive wants to enter into this Agreement with Employer,
subject to the terms and conditions set forth below, including the entry of an
order of the Bankruptcy Court authorizing Employer to enter into and perform
this Agreement.
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants herein and for good and valuable consideration, the receipt of
which is hereby acknowledged, it is agreed as follows:
ARTICLE I
---------
DEFINITIONS
-----------
The following terms shall have the respective meanings set
forth below, unless the context clearly otherwise requires:
1.1 "AFFILIATE" means, with respect to a particular Entity, an Entity
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Entity, and an Entity shall
be "unaffiliated" with another Entity if such Entities are not Affiliates with
respect to one another.
1.2 "CAUSE" means (i) an intentional act of fraud, embezzlement, theft
or any other material violation of law in connection with Executive's duties or
in the course of his employment with Employer involving material harm to
Employer; (ii) intentional wrongful damage to material assets of Employer; (iii)
intentional wrongful engagement in any activity that would constitute a material
breach of Sections 3.1 through 3.4 hereof; or (iv) physical or mental disability
that causes Executive to fail to perform his duties under this Agreement for a
continuous period of 12 months, as provided in Section 2.7(b). No act or
omission by Executive shall be deemed "intentional" if it was due to negligence
and shall be deemed "intentional" only
2
<PAGE> 3
if done, or omitted to be done, by Executive not in good faith and without
reasonable belief that his action or omission was in or not opposed to the best
interests of Employer and its subsidiaries. Failure to meet performance
standards or objectives of Employer shall not constitute "Cause" for purposes
hereof. To terminate the employment of Executive for Cause, Employer must
deliver to Executive a Notice of Termination given within 90 days after the
Board of Directors both (i) has knowledge of conduct or an event allegedly
constituting Cause and (ii) has reason to believe that such conduct or event
could be grounds for Cause. For purposes of this Agreement a "Notice of
Termination" shall mean a copy of a resolution duly adopted by the affirmative
vote of not less than a simple majority of the membership of the Board of
Directors, excluding Executive, at a meeting called for the purpose of
determining that Executive has engaged in conduct that constitutes Cause (and at
which Executive had a reasonable opportunity, together with his counsel, to be
heard before the Board of Directors prior to such vote).
1.3 "CHANGE OF OWNERSHIP" means any one of the following events: (i)
the sale to any purchaser unaffiliated with Employer of all or substantially all
of the assets of Employer; (ii) the sale, distribution, or accumulation of more
than 50% of the outstanding voting stock of Employer to/by any acquiror or group
of affiliated acquirors that are unaffiliated with Employer; (iii) individuals
who, on the completion of Employer's chapter 11 reorganization under the
Bankruptcy Code, constitute the Board of Directors (the "Incumbent Directors")
cease for any reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to such completion whose election
or nomination for election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board (either by a specific vote or by approval
of the proxy statement of Employer in which such person is named as a
3
<PAGE> 4
nominee for director, without objection to such nomination) shall be an
Incumbent Director; PROVIDED, HOWEVER, that no individual elected or nominated
as a director of Employer initially as a result of an actual or threatened
election contest with respect to directors or any other actual or threatened
solicitation of proxies or consents by or on behalf of any person other than the
Board shall be deemed to be an Incumbent Director; or (iv) the merger or
consolidation of Employer with another Entity unaffiliated with Employer if,
immediately after such merger or consolidation, less than two-thirds of the
combined voting power of the then outstanding securities of such Entity are
held, directly or indirectly, in the aggregate by the holders immediately prior
to such transaction of the then outstanding securities of Employer entitled to
vote generally in the election of directors.
In no event shall "Change of Ownership" be construed to include any
change of control of Employer or any subsidiary of Employer that occurs solely
as a result of any exchange or distribution of equity securities of Employer or
any such subsidiary upon consummation of a plan of reorganization for Employer
or any such subsidiary in its chapter 11 case pending as of the date of this
Agreement.
1.4 "CODE" means the Internal Revenue Code of 1986, as amended.
1.5 "COMPETING BUSINESS" means any of the following companies: (i)
Mercantile Stores Co., Inc.; Proffitt's, Inc.; or Carson Pirie Scott & Co.,
including each of their respective Affiliates; (ii) Lazarus, Inc.; (iii) Lazarus
PA, Inc.; or (iv) Rich's Department Stores, Inc.
1.6 "ENTITY" shall have the meaning provided in section 101(16) of the
Bankruptcy Code.
1.7 "GOOD REASON" means (i) the assignment to Executive of any duties
materially inconsistent with Executive's position (including status, offices,
titles and reporting
4
<PAGE> 5
requirements), authority, duties or responsibilities as contemplated in Article
II, or any other action by Employer that results in a material diminution in
such position, authority, duties or responsibilities, excluding for this purpose
an action not taken in bad faith and that is remedied by Employer within 10 days
after receipt of written notice thereof given by Executive, provided that
repeated instances of such action shall be evidence of the bad faith of
Employer; (ii) a reduction in the Executive's annual Base Salary of at least
10%; (iii) the relocation of Employer's principal executive offices to a
location more than 75 miles from the current location of such offices; (iv) any
material failure by Employer to comply with any of the provisions of this
Agreement, other than a failure not occurring in bad faith and which is remedied
by Employer within 10 days after receipt of written notice thereof given by
Executive, provided that repeated failures shall be evidence of the bad faith of
Employer; or (v) removal of Executive as Senior Vice President - [___________],
other than for Cause.
ARTICLE II
----------
EMPLOYMENT
----------
2.1 EFFECTIVENESS. Notwithstanding any other provision of the
Agreement, the Agreement shall not be effective until the Effective Date.
2.2 TERM. Employer shall employ Executive, and Executive shall serve
Employer pursuant to the terms of this Agreement, starting on the Effective
Date. The term of this Agreement shall extend initially until the [SECOND OR
THIRD] anniversary of the Effective Date. The term of this Agreement shall be
automatically extended on the [SECOND OR THIRD] anniversary of the Effective
Date and each anniversary of the Effective Date thereafter for a period of one
year unless Employer or Executive shall have given written notice of termination
to the other not
5
<PAGE> 6
less than 120 days prior to such anniversary of the Effective Date. Upon
termination of this Agreement pursuant to any such notice, Executive's
employment with Employer shall terminate, and Employer's only obligation to
Executive will be payment of the amounts described in Section 2.7(c)(ii).
2.3 DUTIES. Executive will serve as and perform the duties of Senior
Vice President - [____________] of Employer in accordance with the terms of this
Agreement. The duties of Executive shall be those commensurate with his office
and shall include those responsibilities reasonably assigned to Executive by the
Chairman or President of the Employer, with responsibility for reporting to the
Chairman or President of the Employer.
2.4 COMPENSATION. In consideration of Executive's services hereunder,
Employer shall pay Executive cash compensation consisting of an annual "Base
Salary" and "Bonus." As of the Effective Date, Executive's Base Salary shall be
$________ per year, and his 1997 fiscal year Bonus shall consist of an incentive
bonus that includes a pro rata share, based on the percentage of days served
during fiscal 1997 after the Effective Date, of up to 30% of Executive's Base
Salary and a pro rata share, based on the percentage of days served during
fiscal 1997 before the Effective Date, of up to [ ]% of Executive's annual
salary immediately prior to the Effective Date. In each fiscal year thereafter,
Executive's Bonus shall consist of an incentive bonus up to 30% of his Base
Salary, to be earned as determined by the Board of Directors. For purposes of
the preceding sentences, the "year" for which the Bonus is payable to Executive
shall be the Employer's fiscal year beginning in February 1997 and each
subsequent fiscal year of the Employer. Executive's Base Salary shall be subject
to review at the discretion of the Board of Directors from time to time taking
into account changes in Executive's responsibilities, increases
6
<PAGE> 7
in the cost of living, performance by Executive, increases in salary to other
executives of Employer and other pertinent factors.
2.5 PAYMENT SCHEDULE. The Compensation specified in Section 2.4 hereof
shall be payable as current salary and bonus in accordance with Employer's
payroll and bonus procedures for other executives. Base Salary shall be paid in
installments not less frequently than monthly and at the same rate for any
fraction of a month unexpired at the end of the term. Bonuses shall be paid
annually in a lump sum not later than April 15 or, if such day is not a business
day on which the Employer's executive offices are open, the first business day
thereafter.
2.6 EXPENSES. Executive shall be allowed reasonable traveling expenses
and other reasonable expenses in carrying out his duties under this Agreement
and shall be furnished office space, assistance and accommodations suitable to
the character of his position with Employer and adequate for the performance of
his duties hereunder.
2.7 TERMINATION OF EMPLOYMENT.
(a) TERMINATION FOLLOWING A CHANGE OF OWNERSHIP. If (i) before
the second anniversary of a Change of Ownership Employer notifies Executive that
Executive is being terminated, and such termination is without Cause; (ii)
before the second anniversary of a Change of Ownership Executive terminates his
employment for Good Reason; (iii) Executive terminates his employment with
Employer for any reason, or without reason, during the 30-day period immediately
following the first anniversary of a Change of Ownership; or (iv) Executive's
employment with Employer is terminated in connection with but prior to a Change
of Ownership and termination occurs following the commencement of any discussion
with any third party that ultimately results in a Change of Ownership, Executive
shall be entitled (except as otherwise provided in paragraphs (b), (c) and (d)
of this Section 2.7 and subject to Section 5.1) to receive a
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lump sum payment as severance compensation equal to the greater of (I) 2.99
times his "base amount" as such term is defined in Section 280G of the Code, or
(II) 2 times his most recent Base Salary and Bonus. Employer shall make such
payment not later than 45 days after the date of termination. If any payment
made to the Executive pursuant to this Section 2.7(a) or otherwise pursuant to
or by reason of any other agreement, policy, plan, program or arrangement,
including without limitation any stock option, stock appreciation right or
similar right, or the lapse or termination of any restriction on or the vesting
or exercisability of any of the foregoing (a "Payment") is determined to be
subject to the excise tax imposed by Section 4999 of the Code (or any successor
provision thereto) by reason of being considered "contingent on a change in
ownership or control" of the Employer, within the meaning of Section 280G of the
Code (or any successor provision thereto) or to any similar tax imposed by state
or local law, or to any interest or penalties with respect to such tax (such tax
or taxes, together with any such interest and penalties, being hereafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment or payments (collectively, a "280G
Gross-Up Payment"). The 280G Gross-Up Payment shall be in an amount such that,
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any excise tax imposed upon the
280G Gross-Up Payment, the Executive retains a portion of the 280G Gross-Up
Payment equal to the Excise Tax imposed upon the Payment.
(b) DISABILITY. Executive shall not be in breach of this
Agreement if he shall fail to perform his duties hereof because of physical or
mental disability. If Executive fails to render services to Employer because of
Executive's physical or mental disability for a continuous period of 12 months,
the Board of Directors or its delegate may terminate Executive's employment
prior to the end of the then current term. If any dispute exists between the
parties as
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to Executive's physical or mental disability at any time, such question shall be
settled by the opinion of an impartial reputable physician agreed upon for that
purpose by the parties or their representatives. Failing agreement upon an
impartial physician for purposes of the preceding sentence, the question of
Executive's physical or mental disability shall be resolved within 10 days of a
written request therefor by either party to the other, by a physician designated
by the then Executive Vice President of the Ohio Academy of Family Physicians.
The written opinion of the physician as to the matter in dispute shall be final
and binding on the parties.
(c) OTHER TERMINATIONS BY EMPLOYER. (i) CAUSE. Employer may
terminate the employment of Executive for Cause at any time upon notice given
pursuant to Section 5.6. Upon such termination, this Agreement and all of
Employer's obligations under this Agreement shall terminate, except that
Employer shall remain obligated to pay to Executive any unpaid Base Salary
through the effective date of such termination and any vacation accrued but
unused as of Executive's last day worked.
(ii) NOT FOR CAUSE. Employer may terminate the
employment of Executive at any time for any reason. However, if such termination
of employment does not occur pursuant to Section 2.2 or under the circumstances
described in paragraphs (a), (b) or (c)(i) of this Section 2.7, Employer shall
remain obligated to Executive for (I) payment of Executive's unpaid Base Salary
(as described in Section 2.4) through the then-remaining term of this Agreement
pursuant to Section 2.2, (II) any Bonus (as described in Section 2.4) paid on or
before Executive's last day worked and (III) payment for any vacation accrued
but unused as of before Executive's last day worked.
(d) DEATH. If Executive dies while rendering services under
this Agreement, there shall be payable to his estate an amount equal to his Base
Salary for the lesser of one year
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or the then remaining term of this Agreement. Such amount shall be paid to
Executive's estate in a single lump sum.
2.8 MITIGATION; OFFSET. Executive shall not be required to mitigate the
amount of any payment or benefit provided for in the Agreement by seeking other
employment or otherwise. However, any amount payable pursuant to this Agreement
following the termination of Executive's employment shall reduce any amount
payable by Employer to or with respect to Executive pursuant to any other
severance pay or other similar plan, program or arrangement of Employer,
including, without limitation, the Employer's Master Severance Plan for Key
Employees.
ARTICLE III
-----------
CERTAIN OBLIGATIONS OF EXECUTIVE
--------------------------------
3.1 NO PARTICIPATION IN OTHER BUSINESSES. Executive shall not, without
the consent of the Board of Directors, become actively associated with or
engaged in any business other than that of Employer or a division or Affiliate
of Employer, and he shall do nothing inconsistent with his duties to Employer.
3.2 TRADE SECRETS AND CONFIDENTIAL INFORMATION.
(a) UNAUTHORIZED DISCLOSURE, USE OR SOLICITATION. Executive
will keep in strict confidence, and will not, directly or indirectly, at any
time during or after his employment with Employer, disclose, furnish,
disseminate, make available or, except in the course of performing his duties of
employment under this Agreement, use any trade secrets or confidential business
and technical information of Employer or its customers, vendors or property
owners or managers, without limitation as to when or how Executive may have
acquired such information.
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Such confidential information will include, without limitation, Employer's
unique selling methods and trade techniques; management, training, marketing and
selling manuals; promotional materials; training courses and other training and
instructional materials; any personnel information; material nonpublic financial
information; any corporate organizational information; lease terms; vendor,
owner, manager and product information; customer lists; other customer
information; and other trade information. Executive specifically acknowledges
that all such confidential information including, without limitation, customer
lists, other customer information and other trade information, whether reduced
to writing, maintained on any form of electronic media, or maintained in the
mind or memory of Executive and whether compiled by Employer and/or Executive,
derives independent economic value from not being readily known to or
ascertainable by proper means by others who can obtain economic value from its
disclosure or use, that reasonable efforts have been made by Employer to
maintain the secrecy of such information, that such information is the sole
property of Employer and that any retention and use of such information by
Executive during his employment with Employer (except in the course of
performing his duties and obligations under this Agreement) or after the
termination of his employment will constitute a misappropriation of Employer's
trade secrets.
(b) POST-TERMINATION. Executive agrees that, upon termination
of Executive's employment with Employer, for any reason, Executive will return
to Employer, in good condition, all property of Employer, including without
limitation, the originals and all copies of all management, training, marketing
and selling manuals; promotional materials; other training and instructional
materials; financial information; vendor, owner, manager and product
information; customer lists; other customer information; and all other selling,
service and trade information and equipment. If such items are not returned,
Employer will have the right to
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charge Executive for all reasonable damages, costs, attorneys' fees and other
expenses incurred in searching for, taking, removing and/or recovering such
property.
3.3 NONCOMPETITION. Executive and Employer recognize that Executive's
duties under this Agreement will entail the receipt of trade secrets and
confidential information, which include not only information concerning
Employer's current operations, procedures, suppliers and other contacts, but
also its short-range and long-range plans, and that such trade secrets and
confidential information may have been developed by Employer and its Affiliates
at substantial cost and constitute valuable and unique property of Employer.
Accordingly, Executive acknowledges that the foregoing makes it reasonably
necessary for the protection of Employer's business interests that Executive not
compete with Employer or any of its Affiliates during the term of this Agreement
and for a reasonable and limited period thereafter. Therefore, during the term
of this Agreement and for one year after termination of the Agreement, Executive
shall not have any investment in a Competing Business other than a de minimis
investment and shall not render personal services to any such Competing Business
in any manner, including, without limitation, as owner, partner, director,
trustee, officer, employee, consultant or advisor thereof; PROVIDED, HOWEVER,
that this Section 3.3 shall not apply if Executive terminates his employment for
Good Reason or Employer terminates Executive other than for Cause. For purposes
of the preceding sentence, a de minimis investment is ownership of less than 1/2
of 1% of the outstanding stock or debt of any Competing Business.
Notwithstanding Section 2.7 above, if Executive shall breach the
covenants contained in this Section 3.3 or in Section 3.2, Employer shall have
no further obligations to Executive pursuant to this Agreement and may recover
from Executive all such damages as it may be entitled to at law or in equity. In
addition, Executive acknowledges that any such breach is likely
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to result in immediate and irreparable harm to Employer for which money damages
are likely to be inadequate. Accordingly, Executive consents to injunctive and
other appropriate equitable relief that Employer may seek to protect Employer's
rights under this Agreement. Such relief may include, without limitation, an
injunction to prevent Executive from disclosing any trade secrets or
confidential information concerning Employer to any Entity, to prevent any
Entity from receiving from Executive or using any such trade secrets or
confidential information and/or to prevent any Entity from retaining or seeking
to retain any other employees of Employer.
3.4 CONFLICTS OF INTEREST. Executive shall not engage in any activity
that would violate any Conflict of Interest or Business Ethics Statement of
Employer that Executive may sign from time to time.
ARTICLE IV
----------
OTHER BENEFITS
--------------
4.1 EMPLOYEE BENEFITS.
(a) Executive and Executive's family, as applicable, shall be
eligible for participation in and shall receive all benefits under the savings
and retirement programs, welfare benefit plans, fringe benefit programs and
perquisites that Employer provides to senior executives of Employer in effect
from time to time.
(b) Subject to Section 5.1, upon termination under
Section 2.7(a) hereof:
(i) The benefits described in Section 4.1(a) will
continue until the Executive obtains new employment providing substantially
similar benefits, but in any event no later than two years after the date of
termination. During the period of continued coverage pursuant to this
Subsection, the Executive will be required to pay the same cost of coverage, co-
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pays, deductibles and other similar payments paid by active senior executives of
the Company having elected the same type of coverage. The Executive will cease
to be eligible for continued health and life insurance benefits provided by the
Employer if he (I) waives such coverage or (II) fails to pay any amount required
for such coverage.
(ii) The Executive will be reimbursed by the Employer for reasonable
expenses incurred for outplacement counseling that are pre-approved by the
Employer's Senior Vice President - Human Resources, (II) that do not exceed 15%
of the Executive's Base Salary and (III) that are incurred by the Executive
within 6 months following such termination.
4.2 RELOCATION. Executive may, but is not required to, relocate to a
residence within 35 miles of downtown Dayton, Ohio. If Executive relocates as
described in the previous sentence within six months of the date hereof,
payments and reimbursements made on behalf of or to Executive on account of such
relocation shall be made in accordance with the Employer's applicable relocation
policy.
4.3 INCENTIVE COMPENSATION. Employer and Executive recognize that the
primary objective for Employer over the coming years is to increase the value of
its business through superior performance in achieving growth in operating
profits. The enhancement of business value is critical to all constituencies of
Employer, including creditors, shareholders, management, employees, vendors and
customers. Accordingly, Employer has formulated, and will implement as part of
its chapter 11 plan of reorganization, the Equity and Performance Incentive Plan
that will award equity interests in Employer to key employees based on both
annual and long-term incentives from time to time after emergence from chapter
11. The terms of such program and the awards to be made to Executive are
comparable to the terms of similar programs implemented by comparable companies.
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4.4 VACATION AND SICK LEAVE. Executive shall be entitled to vacation
and sick leave each year, in accordance with Employer's policies in effect from
time to time; PROVIDED, HOWEVER, that Executive shall be entitled to a minimum
of three weeks vacation per year.
ARTICLE V
---------
MISCELLANEOUS
-------------
5.1 RELEASE. Payment of the amount described in Section 2.7(a) and the
benefits described in Section 4.1(b) to the Executive is conditioned upon the
Executive executing and delivering a release satisfactory to the Employer
releasing the Employer from any and all claims, demands, damages, actions and/or
causes of action whatsoever, which the Executive may have had on account of the
termination of his employment, including, but not limited to claims of
discrimination, including on the basis of sex, race, age, national origin,
religion, or handicapped status (with all applicable periods during which the
Executive may revoke the release or any provision thereof having expired), and
any and all claims, demands and causes of action for retirement (other than
under the retirement plans maintained by the Employer that are qualified under
Section 401(a) of the Code or under any "welfare benefit plan" of the Employer
(as the term "welfare benefit plan" is defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended)), severance or other
termination pay. Such release will not, however, apply to the ongoing
obligations of the Employer arising under this Agreement, or rights of
indemnification the Executive may have under the Employer's policies or by
contract or by statute.
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5.2 SUCCESSORS AND BINDING AGREEMENT.
(a) Employer will require any successor to all or
substantially all of the businesses or assets of Employer (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise), by
agreement in form and substance reasonably satisfactory to Executive, expressly
to assume and agree to perform this Agreement in the same manner and to the same
extent Employer would be required to perform if no such succession had taken
place. This Agreement will be binding upon and inure to the benefit of Employer
and any successor to Employer, including without limitation any persons
acquiring directly or indirectly all or substantially all of the businesses or
assets of Employer whether by purchase, merger, consolidation, reorganization or
otherwise (and such successor will thereafter be deemed "Employer" for the
purposes of this Agreement).
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the
parties hereto will, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereof except as expressly
provided in Sections 5.2(a) and (b). Without limiting the generality or effect
of the foregoing, Executive's right to receive payments hereof will not be
assignable, transferable or delegable, whether by pledge, creation of a security
interest, or otherwise, other than by a transfer by Executive's will or by the
laws of descent and distribution and, if Executive attempts any assignment or
transfer contrary to this Section 5.2, Employer will have no liability to pay
any amount Executive attempts to assign, transfer or delegate.
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5.3 GOVERNING LAW; ARBITRATION. This Agreement has been executed on
behalf of Employer by an officer of Employer located in the City of Moraine,
Ohio. This Agreement and all questions arising in connection with it shall be
governed by the internal substantive law of the State of Ohio, without giving
effect to principles of conflict of laws. Subject to the following sentence, all
disputes arising out of, or in connection with this Agreement, which are not
promptly settled by mutual agreement of the parties hereto, shall be finally
settled by arbitration in accordance with the rules of the American Arbitration
Association. Notwithstanding, Employer may, at its option, seek injunctive
relief as contemplated in Section 3.3 above either in lieu of or in addition to
the arbitration remedies provided for in this Section 5.3
Arbitration shall be conducted by one or more arbitrators appointed in
accordance with such rules on the request of any party to the agreement giving
rise to the dispute. Arbitration shall take place in Dayton, Ohio. Such
arbitration shall be governed by this Agreement and shall be binding upon the
parties hereto. The validity, construction, performance or termination of any
agreement by and between the parties submitted to arbitration shall be
determined on the basis of the contractual obligations of the parties. The
arbitrator shall determine his jurisdiction over persons and subject matter if
such jurisdiction is challenged by one of the parties. The award of the
arbitrator shall: (a) be rendered in writing stating the grounds on which the
arbitrators base same, and how the costs of arbitration being borne; the
expenses of Executive to successfully petition or defend his interests shall be
borne by Employer; and (b) be carried out voluntarily and without delay, and
failing this, be made enforceable through either party by entry of a judgment in
a competent court of any jurisdiction.
5.4 SEVERABILITY. If any portion of this Agreement is held to be
invalid or unenforceable, such holding shall not affect any other portion of
this Agreement.
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5.5 ENTIRE AGREEMENT. This Agreement comprises the entire agreement
between the parties hereto and, as of the date hereof, supersedes any prior
agreements between the parties. This Agreement may not be modified, renewed or
extended except by a written instrument referring to this Agreement and executed
by the parties hereto.
5.6 NOTICES. Any notice or consent required or permitted to be given
under this Agreement shall be in writing and shall be effective: (a) when given
by personal delivery, (b) one business day after being sent by overnight
delivery service or (c) five business days after being sent by certified U.S.
mail, return receipt requested, to the Secretary of Employer at its principal
place of business in the City of Moraine or to Executive at his last known
address as shown on the records of Employer.
5.7 WITHHOLDING TAXES. Employer may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
THE ELDER-BEERMAN STORES CORP.
By:
--------------------------------------------
Name: Frederick J. Mershad
Title: President and Chief Executive Officer
-----------------------------------------------
Executive
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EXHIBIT 10(d)
FORM OF EMPLOYMENT AGREEMENT
FOR EXECUTIVE VICE PRESIDENTS
THIS AGREEMENT, dated as of the _____ day of _________, 1997,
between The Elder-Beerman Stores Corp., an Ohio corporation (the "Employer"),
and __________________ (the "Executive").
R E C I T A L S :
1. On October 17, 1995, Employer and its subsidiaries
(collectively, the "Debtors") filed voluntarily petitions for relief under
chapter 11 of the Bankruptcy Code, 11 U.S.C. Sections 101-1330 (the "Bankruptcy
Code"). The Debtors continue to manage and operate their businesses as debtors
in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.
Employer's chapter 11 case is pending in the United States Bankruptcy Court for
the Southern District of Ohio, Western Division (the "Bankruptcy Court").
2. Employer has determined that it is critical to the success
of its efforts to reorganize under chapter 11 that it select the most qualified
person to serve as Executive Vice President - [_______] for Employer upon the
Effective Date (as defined in the Debtors' Third Amended Joint Plan of
Reorganization) of a plan of reorganization.
3. Employer wants to enter into this Agreement with Executive
based on its belief that Executive is uniquely qualified to assume the role of
Executive Vice President - [ ] upon the Effective Date, subject to the terms and
conditions set forth below.
4. Executive wants to enter into this Agreement with Employer,
subject to the terms and conditions set forth below, including the entry of an
order of the Bankruptcy Court authorizing Employer to enter into and perform
this Agreement.
<PAGE> 2
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants herein and for good and valuable consideration, the receipt of
which is hereby acknowledged, it is agreed as follows:
ARTICLE I
---------
DEFINITIONS
-----------
The following terms shall have the respective meanings set forth below,
unless the context clearly otherwise requires:
1.1 "AFFILIATE" means, with respect to a particular Entity, an Entity
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Entity, and an Entity shall
be "unaffiliated" with another Entity if such Entities are not Affiliates with
respect to one another.
1.2 "CAUSE" means (i) an intentional act of fraud, embezzlement, theft
or any other material violation of law in connection with Executive's duties or
in the course of his employment with Employer involving material harm to
Employer; (ii) intentional wrongful damage to material assets of Employer; (iii)
intentional wrongful engagement in any activity that would constitute a material
breach of Sections 3.1 through 3.4 hereof; or (iv) physical or mental disability
that causes Executive to fail to perform his duties under this Agreement for a
continuous period of 12 months, as provided in Section 2.7(b). No act or
omission by Executive shall be deemed "intentional" if it was due to negligence
and shall be deemed "intentional" only if done, or omitted to be done, by
Executive not in good faith and without reasonable belief that his action or
omission was in or not opposed to the best interests of Employer and its
subsidiaries. Failure to meet performance standards or objectives of Employer
shall not constitute "Cause" for purposes hereof. To terminate the employment of
Executive for Cause, Employer must deliver to Executive a Notice of Termination
given within 90
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days after the Board of Directors both (i) has knowledge of conduct or an event
allegedly constituting Cause and (ii) has reason to believe that such conduct or
event could be grounds for Cause. For purposes of this Agreement a "Notice of
Termination" shall mean a copy of a resolution duly adopted by the affirmative
vote of not less than a simple majority of the membership of the Board of
Directors, excluding Executive, at a meeting called for the purpose of
determining that Executive has engaged in conduct that constitutes Cause (and at
which Executive had a reasonable opportunity, together with his counsel, to be
heard before the Board of Directors prior to such vote).
1.3 "CHANGE OF OWNERSHIP" means any one of the following events: (i)
the sale to any purchaser unaffiliated with Employer of all or substantially all
of the assets of Employer; (ii) the sale, distribution, or accumulation of more
than 50% of the outstanding voting stock of Employer to/by any acquiror or group
of affiliated acquirors that are unaffiliated with Employer; (iii) individuals
who, on the completion of Employer's chapter 11 reorganization under the
Bankruptcy Code, constitute the Board of Directors (the "Incumbent Directors")
cease for any reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to such completion whose election
or nomination for election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board (either by a specific vote or by approval
of the proxy statement of Employer in which such person is named as a nominee
for director, without objection to such nomination) shall be an Incumbent
Director; PROVIDED, HOWEVER, that no individual elected or nominated as a
director of Employer initially as a result of an actual or threatened election
contest with respect to directors or any other actual or threatened solicitation
of proxies or consents by or on behalf of any person other than the Board shall
be deemed to be an Incumbent Director; or (iv) the merger or consolidation of
Employer with another Entity unaffiliated with Employer if, immediately after
such merger or consolidation, less than a majority of the combined voting power
of the then
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outstanding securities of such Entity are held, directly or indirectly, in the
aggregate by the holders immediately prior to such transaction of the then
outstanding securities of Employer entitled to vote generally in the election of
directors.
In no event shall "Change of Ownership" be construed to include any
change of control of Employer or any subsidiary of Employer that occurs solely
as a result of any exchange or distribution of equity securities of Employer or
any such subsidiary upon consummation of a plan of reorganization for Employer
or any such subsidiary in its chapter 11 case pending as of the date of this
Agreement.
1.4 "CODE" means the Internal Revenue Code of 1986, as amended.
1.5 "COMPETING BUSINESS" means any of the following companies: (i)
Mercantile Stores Co., Inc.; Proffitt's, Inc.; or Carson Pirie Scott & Co.,
including each of their respective Affiliates; (ii) Lazarus, Inc.; (iii) Lazarus
PA, Inc.; or (iv) Rich's Department Stores, Inc.
1.6 "ENTITY" shall have the meaning provided in section 101(16) of the
Bankruptcy Code.
1.7 "GOOD REASON" means (i) the assignment to Executive of any duties
materially inconsistent with Executive's position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities as
contemplated in Article II, or any other action by Employer that results in a
material diminution in such position, authority, duties or responsibilities,
excluding for this purpose an action not taken in bad faith and that is remedied
by Employer within 10 days after receipt of written notice thereof given by
Executive, provided that repeated instances of such action shall be evidence of
the bad faith of Employer; (ii) a reduction in the Executive's annual Base
Salary of at least 10%; (iii) the relocation of Employer's principal executive
offices to a location more than 75 miles from the current location of such
offices; (iv) any material failure by Employer to comply with any of the
provisions of this Agreement, other than a failure not occurring in bad faith
and which is
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remedied by Employer within 10 days after receipt of written notice thereof
given by Executive, provided that repeated failures shall be evidence of the bad
faith of Employer; or (v) removal of Executive as Executive Vice President -
[___________], other than for Cause.
ARTICLE II
----------
EMPLOYMENT
----------
2.1 EFFECTIVENESS. Notwithstanding any other provision of the
Agreement, the Agreement shall not be effective until the Effective Date.
2.2 TERM. Employer shall employ Executive, and Executive shall serve
Employer pursuant to the terms of this Agreement, starting on the Effective
Date. The term of this Agreement shall extend initially until the third
anniversary of the Effective Date. The term of this Agreement shall be
automatically extended on the third anniversary of the Effective Date and each
anniversary of the Effective Date thereafter for a period of one year unless
Employer or Executive shall have given written notice of termination to the
other not less than 120 days prior to such anniversary of the Effective Date.
Upon termination of this Agreement pursuant to any such notice, Executive's
employment with Employer shall terminate, and Employer's only obligation to
Executive will be payment of the amounts described in Section 2.7(c)(ii).
2.3 DUTIES. Executive will serve as and perform the duties of Executive
Vice President - [____________] of Employer in accordance with the terms of this
Agreement. The duties of Executive shall be those commensurate with his office
and shall include those responsibilities reasonably assigned to Executive by the
Chairman or President of the Employer, with responsibility for reporting to the
Chairman or President of the Employer.
2.4 COMPENSATION. In consideration of Executive's services hereunder,
Employer shall pay Executive cash compensation consisting of an annual "Base
Salary" and "Bonus." As of the Effective
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Date, Executive's Base Salary shall be $________ per year, and his 1997 fiscal
year Bonus shall consist of an incentive bonus that includes a pro rata share,
based on the percentage of days served in fiscal 1997 after the Effective Date,
of up to 30% of Executive's Base Salary and a pro rata share, based on the
percentage of days served in fiscal 1997 before the Effective Date, of up to
[ ]% of Executive's annual salary immediately prior to the Effective Date in
accordance with the Key Employee Retention Program Orders (as defined in the
Debtors' Third Amended Joint Plan of Reorganization). Commencing with the
Effective Date, Executive shall participate in the Company's Equity and
Performance Incentive Plan and Executive's Bonus thereunder shall consist of an
incentive bonus of up to 30% of his Base Salary, as determined by the Board of
Directors pursuant to the provisions of such plan. For purposes of the preceding
sentences, the "year" for which the Bonus is payable to Executive shall be the
Employer's fiscal year beginning in February 1997 and each subsequent fiscal
year of the Employer. Executive's Base Salary shall be subject to review at the
discretion of the Board of Directors from time to time taking into account
changes in Executive's responsibilities, increases in the cost of living,
performance by Executive, increases in salary to other executives of Employer
and other pertinent factors.
2.5 PAYMENT SCHEDULE. The Compensation specified in Section 2.4 hereof
shall be payable as current salary and bonus in accordance with Employer's
payroll and bonus procedures for other executives. Base Salary shall be paid in
installments not less frequently than monthly and at the same rate for any
fraction of a month unexpired at the end of the term. Bonuses shall be paid
annually in a lump sum not later than April 15 or, if such day is not a business
day on which the Employer's executive offices are open, the first business day
thereafter.
2.6 EXPENSES. Executive shall be allowed reasonable traveling expenses
and other reasonable expenses in carrying out his duties under this Agreement
and shall be furnished office
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space, assistance and accommodations suitable to the character of his position
with Employer and adequate for the performance of his duties hereunder.
2.7 TERMINATION OF EMPLOYMENT.
(a) TERMINATION FOLLOWING A CHANGE OF OWNERSHIP. If (i) before
the second anniversary of a Change of Ownership Employer notifies Executive that
Executive is being terminated, and such termination is without Cause; (ii)
before the second anniversary of a Change of Ownership Executive terminates his
employment for Good Reason; (iii) Executive terminates his employment with
Employer for any reason, or without reason, during the 30-day period immediately
following the first anniversary of a Change of Ownership; or (iv) Executive's
employment with Employer is terminated in connection with but prior to a Change
of Ownership and termination occurs following the commencement of any discussion
with any third party that ultimately results in a Change of Ownership, Executive
shall be entitled (except as otherwise provided in paragraphs (b), (c) and (d)
of this Section 2.7 and subject to Section 5.1) to receive a lump sum payment as
severance compensation equal to the greater of (I) 2.99 times his "base amount"
as such term is defined in Section 280G of the Code, or (II) 2 times his most
recent Base Salary and Bonus. Employer shall make such payment not later than 45
days after the date of termination. If any payment made to the Executive
pursuant to this Section 2.7(a) or otherwise pursuant to or by reason of any
other agreement, policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right or similar right, or the
lapse or termination of any restriction on or the vesting or exercisability of
any of the foregoing (a "Payment") is determined to be subject to the excise tax
imposed by Section 4999 of the Code (or any successor provision thereto) by
reason of being considered "contingent on a change in ownership or control" of
the Employer, within the meaning of Section 280G of the Code (or any successor
provision thereto) or to any similar tax imposed by state
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<PAGE> 8
or local law, or to any interest or penalties with respect to such tax (such tax
or taxes, together with any such interest and penalties, being hereafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment or payments (collectively, a "280G
Gross- Up Payment"). The 280G Gross-Up Payment shall be in an amount such that,
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any excise tax imposed upon the
280G Gross-Up Payment, the Executive retains a portion of the 280G Gross-Up
Payment equal to the Excise Tax imposed upon the Payment.
(b) DISABILITY. Executive shall not be in breach of this
Agreement if he shall fail to perform his duties hereof because of physical or
mental disability. If Executive fails to render services to Employer because of
Executive's physical or mental disability for a continuous period of 12 months,
the Board of Directors or its delegate may terminate Executive's employment
prior to the end of the then current term. If any dispute exists between the
parties as to Executive's physical or mental disability at any time, such
question shall be settled by the opinion of an impartial reputable physician
agreed upon for that purpose by the parties or their representatives. Failing
agreement upon an impartial physician for purposes of the preceding sentence,
the question of Executive's physical or mental disability shall be resolved
within 10 days of a written request therefor by either party to the other, by a
physician designated by the then Executive Vice President of the Ohio Academy of
Family Physicians. The written opinion of the physician as to the matter in
dispute shall be final and binding on the parties.
(c) OTHER TERMINATIONS BY EMPLOYER. (i) CAUSE. Employer may
terminate the employment of Executive for Cause at any time upon notice given
pursuant to Section 5.6. Upon such termination, this Agreement and all of
Employer's obligations under this Agreement shall terminate, except that
Employer shall remain obligated to pay to Executive any unpaid Base Salary
through the
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<PAGE> 9
effective date of such termination and any vacation accrued but unused as of
Executive's last day worked.
(ii) NOT FOR CAUSE. Employer may terminate the
employment of Executive at any time for any reason. However, if such termination
of employment does not occur pursuant to Section 2.2 or under the circumstances
described in paragraphs (a), (b) or (c)(i) of this Section 2.7, Employer shall
remain obligated to Executive for (I) payment of Executive's unpaid Base Salary
(as described in Section 2.4) through the then-remaining term of this Agreement
pursuant to Section 2.2, (II) any Bonus (as described in Section 2.4) paid on or
before Executive's last day worked and (III) payment for any vacation accrued
but unused as of Executive's last day worked.
(d) DEATH. If Executive dies while rendering services under
this Agreement, there shall be payable to his estate an amount equal to his Base
Salary for the lesser of one year or the then remaining term of this Agreement.
Such amount shall be paid to Executive's estate in a single lump sum.
2.8 MITIGATION; OFFSET. Executive shall not be required to mitigate the
amount of any payment or benefit provided for in the Agreement by seeking other
employment or otherwise. However, any amount payable pursuant to this Agreement
following the termination of Executive's employment shall reduce any amount
payable by Employer to or with respect to Executive pursuant to any other
severance pay or other similar plan, program or arrangement of Employer,
including, without limitation, the Employer's Master Severance Plan for Key
Employees.
ARTICLE III
-----------
CERTAIN OBLIGATIONS OF EXECUTIVE
--------------------------------
3.1 NO PARTICIPATION IN OTHER BUSINESSES. Executive shall not, without
the consent of the Board of Directors, become actively associated with or
engaged in any business other than that of
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Employer or a division or Affiliate of Employer, and he shall do nothing
inconsistent with his duties to Employer.
3.2 TRADE SECRETS AND CONFIDENTIAL INFORMATION.
(a) UNAUTHORIZED DISCLOSURE, USE OR SOLICITATION. Executive
will keep in strict confidence, and will not, directly or indirectly, at any
time during or after his employment with Employer, disclose, furnish,
disseminate, make available or, except in the course of performing his duties of
employment under this Agreement, use any trade secrets or confidential business
and technical information of Employer or its customers, vendors or property
owners or managers, without limitation as to when or how Executive may have
acquired such information. Such confidential information will include, without
limitation, Employer's unique selling methods and trade techniques; management,
training, marketing and selling manuals; promotional materials; training courses
and other training and instructional materials; any personnel information;
material nonpublic financial information; any corporate organizational
information; lease terms; vendor, owner, manager and product information;
customer lists; other customer information; and other trade information.
Executive specifically acknowledges that all such confidential information
including, without limitation, customer lists, other customer information and
other trade information, whether reduced to writing, maintained on any form of
electronic media, or maintained in the mind or memory of Executive and whether
compiled by Employer and/or Executive, derives independent economic value from
not being readily known to or ascertainable by proper means by others who can
obtain economic value from its disclosure or use, that reasonable efforts have
been made by Employer to maintain the secrecy of such information, that such
information is the sole property of Employer and that any retention and use of
such information by Executive during his employment with Employer (except
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<PAGE> 11
in the course of performing his duties and obligations under this Agreement) or
after the termination of his employment will constitute a misappropriation of
Employer's trade secrets.
(b) POST-TERMINATION. Executive agrees that, upon termination
of Executive's employment with Employer, for any reason, Executive will return
to Employer, in good condition, all property of Employer, including without
limitation, the originals and all copies of all management, training, marketing
and selling manuals; promotional materials; other training and instructional
materials; financial information; vendor, owner, manager and product
information; customer lists; other customer information; and all other selling,
service and trade information and equipment. If such items are not returned,
Employer will have the right to charge Executive for all reasonable damages,
costs, attorneys' fees and other expenses incurred in searching for, taking,
removing and/or recovering such property.
3.3 NONCOMPETITION. Executive and Employer recognize that Executive's
duties under this Agreement will entail the receipt of trade secrets and
confidential information, which include not only information concerning
Employer's current operations, procedures, suppliers and other contacts, but
also its short-range and long-range plans, and that such trade secrets and
confidential information may have been developed by Employer and its Affiliates
at substantial cost and constitute valuable and unique property of Employer.
Accordingly, Executive acknowledges that the foregoing makes it reasonably
necessary for the protection of Employer's business interests that Executive not
compete with Employer or any of its Affiliates during the term of this Agreement
and for a reasonable and limited period thereafter. Therefore, during the term
of this Agreement and for one year after termination of the Agreement, Executive
shall not have any investment in a Competing Business other than a de minimus
investment and shall not render personal services to any such Competing Business
in any manner, including, without limitation, as owner, partner, director,
trustee, officer, employee,
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consultant or advisor thereof; PROVIDED, HOWEVER, that this Section 3.3 shall
not apply if Executive terminates his employment for Good Reason or Employer
terminates Executive other than for Cause. For purposes of the preceding
sentence, a de minimus investment is ownership of less than 1/2 of 1% of the
outstanding stock or debt of any Competing Business.
Notwithstanding Section 2.7 above, if Executive shall breach the
covenants contained in this Section 3.3 or in Section 3.2, Employer shall have
no further obligations to Executive pursuant to this Agreement and may recover
from Executive all such damages as it may be entitled to at law or in equity. In
addition, Executive acknowledges that any such breach is likely to result in
immediate and irreparable harm to Employer for which money damages are likely to
be inadequate. Accordingly, Executive consents to injunctive and other
appropriate equitable relief that Employer may seek to protect Employer's rights
under this Agreement. Such relief may include, without limitation, an injunction
to prevent Executive from disclosing any trade secrets or confidential
information concerning Employer to any Entity, to prevent any Entity from
receiving from Executive or using any such trade secrets or confidential
information and/or to prevent any Entity from retaining or seeking to retain any
other employees of Employer.
3.4 CONFLICTS OF INTEREST. Executive shall not engage in any activity
that would violate any Conflict of Interest or Business Ethics Statement of
Employer that Executive may sign from time to time.
ARTICLE IV
----------
OTHER BENEFITS
--------------
4.1 EMPLOYEE BENEFITS.
(a) Executive and Executive's family, as applicable, shall be
eligible for participation in and shall receive all benefits under the savings
and retirement programs, welfare
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benefit plans, fringe benefit programs and perquisites that Employer provides to
senior executives of Employer in effect from time to time.
(b) Subject to Section 5.1, upon termination under
Section 2.7(a) hereof:
(i) The benefits described in Section 4.1(a) will
continue until the Executive obtains new employment providing substantially
similar benefits, but in any event no later than two years after the date of
termination. During the period of continued coverage pursuant to this
Subsection, the Executive will be required to pay the same cost of coverage,
co-pays, deductibles and other similar payments paid by active senior executives
of the Company having elected the same type of coverage. The Executive will
cease to be eligible for continued health and life insurance benefits provided
by the Employer if he (I) waives such coverage or (II) fails to pay any amount
required for such coverage.
(ii) The Executive will be reimbursed by the
Employer for reasonable expenses incurred for outplacement counseling (I) that
are pre-approved by the Employer's Senior Vice President - Human Resources, (II)
that do not exceed 15% of the Executive's Base Salary and (III) that are
incurred by the Executive within 6 months following such termination.
4.2 RELOCATION. Executive shall relocate to a residence within 25 miles
of downtown Dayton, Ohio. Payments and reimbursements made on behalf of or to
Executive on account of such relocation shall be made in accordance with the
Employer's applicable relocation policy.
4.3 VACATION AND SICK LEAVE. Executive shall be entitled to vacation
and sick leave each year, in accordance with Employer's policies in effect from
time to time; PROVIDED, HOWEVER, that Executive shall be entitled to a minimum
of four weeks vacation per year.
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ARTICLE V
---------
MISCELLANEOUS
-------------
5.1 RELEASE. Payment of the amount described in Section 2.7(a) and the
benefits described in Section 4.1(b) to the Executive is conditioned upon the
Executive executing and delivering a release satisfactory to the Employer
releasing the Employer from any and all claims, demands, damages, actions and/or
causes of action whatsoever, which the Executive may have had on account of the
termination of his employment, including, but not limited to claims of
discrimination, including on the basis of sex, race, age, national origin,
religion, or handicapped status (with all applicable periods during which the
Executive may revoke the release or any provision thereof having expired), and
any and all claims, demands and causes of action for retirement (other than
under the retirement plans maintained by the Employer that are qualified under
Section 401(a) of the Code or under any "welfare benefit plan" of the Employer
(as the term "welfare benefit plan" is defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended)), severance or other
termination pay. Such release will not, however, apply to the ongoing
obligations of the Employer arising under this Agreement, or rights of
indemnification the Executive may have under the Employer's policies or by
contract or by statute.
5.2 SUCCESSORS AND BINDING AGREEMENT.
(a) Employer will require any successor to all or
substantially all of the businesses or assets of Employer (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise), by
agreement in form and substance reasonably satisfactory to Executive, expressly
to assume and agree to perform this Agreement in the same manner and to the same
extent Employer would be required to perform if no such succession had taken
place. This Agreement will be binding upon and inure to the benefit of Employer
and any successor to Employer, including without
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limitation any persons acquiring directly or indirectly all or substantially all
of the businesses or assets of Employer whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor will thereafter
be deemed "Employer" for the purposes of this Agreement).
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the
parties hereto will, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereof except as expressly
provided in Sections 5.2(a) and (b). Without limiting the generality or effect
of the foregoing, Executive's right to receive payments hereof will not be
assignable, transferable or delegable, whether by pledge, creation of a security
interest, or otherwise, other than by a transfer by Executive's will or by the
laws of descent and distribution and, if Executive attempts any assignment or
transfer contrary to this Section 5.2, Employer will have no liability to pay
any amount Executive attempts to assign, transfer or delegate.
5.3 GOVERNING LAW; ARBITRATION. This Agreement has been executed on
behalf of Employer by an officer of Employer located in the City of Moraine,
Ohio. This Agreement and all questions arising in connection with it shall be
governed by the internal substantive law of the State of Ohio, without giving
effect to principles of conflict of laws. Subject to the following sentence, all
disputes arising out of, or in connection with this Agreement, which are not
promptly settled by mutual agreement of the parties hereto, shall be finally
settled by arbitration in accordance with the rules of the American Arbitration
Association. Notwithstanding, Employer may, at its option, seek injunctive
relief as contemplated in Section 3.3 above either in lieu of or in addition to
the arbitration remedies provided for in this Section 5.3
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Arbitration shall be conducted by one or more arbitrators appointed in
accordance with such rules on the request of any party to the agreement giving
rise to the dispute. Arbitration shall take place in Dayton, Ohio. Such
arbitration shall be governed by this Agreement and shall be binding upon the
parties hereto. The validity, construction, performance or termination of any
agreement by and between the parties submitted to arbitration shall be
determined on the basis of the contractual obligations of the parties. The
arbitrator shall determine his jurisdiction over persons and subject matter if
such jurisdiction is challenged by one of the parties. The award of the
arbitrator shall: (a) be rendered in writing stating the grounds on which the
arbitrators base same, and how the costs of arbitration being borne; the
expenses of Executive to successfully petition or defend his interests shall be
borne by Employer; and (b) be carried out voluntarily and without delay, and
failing this, be made enforceable through either party by entry of a judgment in
a competent court of any jurisdiction.
5.4 SEVERABILITY. If any portion of this Agreement is held to be
invalid or unenforceable, such holding shall not affect any other portion of
this Agreement.
5.5 ENTIRE AGREEMENT. This Agreement comprises the entire agreement
between the parties hereto and, as of the date hereof, supersedes any prior
agreements between the parties. This Agreement may not be modified, renewed or
extended except by a written instrument referring to this Agreement and executed
by the parties hereto.
5.6 NOTICES. Any notice or consent required or permitted to be given
under this Agreement shall be in writing and shall be effective: (a) when given
by personal delivery, (b) one business day after being sent by overnight
delivery service or (c) five business days after being sent by certified U.S.
mail, return receipt requested, to the Secretary of Employer at its principal
place of business in the City of Moraine or to Executive at his last known
address as shown on the records of Employer.
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5.7 WITHHOLDING TAXES. Employer may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
THE ELDER-BEERMAN STORES CORP.
By:
-----------------------------------
Name: Frederick J. Mershad
Title: Chief Executive Officer
--------------------------------------
Executive
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<PAGE> 1
EXHIBIT 10(e)
SEVERANCE PAY PLAN FOR KEY EMPLOYEES
OF
THE ELDER-BEERMAN STORES CORP.
<PAGE> 2
SEVERANCE PAY PLAN FOR KEY EMPLOYEES
OF
THE ELDER-BEERMAN STORES CORP.
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Purpose............................................................................................ 1
2. Effective Date..................................................................................... 1
3. Definitions........................................................................................ 1
4. Eligibility........................................................................................ 4
5. Severance Compensation............................................................................. 4
6. Limitation and Indemnification..................................................................... 5
7. Mitigation; Offset................................................................................. 5
8. Timing of Severance Pay, Etc....................................................................... 6
9. Confidentiality; Confidential Information.......................................................... 6
10. Release............................................................................................ 7
11. Legal Fees and Expenses............................................................................ 7
12. Employment Rights.................................................................................. 7
13. Withholding Taxes.................................................................................. 7
14. Successors and Binding Effect...................................................................... 7
15. Governing Law...................................................................................... 8
16. Severability....................................................................................... 8
17. Captions........................................................................................... 8
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
18. Construction....................................................................................... 8
19. Administration of the Plan......................................................................... 9
20. Amendment and Termination......................................................................... 10
</TABLE>
<PAGE> 4
SEVERANCE PAY PLAN FOR KEY EMPLOYEES
OF
THE ELDER-BEERMAN STORES CORP.
1. PURPOSE. This Severance Pay Plan for Key Employees of The
Elder-Beerman Stores Corp. (the "Plan") is designed to assure fair treatment of
Key Employees (as defined below) in the event of a Change of Ownership (as
defined below). In such circumstances, it would permit Key Employees to make
critical career decisions in an atmosphere free of time pressure and financial
uncertainty, increasing their willingness to remain with The Elder-Beerman
Stores Corp. (the "Corporation") notwithstanding the outcome of a possible
Change of Ownership.
2. EFFECTIVE DATE. The Plan will be effective as of the effective date of
the Corporation's plan of reorganization (the "Effective Date").
3. DEFINITIONS. Where the following words and phrases appear in the Plan,
they have the respective meanings set forth below, unless their context clearly
indicates otherwise:
(a) BASE SALARY: With respect to each Key Employee, the annual
base compensation of such Key Employee at the rate in effect immediately prior
to the Change of Ownership or at such higher rate as may be in effect
immediately prior to the Key Employee's termination of employment.
(b) BOARD: The board of directors of the Corporation.
(c) CAUSE: Any one of the following:
(i) an intentional act of fraud, embezzlement, theft or any
other material violation of law in connection with the Key Employee's
duties or in the course of his employment with the Company involving
material harm to the Company;
(ii) intentional wrongful damage to material assets of the
Company;
(iii) intentional wrongful engagement in any activity that
would constitute a material breach of any Company policy regarding
confidentiality or competition with the Company; or
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(iv) physical or mental disability that causes the Key
Employee to fail to perform his duties for a continuous period of 12
months.
No act or omission by the Key Employee will be deemed
"intentional" if it was due to negligence and will be deemed "intentional" only
if done, or omitted to be done, by the Key Employee not in good faith and
without reasonable belief that his action or omission was in or not opposed to
the best interests of the Company. Failure to meet performance standards or
objectives established by the Company will not constitute "Cause" for purposes
hereof.
(d) CHANGE OF OWNERSHIP: Any one of the following events:
(i) the sale to any purchaser unaffiliated with the
Corporation of all or substantially all of the assets of the
Corporation;
(ii) the sale, distribution, or accumulation of more than
50% of the outstanding voting stock of the Corporation to/by any acquiror
or group of affiliated acquirors that are unaffiliated with the
Corporation;
(iii) individuals who, on the completion of the
Corporation's chapter 11 reorganization under the Bankruptcy Code,
constitute the Board (the "Incumbent Directors") cease for any reason to
constitute at least a majority of the Board, provided that any person
becoming a director subsequent to such completion whose election or
nomination for election was approved by a vote of at least two-thirds of
the Incumbent Directors then on the Board (either by a specific vote or
by approval of the proxy statement of the Corporation in which such
person is named as a nominee for director, without objection to such
nomination) shall be an Incumbent Director; provided, however, that no
individual elected or nominated as a director of the Corporation
initially as a result of an actual or threatened election contest with
respect to directors or any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than the Board
shall be deemed to be an Incumbent Director; or
(iv) the merger or consolidation of the Corporation with
another entity (as such term is defined in section 101(16) of the
Bankruptcy Code) (an "Entity") unaffiliated with the Corporation if,
immediately after such merger or consolidation, less than a majority of
the combined voting power of the then outstanding securities of such
Entity are held, directly or indirectly, in the aggregate by the holders
immediately prior to such transaction of the then outstanding securities
of the Corporation entitled to vote generally in the election of
directors.
In no event may "Change of Ownership" be construed to include any
change of control of the Corporation or any Subsidiary that occurs solely as a
result of any exchange or distribution of equity securities of the Corporation
or any Subsidiary upon consummation of a plan of reorganization for the
Corporation or any Subsidiary in its chapter 11 case.
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<PAGE> 6
(e) CODE: The Internal Revenue Code of 1986, as amended.
(f) COMMITTEE: The Committee described in Section 19.
(g) COMPANY: The Corporation and its Subsidiaries.
(h) GOOD REASON: Any one of the following:
(i) the assignment to the Key Employee of any duties
materially inconsistent with the Key Employee's position (including
status, offices, titles and reporting requirements), authority, duties or
responsibilities, or any other action by the Company that results in a
material diminution in such position, authority, duties or
responsibilities, excluding for this purpose an action not taken in bad
faith and that is remedied by the Company within 10 days after receipt of
written notice thereof given by the Key Employee, provided that repeated
instances of such action will be evidence of the bad faith of the
Company;
(ii) a reduction in the Key Employee's Base Salary of at
least 10%; or
(iii) except with respect to Regional Directors of Stores or
Store Managers, the relocation of the Key Employee's principal work
location to a location more than 50 miles away from the Key Employee's
current principal work location.
(i) INCENTIVE PAY: An amount equal to the Key Employee's target
bonus amount under the Corporation's Annual Incentive Award program for the year
in which the Key Employee's termination of employment occurs or, if greater, for
the year in which a Change of Ownership occurs.
(j) KEY EMPLOYEE: Any employee of the Corporation who holds the
title of Senior Vice President, Vice President or any other employee of the
Company who is designated for participation in the Plan by the Board.
Notwithstanding the foregoing, employees who would otherwise be Key Employees
will not be Key Employees for purposes of the Plan if they have entered into an
employment agreement, severance agreement or similar arrangement with the
Corporation (other than a Termination Agreement) providing for the payment of
severance compensation in specified circumstances following a Change of
Ownership.
(k) SEVERANCE PAY: The amount payable as set forth in Section 5(a)
of the Plan.
(l) SUBSIDIARY: A corporation, company or other entity (i) more
than 50% of whose outstanding shares or securities (representing the right to
vote for the election of directors or other managing authority) are, or (ii)
which does not have outstanding shares or securities (as may be the case in a
partnership, joint venture or unincorporated association), but more than 50% of
whose ownership interest representing the right generally to make decisions for
such other entity is, now or hereafter, owned or controlled, directly or
indirectly, by the Corporation.
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<PAGE> 7
(m) VOTING STOCK: Securities entitled to vote generally in the
election of directors.
4. ELIGIBILITY.
(a) Subject to the limitations described below, the Plan applies
to Key Employees who are employed on the date that a Change of Ownership occurs.
(b) A Key Employee will be eligible for Severance Pay and other
benefits provided pursuant to Section 5 ("Severance Compensation") and other
benefits under the Plan if:
(i) following a Change of Ownership and before the 18-month
anniversary of the Change of Ownership:
(A) the Key Employee's employment with the Company
is terminated by the Company other than for Cause; or
(B) the Key Employee voluntarily terminates his
employment with the Company for Good Reason; or
(ii) the Key Employee's employment with the Company is
terminated not more than 90 days prior to a Change of Ownership
and termination occurs following the commencement of any
discussion with any third party that ultimately results in a
Change of Ownership.
5. SEVERANCE COMPENSATION.
(a) SEVERANCE PAY:
(i) Each Key Employee who is a Senior Vice President, Vice
President or is otherwise designated by the Board to receive Severance
Pay at the same multiple as a Senior Vice President or Vice President and
who is terminated in accordance with Section 4(b) will, within 5 business
days after such termination, receive Severance Pay from the Company in a
lump sum payment (the "Severance Payment") in an amount equal to the sum
of 1 and 1/2 times the Key Employee's Base Salary plus his Incentive Pay.
(ii) Each Key Employee who is not described in Paragraph
(i) of this Subsection and who is terminated in accordance with Section
4(b) will, within 5 business days after such termination, receive
Severance Pay from the Company in a lump sum payment (the "Severance
Payment") in an amount equal to the Key Employee's Base Salary plus his
Incentive Pay.
(b) HEALTH AND LIFE BENEFITS: Each Key Employee who is
terminated in accordance with Section 4(b) may continue, for himself and his
eligible dependents, health and life insurance benefits for the one year period
immediately following his termination of employment. During
4
<PAGE> 8
any period of continued coverage pursuant to this Subsection, the Key Employee
will be required to pay the same cost of coverage, co-pays, deductibles and
other similar payments paid by active employees of the Company having elected
the same type of coverage. The Key Employee will cease to be eligible for
continued health and life insurance benefits provided by the Company if he (i)
waives such coverage, (ii) fails to pay any amount required for such coverage or
(iii) becomes eligible for other group health coverage. Following such one year
period, the Key Employee will be eligible to elect to continue, for himself and
his eligible dependents, health benefits in accordance with the provisions of
Section 4980B of the Code.
(c) OUTPLACEMENT COUNSELING. Each Key Employee who is terminated
in accordance with Section 4(b) will be reimbursed by the Company for reasonable
expenses incurred for outplacement counseling (i) which are pre-approved by the
Corporation's Senior Vice President-Human Resources, (ii) which do not exceed
15% of the Key Employee's Base Salary and (iii) which are incurred by the Key
Employee within 6 months following such termination.
(d) CALCULATION. The calculation of all payments of compensation
and other benefits to be provided to each affected Key Employee under the Plan
will be made by the Board.
6. LIMITATION AND INDEMNIFICATION.
(a) Notwithstanding anything in the Plan to the contrary, the
Company will not be obligated to pay to any Key Employee any amount of money, or
provide the Key Employee with any benefits, which are in excess of the then
maximum amount which the Company can deduct for federal income tax purposes.
(b) Without limiting the generality of Subsection (a) of this
Section, if any Key Employee is a "disqualified individual", as defined in
Section 280G(c) of the Code, the present value of payments under the Plan made
to the Key Employee will not in the aggregate be greater than the excess, if
any, of (i) 299% of the Key Employee's "base amount", as determined under
Section 280G of the Code, over (ii) the aggregate present value of all payments
in the nature of compensation (other than the payments under the Plan) to or for
the Key Employee's benefit that are considered "contingent on a change" in
ownership or control of the Corporation as determined under Section 280G(b)(2)
of the Code. If the application of the preceding sentence should require a
reduction in benefits, such reduction will be implemented first, by reducing any
non-cash benefits to the extent necessary, and second, by reducing any cash
benefits to the extent necessary. In each case, the reductions will be made
starting with the latest payment or benefit. In no event, however, will any
benefit be reduced to the extent such benefit is specifically excluded by
Section 280G(b) of the Code as a "parachute payment" or as an "excess parachute
payment". Any decisions regarding the requirement or implementation of such
reductions will be made by tax counsel selected by the Corporation's independent
accountants and acceptable to the Key Employee.
7. MITIGATION; OFFSET. A Key Employee is not required to mitigate
the amount of any payment or benefit provided for in the Plan by seeking other
employment or otherwise. However,
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<PAGE> 9
any amounts payable pursuant to the Plan shall reduce any amount payable by
Employer to or with respect to Executive pursuant to any other severance pay or
other similar plan or arrangement of the Company including, without limitation,
the Company's Master Severance Plan for Key Employees or any Termination
Agreement between the Corporation and any Key Employee.
8. TIMING OF SEVERANCE PAY, ETC. Severance Pay is not included as
earnings for the purpose of calculating contributions or benefits under any
employee benefit plan of the Company. Severance Pay will not be made from any
benefit plan funds, and will constitute an unfunded, unsecured obligation of the
Company. Severance Pay will be paid in a lump sum on the date of termination or
promptly thereafter. Severance Pay will be net of any income, excise or
employment taxes which are required to be withheld from such payment.
9. CONFIDENTIALITY; CONFIDENTIAL INFORMATION. Payment of Severance
Compensation to a Key Employee is conditioned upon the Key Employee agreeing in
writing with the Corporation that:
(a) The Key Employee will keep in strict confidence, and will not,
directly or indirectly disclose, furnish, disseminate, make available or use any
trade secrets or confidential business and technical information of the Company
or its customers, vendors or property owners or managers, without limitation as
to when or how the Key Employee may have acquired such information. Such
confidential information will include, without limitation, the Company's unique
selling methods and trade techniques; management, training, marketing and
selling manuals; promotional materials; training courses and other training and
instructional materials; any personnel information; material nonpublic financial
information; any corporate organizational information; lease terms; vendor,
owner, manager and product information; customer lists; other customer
information; and other trade information. The Key Employee specifically
acknowledges that all such confidential information including, without
limitation, customer lists, other customer information and other trade
information, whether reduced to writing, maintained on any form of electronic
media, or maintained in the mind or memory of the Key Employee and whether
compiled by the Company and/or the Key Employee, derives independent economic
value from not being readily known to or ascertainable by proper means by others
who can obtain economic value from its disclosure or use, that reasonable
efforts have been made by the Company to maintain the secrecy of such
information, that such information is the sole property of the Company and that
any retention and use of such information by the Key Employee after the
termination of his employment will constitute a misappropriation of the
Company's trade secrets.
(b) The Key Employee agrees that, upon termination of the Key
Employee's employment with the Company for any reason, the Key Employee will
return to the Company, in good condition, all property of the Company, including
without limitation, the originals and all copies of all management, training,
marketing and selling manuals; promotional materials; other training and
instructional materials; any personnel information; any corporate organizational
information; financial information; vendor, owner, manager and product
information; customer lists; other customer information; and all other selling,
service and trade information and equipment. If such items are not returned, the
Company will have the right to charge the Key
6
<PAGE> 10
Employee for all reasonable damages, costs, attorneys' fees and other expenses
incurred in searching for, taking, removing and/or recovering such property.
(c) The Key Employee further acknowledges and agrees that his
obligation of confidentiality survives until and unless such Confidential
Information of the Company becomes, through no fault of the Key Employee,
generally known to the public or the Key Employee is required by law (after
providing the Company with notice and opportunity to contest such requirement)
to make disclosure. The Key Employee's obligations under this Section are in
addition to, and not in limitation or preemption of, all other obligations of
confidentiality which the Key Employee may have to the Company under general
legal or equitable principles or statutes.
10. RELEASE. Payment of the Severance Compensation and other benefits to
a Key Employee is conditioned upon the Key Employee executing and delivering a
release satisfactory to the Corporation releasing the Company from any and all
claims, demands, damages, actions and/or causes of action whatsoever, which he
may have had on account of the termination of his employment, including, but not
limited to claims of discrimination, including on the basis of sex, race, age,
national origin, religion, or handicapped status (with all applicable periods
during which the Key Employee may revoke the release or any provision thereof
having expired), and any and all claims, demands and causes of action for
retirement (other than under the retirement plans maintained by the Company that
are qualified under Section 401(a) of the Code or under any "welfare benefit
plan" of the Company (as the term "welfare benefit plan" is defined in Section
3(1) of the Employee Retirement Income Security Act of 1974, as amended)),
severance or other termination pay. Such release will not, however, apply to the
ongoing obligations of the Company arising under the Plan, or rights of
indemnification the Key Employee may have under the Company's policies or by
contract or by statute.
11. LEGAL FEES AND EXPENSES. In the event the Key Employee prevails, in
whole or in part, in connection with a claim adjudicated pursuant to Section
19(e)(iii), the Company will pay and be solely financially responsible for any
and all reasonable attorneys' and related fees and expenses incurred by the Key
Employee in connection with such claim.
12. EMPLOYMENT RIGHTS. Nothing expressed or implied in the Plan creates
any right or duty on the part of the Company or the Key Employee to have the Key
Employee remain in the employment of the Company at any time prior to a Change
of Ownership.
13. WITHHOLDING OF TAXES. The Company may withhold from any amounts
payable under the Plan all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling.
14. SUCCESSORS AND BINDING EFFECT.
(a) The Company will require any successor (including without
limitation any persons acquiring directly or indirectly all or substantially all
of the business and/or assets of the
7
<PAGE> 11
Company whether by purchase, merger, consolidation, reorganization or otherwise,
and such successor will thereafter be deemed the Company for the purposes of the
Plan) to assume and agree to perform the obligations under the Plan in the same
manner and to the same extent the Company would be required to perform if no
such succession had taken place. The Plan will be binding upon and inure to the
benefit of the Company and any successor to the Company, but is not otherwise
assignable, transferable or delegable by the Company.
(b) The rights under the Plan will inure to the benefit of and be
enforceable by the Key Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees and/or legatees.
(c) The rights under the Plan are personal in nature and neither
the Company nor any Key Employee will, without the consent of the other, assign,
transfer or delegate the Plan or any rights or obligations hereunder except as
expressly provided in this Section. Without limiting the generality of the
foregoing, a Key Employee's right to receive payments hereunder is not
assignable, transferable or delegable, whether by pledge, creation of a security
interest or otherwise, other than by a transfer by will or by the laws of
descent and distribution and, in the event of any attempted assignment or
transfer contrary to this Subsection, the Company has no liability to pay any
amount so attempted to be assigned, transferred or delegated.
(d) The obligation of the Company to make payments and/or provide
benefits hereunder represents an unsecured obligation of the Company.
(e) The Corporation and each Key Employee recognize that each
party will have no adequate remedy at law for breach by the other of any of the
agreements contained herein and, in the event of any such breach, the
Corporation and each Key Employee hereby agree and consent that the other will
be entitled to a decree of specific performance, mandamus or other appropriate
remedy to enforce performance of obligations under the Plan.
15. GOVERNING LAW. The validity, interpretation, construction and
performance of the Plan will be construed and governed in accordance with the
laws of the State of Ohio, without giving effect to the principals of conflict
of laws of such State.
16. SEVERABILITY. In the event that one or more provisions of the Plan is
invalidated for any reason by a court of competent jurisdiction, any provision
so invalidated will be deemed to be separable from the other provisions hereof,
and the remaining provisions of the Plan will continue to be valid and fully
enforceable.
17. CAPTIONS. The captions in the Plan are for convenience of reference
only and do not define, limit or describe the scope or intent of the Plan or any
part hereof and are not to be considered in any construction hereof.
8
<PAGE> 12
18. CONSTRUCTION. The masculine gender, where appearing in the Plan, is
deemed to include the feminine gender and the singular is deemed to include the
plural, unless the context clearly indicates to the contrary.
19. ADMINISTRATION OF THE PLAN.
(a) IN GENERAL: The Plan will be administered by the Board, which
is the named fiduciary under the Plan. The Board may from time to time delegate
all or any part of its authority under the Plan to a committee of the Board (or
subcommittee thereof). A majority of the committee (or subcommittee thereof)
will constitute a quorum, and the action of the members of the committee (or
subcommittee thereof) present at any meeting at which a quorum is present, or
acts unanimously approved in writing, will be the acts of the committee (or
subcommittee thereof). To the extent of any such delegation, references in the
Plan to the Board (other than in Section 20) are deemed to be references to any
such committee or subcommittee.
(b) INTERPRETATION: Except as otherwise provided in Paragraph
(iii) of Subsection (e) of this Section, the Board has the sole and absolute
discretion to interpret where necessary all provisions of the Plan (including,
without limitation, by supplying omissions from, correcting deficiencies in, or
resolving inconsistencies or ambiguities, in the language of the Plan), to
determine the rights and status under the Plan of Key Employees or other
persons, to resolve questions or disputes arising under the Plan and to make any
determinations with respect to the benefits payable hereunder and the persons
entitled thereto as may be necessary for the purposes of the Plan. Without
limiting the generality of the forgoing, the Board is hereby granted the
authority (i) to determine whether a particular employee is a "Key Employee"
under the Plan and (ii) to determine whether a particular Key Employee is
eligible for Severance Compensation and other benefits under the Plan.
(c) DELEGATION OF DUTIES: The Board may delegate any of its
administrative duties, including, without limitation, duties with respect to the
processing, review, investigation, approval and payment of Severance
Compensation, to a named administrator or administrators.
(d) REGULATIONS: The Board will promulgate any rules and
regulations it deems necessary in order to carry out the purposes of the Plan or
to interpret the terms and conditions of the Plan; provided, however, that no
rule, regulation or interpretation may be contrary to the provisions of the
Plan.
(e) CLAIMS PROCEDURE: (i) The Board will determine the rights of
any employee of the Company to any Severance Compensation or other benefits
hereunder. Any employee or former employee of the Company who believes that he
is entitled to receive Severance Compensation or any other benefit under the
Plan, including other than that initially determined by the Board, may file a
claim in writing with the Corporation's Senior Vice President-Human Resources.
The Board will, no later than 90 days after the receipt of a claim, either allow
or deny the claim by written notice to the claimant. If a claimant does not
receive written notice of the
9
<PAGE> 13
Board's decision on his claim within such 90-day period, the claim is deemed to
have been denied in full.
A denial of a claim by the Board, wholly or partially, will be
written in a manner calculated to be understood by the claimant and will
include:
(A) the specific reason or reasons for the denial;
(B) specific reference to pertinent Plan provisions
on which the denial is based;
(C) a description of any additional material or
information necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary; and
(D) an explanation of the claim review procedure.
(ii) A claimant whose claim is denied (or his duly
authorized representative) may, within 30 days after receipt of denial of
his claim, request a review of such denial by the Board by filing with
the Secretary of the Corporation a written request for review of his
claim. If the claimant does not file a request for review within such
30-day period, the claimant will be deemed to have acquiesced in the
original decision of the Board on his claim. If a written request for
review is so filed within such 30-day period, the Board will conduct a
full and fair review of such claim. During such full review, the claimant
will be given the opportunity to review documents that are pertinent to
his claim and to submit issues and comments in writing. The Board will
notify the claimant of its decision on review within 60 days after
receipt of a request for review. Notice of the decision on review will be
in writing. If the decision on review is not furnished to the claimant
within such 60-day period, the claim will be deemed to have been denied
on review.
(iii) A claimant whose claim review pursuant to Paragraph
(ii) of this Subsection is denied (or his duly authorized representative)
may, within 30 days after receipt of denial of his claim, submit his
claim to arbitration before an experienced employment arbitrator licensed
to practice law. In connection with such arbitration, such arbitrator
shall have the authorities granted to the Board by Subsection (b) of this
Section.
(e) REVOCABILITY OF ACTION: Any action taken by the Board with
respect to the rights or benefits under the Plan of any employee will be
revocable by the Board as to payments or distributions not yet made to such
person, and acceptance of Severance Compensation or any other benefit under the
Plan constitutes acceptance of and agreement to the Board making any appropriate
adjustments in future payments or distributions to such person to offset any
excess or underpayment previously made to him.
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<PAGE> 14
20. AMENDMENT AND TERMINATION. The Corporation reserves the right, except
as hereinafter provided, at any time and from time to time, to amend, modify
change or terminate the Plan; provided, however, that after the occurrence of a
Change of Ownership any such amendment, modification, change or termination that
adversely effects the rights of any Key Employee under the Plan may not be made
without the written consent of any such Key Employee.
IN WITNESS WHEREOF, The Elder-Beerman Stores Corp. has caused the
Plan to be executed this ___ day of ______________, 1997.
ATTEST: THE ELDER-BEERMAN STORES CORP.
By:
- ------------------------ -----------------------------------
Title:
--------------------------------
11
<PAGE> 1
EXHIBIT 10(f)
DIRECTOR INDEMNIFICATION AGREEMENT
----------------------------------
This Director Indemnification Agreement, dated as of
___________ __, 1997 (this "Agreement"), is made by and between The
Elder-Beerman Stores Corp., an Ohio corporation (the "Company"), and
____________________ (the "Indemnitee"), a director of the Company.
RECITALS
--------
A. The Indemnitee is presently serving as a director of the
Company, and the Company desires that the Indemnitee continue serving in such
capacity. The Indemnitee is willing, subject to certain conditions including the
execution and performance of this Agreement by the Company, to continue serving
in such capacity.
B. In addition to the indemnification to which the Indemnitee
is entitled under the Amended Code of Regulations of the Company (the
"Regulations"), the Company has obtained, at its sole expense, insurance
protecting the Company and its officers and directors including the Indemnitee
against certain losses arising out of any threatened, pending or completed
action, suit, or proceeding to which such persons may be made or are threatened
to be made parties.
NOW, THEREFORE, in order to induce the Indemnitee to continue
to serve in his present capacity, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and
the Indemnitee agree as follows:
1. CONTINUED SERVICE
-----------------
The Indemnitee shall continue to serve at the will of the
Company as a director of the Company so long as he is duly elected in accordance
with the Regulations or until he resigns in writing in accordance with
applicable law.
2. INITIAL INDEMNITY
-----------------
(a) The Company shall indemnify the Indemnitee, if or when he
is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or
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<PAGE> 2
proceeding, whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the Company), by reason of the fact that he
is or was a director of the Company or is or was serving at the request of the
Company as a director, trustee, officer, employee, or agent of another
corporation, domestic or foreign, nonprofit or for profit, partnership, joint
venture, trust, or other enterprise, or by reason of any action alleged to have
been taken or omitted in any such capacity, against any and all costs, charges,
expenses (including fees and expenses of attorneys and/or others; all such
costs, charges and expenses being herein jointly referred to as "Expenses"),
judgments, fines, and amounts paid in settlement, actually and reasonably
incurred by the Indemnitee in connection therewith including any appeal of or
from any judgment or decision, unless it is proved by clear and convincing
evidence in a court of competent jurisdiction that the Indemnitee's action or
failure to act involved an act or omission undertaken with deliberate intent to
cause injury to the Company or undertaken with reckless disregard for the best
interests of the Company. In addition, with respect to any criminal action or
proceeding, indemnification hereunder shall be made only if the Indemnitee had
no reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the Indemnitee did not satisfy the foregoing standard of
conduct to the extent applicable thereto.
(b) The Company shall indemnify the Indemnitee, if or when he
is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding by or in the right of the Company to
procure a judgment in its favor, by reason of the fact that the Indemnitee is or
was a director of the Company or is or was serving at the request of the Company
as a director, trustee, officer, employee, or agent of another corporation,
domestic or foreign, nonprofit or for profit, partnership, joint venture, trust,
or other enterprise, against any and all Expenses actually and reasonably
incurred by the Indemnitee in connection with the defense or settlement thereof
or any appeal of or from any judgment or decision, unless it is proved by clear
and convincing evidence in a court of competent jurisdiction that the
Indemnitee's action or failure to act involved an act or omission undertaken
with deliberate intent to cause injury to the Company or undertaken with
reckless disregard for the best interests of the Company, except that no
indemnification pursuant to this Section 2(b) shall be made in respect of any
action or suit in which the only liability asserted against the Indemnitee is
pursuant to Section 1701.95 of the Ohio Revised Code (the "ORC").
(c) Any indemnification under Section 2(a) or 2(b) (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the Indemnitee is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 2(a) or 2(b). Such authorization shall be made (i)
by the Board of Directors of the Company (the "Board") by a majority vote of a
quorum consisting of directors who were not and are not parties to or threatened
with such action, suit, or proceeding, or (ii) if such a quorum of disinterested
directors is not available or if a majority of such quorum so directs, in a
written opinion by independent legal counsel (designated for such purpose by the
Board) which shall not be an attorney, or a firm having associated with it an
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<PAGE> 3
attorney, who has been retained by or who has performed services for the
Company, or any person to be indemnified, within the five years preceding such
determination, or (iii) by the shareholders of the Company (the "Shareholders"),
or (iv) by the court of common pleas or other court in which such action, suit,
or proceeding was brought.
(d) To the extent that the Indemnitee has been successful on
the merits or otherwise, including the dismissal of an action without prejudice,
in defense of any action, suit, or proceeding referred to in Section 2(a) or
2(b), or in defense of any claim, issue, or matter therein, he shall be
indemnified against Expenses actually and reasonably incurred by him in
connection therewith. Expenses actually and reasonably incurred by the
Indemnitee in defending any such action, suit, or proceeding shall be paid by
the Company as they are incurred in advance of the final disposition of such
action, suit, or proceeding under the procedure set forth in Section 4(b)
hereof.
(e) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on the Indemnitee with respect to any employee
benefit plan; references to "serving at the request of the Company" shall
include any service as a director, officer, employee, or agent of the Company
which imposes duties on, or involves services by, the Indemnitee with respect to
an employee benefit plan, its participants or beneficiaries; references to the
masculine shall include the feminine; references to the singular shall include
the plural and vice versa; the word including is used by way of illustration
only and not by way of limitation.
(f) No amendment to the Amended Articles of Incorporation of
the Company (the "Articles") or the Regulations shall deny, diminish, or
encumber the Indemnitee's rights to indemnity pursuant to the Regulations, the
ORC, or any other applicable law as applied to any act or failure to act
occurring in whole or in part prior to the date (the "Effective Date") upon
which the amendment was approved by the Shareholders. In the event that the
Company shall purport to adopt any amendment to its Articles or Regulations or
take any other action the effect of which is to deny, diminish, or encumber the
Indemnitee's rights to indemnity pursuant to the Articles, the Regulations, the
ORC, or any such other law, such amendment shall apply only to acts or failures
to act occurring entirely after the Effective Date thereof.
3. ADDITIONAL INDEMNIFICATION
--------------------------
(a) Pursuant to Section 1701.13(E)(6) of the ORC, without
limiting any right which the Indemnitee may have pursuant to Section 2 hereof or
any other provision of this Agreement or the Articles, the Regulations, the ORC,
any policy of insurance, or otherwise, but subject to any limitation on the
maximum permissible indemnity which may exist under applicable law at the time
of any request for indemnity hereunder and subject to the following provisions
of this Section 3, the Company shall indemnify the Indemnitee against any amount
which he is or becomes obligated to pay relating to or arising out of any claim
made against him
- 3 -
<PAGE> 4
because of any act, failure to act, or neglect or breach of duty, including any
actual or alleged error, misstatement, or misleading statement, that he commits,
suffers, permits, or acquiesces in while acting in his capacity as a director of
the Company. The payments which the Company is obligated to make pursuant to
this Section 3 shall include any and all Expenses, judgments, fines, and amounts
paid in settlement, actually and reasonably incurred by the Indemnitee in
connection therewith including any appeal of or from any judgment or decision;
PROVIDED, HOWEVER, that the Company shall not be obligated under this Section 3
to make any payment in connection with any claim against the Indemnitee:
(i) to the extent of any fine or similar
governmental imposition which the Company is
prohibited by applicable law from paying
which results from a final, nonappealable
order; or
(ii) to the extent based upon or attributable to
the Indemnitee having actually realized a
personal gain or profit to which he was not
legally entitled, including profit from the
purchase and sale by the Indemnitee of
equity securities of the Company which are
recoverable by the Company pursuant to
Section 16(b) of the Securities Exchange Act
of 1934, or profit arising from transactions
in publicly traded securities of the Company
which were effected by the Indemnitee in
violation of Section 10(b) of the Securities
Exchange Act of 1934, or Rule 10b-5
promulgated thereunder.
(b) A determination as to whether the Indemnitee shall be
entitled to indemnification under this Section 3 shall be made in accordance
with Section 4(a) hereof. Expenses incurred by the Indemnitee in defending any
claim to which this Section 3 applies shall be paid by the Company as they are
actually and reasonably incurred in advance of the final disposition of such
claim under the procedure set forth in Section 4(b) hereof.
4. CERTAIN PROCEDURES RELATING TO INDEMNIFICATION
----------------------------------------------
(a) For purposes of pursuing his rights to indemnification
under Section 3 hereof, the Indemnitee shall (i) submit to the Board a sworn
statement of request for indemnification substantially in the form of Exhibit l
attached hereto and made a part hereof (the "Indemnification Statement")
averring that he is entitled to indemnification hereunder; and (ii) present to
the Company reasonable evidence of all amounts for which indemnification is
requested. Submission of an Indemnification Statement to the Board shall create
a presumption that the Indemnitee is entitled to indemnification hereunder, and
the Company shall, within 60 calendar days after submission of the
Indemnification Statement, make the payments requested in the Indemnification
Statement to or for the benefit of the Indemnitee, unless (A) within such
60-calendar-day period the Board shall resolve by vote of a majority of the
directors at a meeting
- 4 -
<PAGE> 5
at which a quorum is present that the Indemnitee is not entitled to
indemnification under Section 3 hereof, (B) such vote shall be based upon clear
and convincing evidence (sufficient to rebut the foregoing presumption), and (C)
the Board shall notify Indemnitee within such period of such vote, which notice
shall disclose with particularity the evidence upon which the vote is based. The
foregoing notice shall be sworn to by all persons who participated in the vote
and voted to deny indemnification. The provisions of this Section 4(a) are
intended to be procedural only and shall not affect the right of Indemnitee to
indemnification under Section 3 of this Agreement so long as Indemnitee follows
the prescribed procedure, and any determination by the Board that Indemnitee is
not entitled to indemnification and any failure to make the payments requested
in the Indemnification Statement shall be subject to judicial review by any
court of competent jurisdiction.
(b) For purposes of obtaining payments of Expenses in advance
of final disposition pursuant to the last sentence of Section 2(d) or the last
sentence of Section 3(b) hereof, the Indemnitee shall submit to the Company a
sworn request for advancement of Expenses substantially in the form of Exhibit 2
attached hereto and made a part hereof (the "Undertaking"), averring that he has
reasonably incurred or will reasonably incur actual Expenses in defending an
action, suit or proceeding referred to in Section 2(a) or 2(b) or any claim
referred to in Section 3, or pursuant to Section 8 hereof. Unless at the time of
the Indemnitee's act or omission at issue, the Articles or the Regulations
prohibit such advances by specific reference to ORC Section 1701.13(E)(5)(a) or
unless the only liability asserted against the Indemnitee in the subject action,
suit or proceeding is pursuant to ORC Section 1701.95, the Indemnitee shall be
eligible to execute Part A of the Undertaking by which he undertakes to: (i)
repay such amount if it is proved by clear and convincing evidence in a court of
competent jurisdiction that the Indemnitee's action or failure to act involved
an act or omission undertaken with deliberate intent to cause injury to the
Company or undertaken with reckless disregard for the best interests of the
Company; and (ii) reasonably cooperate with the Company concerning the action,
suit, proceeding or claim. In all cases, the Indemnitee shall be eligible to
execute Part B of the Undertaking by which he undertakes to repay such amount if
it ultimately is determined that he is not entitled to be indemnified by the
Company under this Agreement or otherwise. In the event that the Indemnitee is
eligible to and does execute both Part A and Part B of the Undertaking, the
Expenses which are paid by the Company pursuant thereto shall be required to be
repaid by the Indemnitee only if he is required to do so under the terms of both
Part A and Part B of the Undertaking. Upon receipt of the Undertaking, the
Company shall thereafter promptly pay such Expenses of the Indemnitee as are
noticed to the Company in reasonable detail arising out of the matter described
in the Undertaking. No security shall be required in connection with any
Undertaking.
5. LIMITATION ON INDEMNITY
-----------------------
Notwithstanding anything contained herein to the contrary, the
Company shall not be required hereby to indemnify the Indemnitee with respect to
any action, suit, or proceeding
- 5 -
<PAGE> 6
that was initiated by the Indemnitee unless (a) such action, suit, or proceeding
was initiated by the Indemnitee to enforce any rights to indemnification arising
hereunder and such person shall have been formally adjudged to be entitled to
indemnity by reason hereof, (b) authorized by another agreement to which the
Company is a party whether heretofore or hereafter entered, or (c) otherwise
ordered by the court in which the suit was brought.
6. SUBROGATION; DUPLICATION OF PAYMENTS
------------------------------------
(a) In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
(b) The Company shall not be liable under this Agreement to
make any payment in connection with any claim made against Indemnitee to the
extent Indemnitee has actually received payment (under any insurance policy, the
Regulations or otherwise) of the amounts otherwise payable hereunder.
7. SHAREHOLDER RATIFICATION
------------------------
The Company may, at its option, propose at any future meeting
of Shareholders that this Agreement be ratified by the Shareholders; PROVIDED,
HOWEVER, that the Indemnitee's rights hereunder shall be fully enforceable in
accordance with the terms hereof whether or not such ratification is sought or
obtained.
8. FEES AND EXPENSES OF ENFORCEMENT
---------------------------------
It is the intent of the Company that the Indemnitee not be
required to incur the expenses associated with the enforcement of his rights
under this Agreement by litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Indemnitee hereunder. Accordingly, if it should appear to the
Indemnitee that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person takes
any action to declare this Agreement void or unenforceable, or institutes any
action, suit or proceeding to deny, or to recover from, the Indemnitee the
benefits intended to be provided to the Indemnitee hereunder, the Company
irrevocably authorizes the Indemnitee from time to time to retain counsel of his
choice, at the expense of the Company as hereafter provided, to represent the
Indemnitee in connection with the initiation or defense of any litigation or
other legal action, whether by or against the Company or any director, officer,
shareholder, or other person affiliated with the
- 6 -
<PAGE> 7
Company, in any jurisdiction. Regardless of the outcome thereof, the Company
shall pay and be solely responsible for any and all costs, charges, and
expenses, including fees and expenses of attorneys and others, reasonably
incurred by the Indemnitee pursuant to this Section 8.
9. MERGER OR CONSOLIDATION
-----------------------
In the event that the Company shall be a constituent
corporation in a consolidation, merger, or other reorganization, the Company, if
it shall not be the surviving, resulting, or acquiring corporation therein,
shall require as a condition thereto that the surviving, resulting, or acquiring
corporation agree to assume all of the obligations of the Company hereunder and
to indemnify the Indemnitee to the full extent provided herein. Whether or not
the Company is the resulting, surviving, or acquiring corporation in any such
transaction, the Indemnitee shall stand in the same position under this
Agreement with respect to the resulting, surviving, or acquiring corporation as
he would have with respect to the Company if its separate existence had
continued.
10. NONEXCLUSIVITY; NO THIRD PARTY BENEFICIARIES;
---------------------------------------------
SEVERABILITY
------------
(a) The rights to indemnification provided by this Agreement
shall not be exclusive of any other rights of indemnification to which the
Indemnitee may be entitled under the Articles, the Regulations, the ORC or any
other statute, any insurance policy, agreement, or vote of shareholders or
directors or otherwise, as to any actions or failures to act by the Indemnitee,
and shall continue after he has ceased to be a director, officer, employee, or
agent of the Company or other entity for which his service gives rise to a right
hereunder, and shall inure to the benefit of his heirs, executors and
administrators.
(b) Except as provided in Section 10(a), the rights to
indemnification provided by this Agreement are personal to Indemnitee and are
non-transferable by Indemnitee, and no party other than the Indemnitee is
entitled to indemnification under this Agreement.
(c) If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid and legal.
- 7 -
<PAGE> 8
11. SECURITY
--------
To ensure that the Company's obligations pursuant to this
Agreement can be enforced by Indemnitee, the Company may, at its option,
establish a trust pursuant to which the Company's obligations pursuant to this
Agreement and other similar agreements can be funded.
12. NOTICES
-------
All notices and other communications hereunder shall be in
writing and shall be personally delivered or sent by recognized overnight
courier service (a) if to the Company, to the then-current principal executive
offices of the Company (Attention: General Counsel) or (b) if to the Indemnitee,
to the last known address of Indemnitee as reflected in the Company's records.
Either party may change its address for the delivery of notices or other
communications hereunder by providing notice to the other party as provided in
this Section 12. All notices shall be effective upon actual delivery by the
methods specified in this Section 12.
13. GOVERNING LAW
-------------
This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without giving effect to the
principles of conflict of laws thereof.
14. MODIFICATION
------------
This Agreement and the rights and duties of the Indemnitee and
the Company hereunder may be modified only by an instrument in writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
THE ELDER-BEERMAN STORES CORP.
By________________________________
Title:
----------------------------------
[Signature of Indemnitee]
- 8 -
<PAGE> 9
EXHIBIT 1
---------
INDEMNIFICATION STATEMENT
-------------------------
STATE OF ________________)
) SS
COUNTY OF ______________ )
I, _______________ , being first duly sworn, do depose and say
as follows:
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated _________ __, 1997, between The Elder-Beerman
Stores Corp., an Ohio corporation (the "Company"), and the undersigned.
2. I am requesting indemnification against costs, charges,
expenses (which may include fees and expenses of attorneys and/or others),
judgments, fines, and amounts paid in settlement (collectively, "Liabilities"),
which have been actually and reasonably incurred by me in connection with a
claim referred to in Section 3 of the aforesaid Indemnification Agreement.
3. With respect to all matters related to any such claim, I am
entitled to be indemnified as herein contemplated pursuant to the aforesaid
Indemnification Agreement.
4. Without limiting any other rights which I have or may have,
I am requesting indemnification against Liabilities which have or may arise out
of
------------------------------------------
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for
said County and State, this _____ day of _________, 1997.
------------------------------------------
[Seal]
My commission expires the _____ day of __________, 19__ .
<PAGE> 10
EXHIBIT 2
---------
UNDERTAKING
-----------
STATE OF )
) SS
COUNTY OF )
I, _________________________________, being first duly sworn,
do depose and say as follows:
1. This Undertaking is submitted pursuant to the
Indemnification Agreement, dated ____________ , 1997, between The Elder-Beerman
Stores Corp., an Ohio corporation (the "Company") and the undersigned.
2. I am requesting payment of costs, charges, and expenses
which I have reasonably incurred or will reasonably incur in defending an
action, suit or proceeding, referred to in Section 2(a) or 2(b) or any claim
referred to in Section 3, or pursuant to Section 8, of the aforesaid
Indemnification Agreement.
3. The costs, charges, and expenses for which payment is
requested are, in general, all expenses related to
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4. PART A(1)
I hereby undertake to (a) repay all amounts paid pursuant
hereto if it is proved by clear and convincing evidence in a court of competent
jurisdiction that my action or failure to act
- --------------------------------
(1) The Indemnitee shall not be eligible to execute Part A of this Undertaking
if, at the time of the Indemnitee's act or omission at issue, the Amended
Articles of Incorporation or the Amended Code of Regulations of the Company
prohibit such advances by specific reference to the Ohio Revised Code (the
"ORC") Section 1701.13(E)(5)(a), or if the only liability asserted against the
Indemnitee is in an action, suit or proceeding on the Company's behalf pursuant
to ORC Section 1701.95. In the event that the Indemnitee is eligible to and does
execute both Part A and Part B hereof, the costs, charges and expenses which are
paid by the Company pursuant hereto shall be required to be repaid by the
Indemnitee only if he is required to do so under the terms of both Part A and
Part B hereof.
<PAGE> 11
which is the subject of the matter described herein involved an act or omission
undertaken with deliberate intent to cause injury to the Company or undertaken
with reckless disregard for the best interests of the Company and (b) reasonably
cooperate with the Company concerning the action, suit, proceeding or claim.
-----------------------------------
[Signature of Indemnitee]
4. PART B
I hereby undertake to repay all amounts paid pursuant hereto
if it ultimately is determined that I am not entitled to be indemnified by the
Company under the aforesaid Indemnification Agreement or otherwise.
-----------------------------------
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for
said County and State, this _____ day of _________ , 1997.
-----------------------------------
[Seal]
My commission expires the ____ day of ___________ , 19__.
<PAGE> 12
EXHIBIT 10(g)
OFFICER INDEMNIFICATION AGREEMENT
---------------------------------
This Officer Indemnification Agreement, dated as of
____________ __, 1997 (this "Agreement"), is made by and between The
Elder-Beerman Stores Corp., an Ohio corporation (the "Company"), and
____________________ (the "Indemnitee"), an officer of the Company.
RECITALS
--------
A. The Indemnitee is presently serving as an officer of the
Company, and the Company desires that the Indemnitee continue serving in such
capacity. The Indemnitee is willing, subject to certain conditions including the
execution and performance of this Agreement by the Company, to continue serving
in such capacity.
B. In addition to the indemnification to which the Indemnitee
is entitled under the Amended Code of Regulations of the Company (the
"Regulations"), the Company has obtained, at its sole expense, insurance
protecting the Company and its officers and directors including the Indemnitee
against certain losses arising out of any threatened, pending or completed
action, suit, or proceeding to which such persons may be made or are threatened
to be made parties.
NOW, THEREFORE, in order to induce the Indemnitee to continue
to serve in his present capacity, and for other good and valuable consideration
the receipt and sufficiency of which are hereby acknowledged, the Company and
the Indemnitee agree as follows:
1. CONTINUED SERVICE
-----------------
The Indemnitee shall continue to serve, at the will of the
Company or in accordance with a separate contract, to the extent that such a
contract is in effect at the time in question, as an officer of the Company so
long as he is duly elected and qualified in accordance with the Regulations or
until he resigns in writing in accordance with applicable law.
2. INITIAL INDEMNITY
-----------------
(a) The Company shall indemnify the Indemnitee, if or when he
is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in
<PAGE> 13
the right of the Company), by reason of the fact that he is or was an officer of
the Company or is or was serving at the request of the Company as a director,
trustee, officer, employee, or agent of another corporation, domestic or
foreign, nonprofit or for profit, partnership, joint venture, trust, or other
enterprise, or by reason of any action alleged to have been taken or omitted in
any such capacity, against any and all costs, charges, expenses (including fees
and expenses of attorneys and/or others; all such costs, charges and expenses
being herein jointly referred to as "Expenses"), judgments, fines, and amounts
paid in settlement, actually and reasonably incurred by the Indemnitee in
connection therewith including any appeal of or from any judgment or decision,
if the Indemnitee acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Company, and, with
respect to any criminal action or proceeding, he had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the Indemnitee did not satisfy the foregoing standard of conduct to the extent
applicable thereto.
(b) The Company shall indemnify the Indemnitee, if or when he
is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding by or in the right of the Company to
procure a judgment in its favor, by reason of the fact that the Indemnitee is or
was an officer of the Company or is or was serving at the request of the Company
as a director, trustee, officer, employee, or agent of another corporation,
domestic or foreign, nonprofit or for profit, partnership, joint venture, trust,
or other enterprise, against any and all Expenses actually and reasonably
incurred by the Indemnitee in connection with the defense or settlement thereof
or any appeal of or from any judgment or decision, if the Indemnitee acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company, except that no indemnification pursuant to this
Section 2(b) shall be made in respect of (i) any claim, issue, or matter as to
which the Indemnitee is adjudged to be liable for negligence or misconduct in
the performance of his duty to the Company unless, and only to the extent that,
the court of common pleas or other court in which such action, suit, or
proceeding was brought determines, notwithstanding any adjudication of
liability, that in view of all the circumstances of the case the Indemnitee is
fairly and reasonably entitled to indemnity for such expenses as such court of
common pleas or other court shall deem proper, or (ii) any action or suit in
which the only liability asserted against the Indemnitee is pursuant to Section
1701.95 of the Ohio Revised Code (the "ORC").
(c) Any indemnification under Section 2(a) or 2(b) (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the Indemnitee is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 2(a) or 2(b). Such authorization shall be made (i)
by the Board of Directors of the Company (the "Board") by a majority vote of a
quorum consisting of directors who were not and are not parties to or threatened
with such action, suit, or proceeding, or (ii) if such a quorum of disinterested
directors is not available or if a majority of such quorum so directs, in a
written opinion by independent legal counsel (designated for such purpose by the
Board) which shall not be an attorney, or a firm having associated with it an
attorney, who has been retained by or who has performed services for the
Company, or any
2
<PAGE> 14
person to be indemnified, within the five years preceding such determination, or
(iii) by the shareholders of the Company (the "Shareholders"), or (iv) by the
court of common pleas or other court in which such action, suit, or proceeding
was brought.
(d) To the extent that the Indemnitee has been successful on
the merits or otherwise, including the dismissal of an action without prejudice,
in defense of any action, suit, or proceeding referred to in Section 2(a) or
2(b), or in defense of any claim, issue, or matter therein, he shall be
indemnified against Expenses actually and reasonably incurred by him in
connection therewith. Expenses actually and reasonably incurred by the
Indemnitee in defending any such action, suit, or proceeding shall be paid by
the Company as they are incurred in advance of the final disposition of such
action, suit, or proceeding under the procedure set forth in Section 4(b)
hereof.
(e) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on the Indemnitee with respect to any employee
benefit plan; references to "serving at the request of the Company" shall
include any service as a director, officer, employee, or agent of the Company
which imposes duties on, or involves services by, the Indemnitee with respect to
an employee benefit plan, its participants or beneficiaries; references to the
masculine shall include the feminine; references to the singular shall include
the plural and vice versa; the word including is used by way of illustration
only and not by way of limitation; and with respect to conduct by Indemnitee in
his capacity as a trustee, administrator or other fiduciary of any employee
benefit plan of the Company, if the Indemnitee acted in good faith and in a
manner he reasonably believed to be in the interest of the participants or
beneficiaries of such employee benefit plan, he shall be deemed to have acted in
a manner "not opposed to the best interests of the Company" as referred to
herein.
(f) No amendment to the Amended Articles of Incorporation of
the Company (the "Articles") or the Regulations shall deny, diminish, or
encumber the Indemnitee's rights to indemnity pursuant to the Regulations, the
ORC, or any other applicable law as applied to any act or failure to act
occurring in whole or in part prior to the date (the "Effective Date") upon
which the amendment was approved by the Shareholders. In the event that the
Company shall purport to adopt any amendment to its Articles or Regulations or
take any other action the effect of which is to deny, diminish, or encumber the
Indemnitee's rights to indemnity pursuant to the Articles, the Regulations, the
ORC, or any such other law, such amendment shall apply only to acts or failures
to act occurring entirely after the Effective Date thereof.
3. ADDITIONAL INDEMNIFICATION
--------------------------
(a) Pursuant to Section 1701.13(E)(6) of the ORC, without
limiting any right which the Indemnitee may have pursuant to Section 2 hereof or
any other provision of this Agreement or the Articles, the Regulations, the ORC,
any policy of insurance, or otherwise, but subject to any limitation on the
maximum permissible indemnity which may exist under
3
<PAGE> 15
applicable law at the time of any request for indemnity hereunder and subject to
the following provisions of this Section 3, the Company shall indemnify the
Indemnitee against any amount which he is or becomes obligated to pay relating
to or arising out of any claim made against him because of any act, failure to
act, or neglect or breach of duty, including any actual or alleged error,
misstatement, or misleading statement, that he commits, suffers, permits, or
acquiesces in while acting in his capacity as an officer of the Company. The
payments which the Company is obligated to make pursuant to this Section 3 shall
include any and all Expenses, judgments, fines, and amounts paid in settlement,
actually and reasonably incurred by the Indemnitee in connection therewith
including any appeal of or from any judgment or decision; provided, however,
that the Company shall not be obligated under this Section 3 to make any payment
in connection with any claim against the Indemnitee:
(i) to the extent of any fine or similar
governmental imposition which the Company is
prohibited by applicable law from paying
which results from a final, nonappealable
order; or
(ii) to the extent based upon or attributable to
the Indemnitee having actually realized a
personal gain or profit to which he was not
legally entitled, including profit from the
purchase and sale by the Indemnitee of
equity securities of the Company which are
recoverable by the Company pursuant to
Section 16(b) of the Securities Exchange Act
of 1934, or profit arising from transactions
in publicly traded securities of the Company
which were effected by the Indemnitee in
violation of Section 10(b) of the Securities
Exchange Act of 1934, or Rule 10b-5
promulgated thereunder.
(b) A determination as to whether the Indemnitee shall be
entitled to indemnification under this Section 3 shall be made in accordance
with Section 4(a) hereof. Expenses incurred by the Indemnitee in defending any
claim to which this Section 3 applies shall be paid by the Company as they are
actually and reasonably incurred in advance of the final disposition of such
claim under the procedure set forth in Section 4(b) hereof.
4. CERTAIN PROCEDURES RELATING TO INDEMNIFICATION
----------------------------------------------
(a) For purposes of pursuing his rights to indemnification
under Section 3 hereof, the Indemnitee shall (i) submit to the Board a sworn
statement of request for indemnification substantially in the form of Exhibit l
attached hereto and made a part hereof (the "Indemnification Statement")
averring that he is entitled to indemnification hereunder; and (ii) present to
the Company reasonable evidence of all amounts for which indemnification is
requested. Submission of an Indemnification Statement to the Board shall create
a presumption that the Indemnitee is entitled to indemnification hereunder, and
the Company shall, within 60 calendar days after submission of the
Indemnification Statement, make the payments requested
4
<PAGE> 16
in the Indemnification Statement to or for the benefit of the Indemnitee, unless
(A) within such 60-calendar-day period the Board shall resolve by vote of a
majority of the directors at a meeting at which a quorum is present that the
Indemnitee is not entitled to indemnification under Section 3 hereof, (B) such
vote shall be based upon clear and convincing evidence (sufficient to rebut the
foregoing presumption), and (C) the Board shall notify Indemnitee within such
period of such vote, which notice shall disclose with particularity the evidence
upon which the vote is based. The foregoing notice shall be sworn to by all
persons who participated in the vote and voted to deny indemnification. The
provisions of this Section 4(a) are intended to be procedural only and shall not
affect the right of Indemnitee to indemnification under Section 3 of this
Agreement so long as Indemnitee follows the prescribed procedure, and any
determination by the Board that Indemnitee is not entitled to indemnification
and any failure to make the payments requested in the Indemnification Statement
shall be subject to judicial review by any court of competent jurisdiction.
(b) For purposes of obtaining payments of Expenses in advance
of final disposition pursuant to the last sentence of Section 2(d) or the last
sentence of Section 3(b) hereof, the Indemnitee shall submit to the Company a
sworn request for advancement of Expenses substantially in the form of Exhibit 2
attached hereto and made a part hereof (the "Undertaking"), averring that he has
reasonably incurred or will reasonably incur actual Expenses in defending an
action, suit or proceeding referred to in Section 2(a) or 2(b) or any claim
referred to in Section 3, or pursuant to Section 8 hereof. Unless at the time of
the Indemnitee's act or omission at issue, (i) the Articles or the Regulations
prohibit such advances by specific reference to ORC Section 1701.13(E)(5)(a) or
(ii) unless the only liability asserted against the Indemnitee in the subject
action, suit or proceeding is pursuant to ORC Section 1701.95, the Indemnitee
shall be eligible to execute Part A of the Undertaking by which he undertakes
to: (A) repay such amount if (1) with respect to any action, suit, proceeding or
claim (other than an action by or in the right of the Company) brought against
the Indemnitee by reason of the fact that the Indemnitee is or was an officer of
the Company for which the Indemnitee has received advancement of Expenses, it is
determined that the Indemnitee did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Company or (2) with respect to any action, suit, proceeding or claim brought
against the Indemnitee by or in the right of the Company for which the
Indemnitee has received advancement of Expenses, the Indemnitee is adjudged to
be liable for negligence or for misconduct in the performance of his duty to the
Company and the court has not determined that Indemnitee is entitled to
indemnification; and (B) reasonably cooperate with the Company concerning the
action, suit, proceeding or claim. In all cases, the Indemnitee shall be
eligible to execute Part B of the Undertaking by which he undertakes to repay
such amount if it ultimately is determined that he is not entitled to be
indemnified by the Company under this Agreement or otherwise. In the event that
the Indemnitee is eligible to and does execute both Part A and Part B of the
Undertaking, the Expenses which are paid by the Company pursuant thereto shall
be required to be repaid by the Indemnitee only if he is required to do so under
the terms of both Part A and Part B of the Undertaking. Upon receipt of the
Undertaking, the Company shall thereafter promptly pay such Expenses of the
Indemnitee as are noticed to the Company in
5
<PAGE> 17
reasonable detail arising out of the matter described in the Undertaking. No
security shall be required in connection with any Undertaking.
5. LIMITATION ON INDEMNITY
-----------------------
Notwithstanding anything contained herein to the contrary, the
Company shall not be required hereby to indemnify the Indemnitee with respect to
any action, suit, or proceeding that was initiated by the Indemnitee unless (a)
such action, suit, or proceeding was initiated by the Indemnitee to enforce any
rights to indemnification arising hereunder and such person shall have been
formally adjudged to be entitled to indemnity by reason hereof, (b) authorized
by another agreement to which the Company is a party whether heretofore or
hereafter entered, or (c) otherwise ordered by the court in which the suit was
brought.
6. SUBROGATION; DUPLICATION OF PAYMENTS
------------------------------------
(a) In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
(b) The Company shall not be liable under this Agreement to
make any payment in connection with any claim made against Indemnitee to the
extent Indemnitee has actually received payment (under any insurance policy, the
Regulations or otherwise) of the amounts otherwise payable hereunder.
7. SHAREHOLDER RATIFICATION
------------------------
The Company may, at its option, propose at any future meeting
of Shareholders that this Agreement be ratified by the Shareholders; provided,
however, that the Indemnitee's rights hereunder shall be fully enforceable in
accordance with the terms hereof whether or not such ratification is sought or
obtained.
8. FEES AND EXPENSES OF ENFORCEMENT
--------------------------------
It is the intent of the Company that the Indemnitee not be
required to incur the expenses associated with the enforcement of his rights
under this Agreement by litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Indemnitee hereunder. Accordingly, if it should appear to the
Indemnitee that the Company has failed to comply with any of its obligations
under this
6
<PAGE> 18
Agreement or in the event that the Company or any other person takes any action
to declare this Agreement void or unenforceable, or institutes any action, suit
or proceeding to deny or to recover from, the Indemnitee the benefits intended
to be provided to the Indemnitee hereunder, the Company irrevocably authorizes
the Indemnitee from time to time to retain counsel of his choice, at the expense
of the Company as hereafter provided, to represent the Indemnitee in connection
with the initiation or defense of any litigation or other legal action, whether
by or against the Company or any director, officer, shareholder, or other person
affiliated with the Company, in any jurisdiction. Regardless of the outcome
thereof, the Company shall pay and be solely responsible for any and all costs,
charges, and expenses, including fees and expenses of attorneys and others,
reasonably incurred by the Indemnitee pursuant to this Section 8.
9. MERGER OR CONSOLIDATION
-----------------------
In the event that the Company shall be a constituent
corporation in a consolidation, merger, or other reorganization, the Company, if
it shall not be the surviving, resulting, or acquiring corporation therein,
shall require as a condition thereto that the surviving, resulting, or acquiring
corporation agree to assume all of the obligations of the Company hereunder and
to indemnify the Indemnitee to the full extent provided herein. Whether or not
the Company is the resulting, surviving, or acquiring corporation in any such
transaction, the Indemnitee shall stand in the same position under this
Agreement with respect to the resulting, surviving, or acquiring corporation as
he would have with respect to the Company if its separate existence had
continued.
10. NONEXCLUSIVITY; NO THIRD PARTY BENEFICIARIES;
---------------------------------------------
SEVERABILITY
------------
(a) The rights to indemnification provided by this Agreement
shall not be exclusive of any other rights of indemnification to which the
Indemnitee may be entitled under the Articles, the Regulations, the ORC or any
other statute, any insurance policy, agreement, or vote of shareholders or
directors or otherwise, as to any actions or failures to act by the Indemnitee,
and shall continue after he has ceased to be a director, officer, employee, or
agent of the Company or other entity for which his service gives rise to a right
hereunder, and shall inure to the benefit of his heirs, executors and
administrators.
(b) Except as provided in Section 10(a), the rights to
indemnification provided by this Agreement are personal to Indemnitee and are
non-transferable by Indemnitee, and no party other than the Indemnitee is
entitled to indemnification under this Agreement.
(c) If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected, and the provision so held to be invalid, unenforceable or
7
<PAGE> 19
otherwise illegal shall be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid and legal.
11. SECURITY
--------
To ensure that the Company's obligations pursuant to this
Agreement can be enforced by Indemnitee, the Company may, at its option,
establish a trust pursuant to which the Company's obligations pursuant to this
Agreement and other similar agreements can be funded.
12. NOTICES
-------
All notices and other communications hereunder shall be in
writing and shall be personally delivered or sent by recognized overnight
courier service (a) if to the Company, to the then-current principal executive
offices of the Company (Attention: General Counsel) or (b) if to the Indemnitee,
to the last known address of Indemnitee as reflected in the Company's records.
Either party may change its address for the delivery of notices or other
communications hereunder by providing notice to the other party as provided in
this Section 12. All notices shall be effective upon actual delivery by the
methods specified in this Section 12.
13. GOVERNING LAW
-------------
This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without giving effect to the
principles of conflict of laws thereof.
14. MODIFICATION
------------
This Agreement and the rights and duties of the Indemnitee and
the Company hereunder may be modified only by an instrument in writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
THE ELDER-BEERMAN STORES CORP.
By
-------------------------------------
Title:
---------------------------------------
[Signature of Indemnitee]
8
<PAGE> 20
Exhibit 1
---------
INDEMNIFICATION STATEMENT
-------------------------
STATE OF )
) SS
COUNTY OF )
I, ________________ , being first duly sworn, do depose and say as
follows:
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated ________ __ 1997, between The Elder-Beerman
Stores Corp., an Ohio corporation (the "Company"), and the undersigned.
2. I am requesting indemnification against costs, charges, expenses
(which may include fees and expenses of attorneys and/or others), judgments,
fines, and amounts paid in settlement (collectively, "Liabilities"), which have
been actually and reasonably incurred by me in connection with a claim referred
to in Section 3 of the aforesaid Indemnification Agreement.
3. With respect to all matters related to any such claim, I am entitled
to be indemnified as herein contemplated pursuant to the aforesaid
Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I am
requesting indemnification against Liabilities which have or may arise out of
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
----------------------------
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for said
County and State, this ____ day of ____________, 1997.
----------------------------
[Seal]
My commission expires the ____ day of _____________, 19__.
<PAGE> 21
Exhibit 2
---------
UNDERTAKING
-----------
STATE OF )
) SS
COUNTY OF )
I, _____________________ , being first duly sworn do depose
and say as follows:
l. This Undertaking is submitted pursuant to the
Indemnification Agreement, dated __________ __ , 1997, between The Elder-Beerman
Stores Corp., an Ohio corporation (the "Company") and the undersigned.
2. I am requesting payment of costs, charges, and expenses
which I have reasonably incurred or will reasonably incur in defending an
action, suit or proceeding, referred to in Section 2(a) or 2(b) or any claim
referred to in Section 3, or pursuant to Section 8, of the aforesaid
Indemnification Agreement.
3. The costs, charges, and expenses for which payment is
requested are, in general, all expenses related to
- -----------------------------------------------------
- -----------------------------------------------------------------------------.
4. Part A(1)
---------
I hereby undertake to: (a) repay all amounts paid pursuant hereto if
(i) with respect to any action, suit, proceeding or claim (other than an action
by or in the right of the Company) brought against me by reason of the fact that
I am or was an officer of the Company for which I have
- --------
(1) The Indemnitee shall not be eligible to execute Part A of this Undertaking
if, at the time of the Indemnitee's act or omission at issue, the Amended
Articles of Incorporation] or Amended Code of Regulations of the Company
prohibit such advances by specific reference to the Ohio Revised Code (the
"ORC") Section 1701.13(E)(5)(a), or if the only liability asserted against the
Indemnitee is in an action, suit or proceeding on the Company's behalf pursuant
to ORC Section 1701.95. In the event that the Indemnitee is eligible to and does
execute both Part A and Part B hereof, the costs, charges and expenses which are
paid by the Company pursuant hereto shall be required to be repaid by the
Indemnitee only if he is required to do so under the terms of both Part A and
Part B hereof.
10
<PAGE> 22
received advancement of Expenses, it is determined that I did not act in good
faith or in a manner which I reasonably believed to be in or not opposed to the
best interests of the Company or (ii) with respect to any action, suit,
proceeding or claim brought against me by or in the right of the Company for
which I have received advancement of Expenses, I am adjudged to be liable for
negligence or misconduct in the performance of my duty to the Company and the
court has not determined that I am entitled to indemnification; and (b)
reasonably cooperate with the Company concerning the action, suit, proceeding or
claim.
--------------------------
[Signature of Indemnitee]
4. Part B
------
I hereby undertake to repay all amounts paid pursuant hereto if it
ultimately is determined that I am not entitled to be indemnified by the Company
under the aforesaid Indemnification Agreement or otherwise.
-------------------------
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for said
County and State, this ____ day of ___________, 1997.
------------------------------
[Seal]
My commission expires the _____ day of ______________, 19__.
11
<PAGE> 1
EXHIBIT 10(h)
-------------
DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENT
----------------------------------------------
This Director and Officer Indemnification Agreement, dated as
of ____________ __, 1997 (this "Agreement"), is made by and between The
Elder-Beerman Stores Corp., an Ohio corporation (the "Company"), and
____________________ (the "Indemnitee"), a director and an officer of the
Company.
RECITALS
--------
A. The Indemnitee is presently serving as a director and an
officer of the Company, and the Company desires that the Indemnitee continue
serving in such capacities. The Indemnitee is willing, subject to certain
conditions including the execution and performance of this Agreement by the
Company, to continue serving in such capacities.
B. In addition to the indemnification to which the Indemnitee
is entitled under the Amended Code of Regulations of the Company (the
"Regulations"), the Company has obtained, at its sole expense, insurance
protecting the Company and its officers and directors including the Indemnitee
against certain losses arising out of any threatened, pending or completed
action, suit, or proceeding to which such persons may be made or are threatened
to be made parties.
NOW, THEREFORE, in order to induce the Indemnitee to continue
to serve in his present capacity, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and
the Indemnitee agree as follows:
1. CONTINUED SERVICE
-----------------
The Indemnitee shall continue to serve, at the will of the
Company or in accordance with a separate contract, to the extent that such a
contract is in effect at the time in question, as a director and an officer of
the Company so long as he is duly elected in accordance with the Regulations or
until he resigns in writing in accordance with applicable law.
2. INITIAL INDEMNITY
-----------------
(a) The Company shall indemnify the Indemnitee, if or when he
is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in the right of the Company), by
reason of the fact that he is or was a director or an officer of the Company or
is or was serving at the request of the Company as a director, trustee, officer,
<PAGE> 2
employee, or agent of another corporation, domestic or foreign, nonprofit or for
profit, partnership, joint venture, trust, or other enterprise, or by reason of
any action alleged to have been taken or omitted in any such capacity, against
any and all costs, charges, expenses (including fees and expenses of attorneys
and/or others; all such costs, charges and expenses being herein jointly
referred to as "Expenses"), judgments, fines, and amounts paid in settlement,
actually and reasonably incurred by the Indemnitee in connection therewith
including any appeal of or from any judgment or decision, unless it is proved by
clear and convincing evidence in a court of competent jurisdiction that the
Indemnitee's action or failure to act involved an act or omission undertaken
with deliberate intent to cause injury to the Company or undertaken with
reckless disregard for the best interests of the Company. In addition, with
respect to any criminal action or proceeding, indemnification hereunder shall be
made only if the Indemnitee had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Indemnitee did not satisfy
the foregoing standard of conduct to the extent applicable thereto.
(b) The Company shall indemnify the Indemnitee, if or when he
is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding by or in the right of the Company to
procure a judgment in its favor, by reason of the fact that the Indemnitee is or
was a director or an officer of the Company or is or was serving at the request
of the Company as a director, trustee, officer, employee, or agent of another
corporation, domestic or foreign, nonprofit or for profit, partnership, joint
venture, trust, or other enterprise, against any and all Expenses actually and
reasonably incurred by the Indemnitee in connection with the defense or
settlement thereof or any appeal of or from any judgment or decision, unless it
is proved by clear and convincing evidence in a court of competent jurisdiction
that the Indemnitee's action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to the Company or undertaken
with reckless disregard for the best interests of the Company, except that no
indemnification pursuant to this Section 2(b) shall be made in respect of any
action or suit in which the only liability asserted against the Indemnitee is
pursuant to Section 1701.95 of the Ohio Revised Code (the "ORC").
(c) Any indemnification under Section 2(a) or 2(b) (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the Indemnitee is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 2(a) or 2(b). Such authorization shall be made (i)
by the Board of Directors of the Company (the "Board") by a majority vote of a
quorum consisting of directors who were not and are not parties to or threatened
with such action, suit, or proceeding, or (ii) if such a quorum of disinterested
directors is not available or if a majority of such quorum so directs, in a
written opinion by independent legal counsel (designated for such purpose by the
Board) which shall not be an attorney, or a firm having associated with it an
attorney, who has been retained by or who has performed services for the
Company, or any person to be indemnified, within the five years preceding such
determination, or (iii) by the shareholders of the Company (the "Shareholders"),
or (iv) by the court of common pleas or other court in which such action, suit,
or proceeding was brought.
2
<PAGE> 3
(d) To the extent that the Indemnitee has been successful on
the merits or otherwise, including the dismissal of an action without prejudice,
in defense of any action, suit, or proceeding referred to in Section 2(a) or
2(b), or in defense of any claim, issue, or matter therein, he shall be
indemnified against Expenses actually and reasonably incurred by him in
connection therewith. Expenses actually and reasonably incurred by the
Indemnitee in defending any such action, suit, or proceeding shall be paid by
the Company as they are incurred in advance of the final disposition of such
action, suit, or proceeding under the procedure set forth in Section 4(b)
hereof.
(e) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on the Indemnitee with respect to any employee
benefit plan; references to "serving at the request of the Company" shall
include any service as a director, officer, employee, or agent of the Company
which imposes duties on, or involves services by, the Indemnitee with respect to
an employee benefit plan, its participants or beneficiaries; references to the
masculine shall include the feminine; references to the singular shall include
the plural and vice versa; the word including is used by way of illustration
only and not by way of limitation; and with respect to conduct by Indemnitee in
his capacity as a trustee, administrator or other fiduciary of any employee
benefit plan of the Company, if the Indemnitee acted in good faith and in a
manner he reasonably believed to be in the interest of the participants or
beneficiaries of such employee benefit plan, he shall be deemed to have acted in
a manner "not opposed to the best interests of the Company" as referred to
herein.
(f) No amendment to the Amended Articles of Incorporation of
the Company (the "Articles") or the Regulations shall deny, diminish, or
encumber the Indemnitee's rights to indemnity pursuant to the Regulations, the
ORC, or any other applicable law as applied to any act or failure to act
occurring in whole or in part prior to the date (the "Effective Date") upon
which the amendment was approved by the Shareholders. In the event that the
Company shall purport to adopt any amendment to its Articles or Regulations or
take any other action the effect of which is to deny, diminish, or encumber the
Indemnitee's rights to indemnity pursuant to the Articles, the Regulations, the
ORC, or any such other law, such amendment shall apply only to acts or failures
to act occurring entirely after the Effective Date thereof.
3. ADDITIONAL INDEMNIFICATION
--------------------------
(a) Pursuant to Section 1701.13(E)(6) of the ORC, without
limiting any right which the Indemnitee may have pursuant to Section 2 hereof or
any other provision of this Agreement or the Articles, the Regulations, the ORC,
any policy of insurance, or otherwise, but subject to any limitation on the
maximum permissible indemnity which may exist under applicable law at the time
of any request for indemnity hereunder and subject to the following provisions
of this Section 3, the Company shall indemnify the Indemnitee against any amount
which he is or becomes obligated to pay relating to or arising out of any claim
made against him because of any act, failure to act, or neglect or breach of
duty, including any actual or alleged error, misstatement, or misleading
statement, that he commits, suffers, permits, or acquiesces in while acting in
his capacity as a director or an officer of the Company. The payments which the
3
<PAGE> 4
Company is obligated to make pursuant to this Section 3 shall include any and
all Expenses, judgments, fines, and amounts paid in settlement, actually and
reasonably incurred by the Indemnitee in connection therewith including any
appeal of or from any judgment or decision; PROVIDED, HOWEVER, that the Company
shall not be obligated under this Section 3 to make any payment in connection
with any claim against the Indemnitee:
(i) to the extent of any fine or similar
governmental imposition which the Company is
prohibited by applicable law from paying
which results from a final, nonappealable
order; or
(ii) to the extent based upon or attributable to
the Indemnitee having actually realized a
personal gain or profit to which he was not
legally entitled, including profit from the
purchase and sale by the Indemnitee of
equity securities of the Company which are
recoverable by the Company pursuant to
Section 16(b) of the Securities Exchange Act
of 1934, or profit arising from transactions
in publicly traded securities of the Company
which were effected by the Indemnitee in
violation of Section 10(b) of the Securities
Exchange Act of 1934, or Rule 10b-5
promulgated thereunder.
(b) A determination as to whether the Indemnitee shall be
entitled to indemnification under this Section 3 shall be made in accordance
with Section 4(a) hereof. Expenses incurred by the Indemnitee in defending any
claim to which this Section 3 applies shall be paid by the Company as they are
actually and reasonably incurred in advance of the final disposition of such
claim under the procedure set forth in Section 4(b) hereof.
4. CERTAIN PROCEDURES RELATING TO INDEMNIFICATION
----------------------------------------------
(a) For purposes of pursuing his rights to indemnification
under Section 3 hereof, the Indemnitee shall (i) submit to the Board a sworn
statement of request for indemnification substantially in the form of Exhibit l
attached hereto and made a part hereof (the "Indemnification Statement")
averring that he is entitled to indemnification hereunder; and (ii) present to
the Company reasonable evidence of all amounts for which indemnification is
requested. Submission of an Indemnification Statement to the Board shall create
a presumption that the Indemnitee is entitled to indemnification hereunder, and
the Company shall, within 60 calendar days after submission of the
Indemnification Statement, make the payments requested in the Indemnification
Statement to or for the benefit of the Indemnitee, unless (A) within such
60-calendar-day period the Board shall resolve by vote of a majority of the
directors at a meeting at which a quorum is present that the Indemnitee is not
entitled to indemnification under Section 3 hereof, (B) such vote shall be based
upon clear and convincing evidence (sufficient to rebut the foregoing
presumption), and (C) the Board shall notify Indemnitee within such period of
such vote, which notice shall disclose with particularity the evidence upon
which the vote is based. The foregoing notice shall be sworn to by all persons
who participated in the vote and voted to deny indemnification. The provisions
of this Section 4(a) are intended to be procedural only and
4
<PAGE> 5
shall not affect the right of Indemnitee to indemnification under Section 3 of
this Agreement so long as Indemnitee follows the prescribed procedure, and any
determination by the Board that Indemnitee is not entitled to indemnification
and any failure to make the payments requested in the Indemnification Statement
shall be subject to judicial review by any court of competent jurisdiction.
(b) For purposes of obtaining payments of Expenses in advance
of final disposition pursuant to the last sentence of Section 2(d) or the last
sentence of Section 3(b) hereof, the Indemnitee shall submit to the Company a
sworn request for advancement of Expenses substantially in the form of Exhibit 2
attached hereto and made a part hereof (the "Undertaking"), averring that he has
reasonably incurred or will reasonably incur actual Expenses in defending an
action, suit or proceeding referred to in Section 2(a) or 2(b) or any claim
referred to in Section 3, or pursuant to Section 8 hereof. Unless at the time of
the Indemnitee's act or omission at issue, the Articles or the Regulations
prohibit such advances by specific reference to ORC Section l70l.l3(E)(5)(a) or
unless the only liability asserted against the Indemnitee in the subject action,
suit or proceeding is pursuant to ORC Section 1701.95, the Indemnitee shall be
eligible to execute Part A of the Undertaking by which he undertakes to: (i)
repay such amount if it is proved by clear and convincing evidence in a court of
competent jurisdiction that the Indemnitee's action or failure to act involved
an act or omission undertaken with deliberate intent to cause injury to the
Company or undertaken with reckless disregard for the best interests of the
Company; and (ii) reasonably cooperate with the Company concerning the action,
suit, proceeding or claim. In all cases, the Indemnitee shall be eligible to
execute Part B of the Undertaking by which he undertakes to repay such amount if
it ultimately is determined that he is not entitled to be indemnified by the
Company under this Agreement or otherwise. In the event that the Indemnitee is
eligible to and does execute both Part A and Part B of the Undertaking, the
Expenses which are paid by the Company pursuant thereto shall be required to be
repaid by the Indemnitee only if he is required to do so under the terms of both
Part A and Part B of the Undertaking. Upon receipt of the Undertaking, the
Company shall thereafter promptly pay such Expenses of the Indemnitee as are
noticed to the Company in reasonable detail arising out of the matter described
in the Undertaking. No security shall be required in connection with any
Undertaking.
5. LIMITATION ON INDEMNITY
-----------------------
Notwithstanding anything contained herein to the contrary, the
Company shall not be required hereby to indemnify the Indemnitee with respect to
any action, suit, or proceeding that was initiated by the Indemnitee unless (a)
such action, suit, or proceeding was initiated by the Indemnitee to enforce any
rights to indemnification arising hereunder and such person shall have been
formally adjudged to be entitled to indemnity by reason hereof, (b) authorized
by another agreement to which the Company is a party whether heretofore or
hereafter entered, or (c) otherwise ordered by the court in which the suit was
brought.
5
<PAGE> 6
6. SUBROGATION; DUPLICATION OF PAYMENTS
-------------------------------------
(a) In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
(b) The Company shall not be liable under this Agreement to
make any payment in connection with any claim made against Indemnitee to the
extent Indemnitee has actually received payment (under any insurance policy, the
Regulations or otherwise) of the amounts otherwise payable hereunder.
7. SHAREHOLDER RATIFICATION
------------------------
The Company may, at its option, propose at any future meeting
of Shareholders that this Agreement be ratified by the Shareholders; PROVIDED,
HOWEVER, that the Indemnitee's rights hereunder shall be fully enforceable in
accordance with the terms hereof whether or not such ratification is sought or
obtained.
8. FEES AND EXPENSES OF ENFORCEMENT
--------------------------------
It is the intent of the Company that the Indemnitee not be
required to incur the expenses associated with the enforcement of his rights
under this Agreement by litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Indemnitee hereunder. Accordingly, if it should appear to the
Indemnitee that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person takes
any action to declare this Agreement void or unenforceable, or institutes any
action, suit or proceeding to deny, or to recover from, the Indemnitee the
benefits intended to be provided to the Indemnitee hereunder, the Company
irrevocably authorizes the Indemnitee from time to time to retain counsel of his
choice, at the expense of the Company as hereafter provided, to represent the
Indemnitee in connection with the initiation or defense of any litigation or
other legal action, whether by or against the Company or any director, officer,
shareholder, or other person affiliated with the Company, in any jurisdiction.
Regardless of the outcome thereof, the Company shall pay and be solely
responsible for any and all costs, charges, and expenses, including fees and
expenses of attorneys and others, reasonably incurred by the Indemnitee pursuant
to this Section 8.
6
<PAGE> 7
9. MERGER OR CONSOLIDATION
-----------------------
In the event that the Company shall be a constituent
corporation in a consolidation, merger, or other reorganization, the Company, if
it shall not be the surviving, resulting, or acquiring corporation therein,
shall require as a condition thereto that the surviving, resulting, or acquiring
corporation agree to assume all of the obligations of the Company hereunder and
to indemnify the Indemnitee to the full extent provided herein. Whether or not
the Company is the resulting, surviving, or acquiring corporation in any such
transaction, the Indemnitee shall stand in the same position under this
Agreement with respect to the resulting, surviving, or acquiring corporation as
he would have with respect to the Company if its separate existence had
continued.
10. NONEXCLUSIVITY; NO THIRD PARTY BENEFICIARIES; SEVERABILITY
----------------------------------------------------------
(a) The rights to indemnification provided by this Agreement
shall not be exclusive of any other rights of indemnification to which the
Indemnitee may be entitled under the Articles, the Regulations, the ORC or any
other statute, any insurance policy, agreement, or vote of shareholders or
directors or otherwise, as to any actions or failures to act by the Indemnitee,
and shall continue after he has ceased to be a director, officer, employee, or
agent of the Company or other entity for which his service gives rise to a right
hereunder, and shall inure to the benefit of his heirs, executors and
administrators.
(b) Except as provided in Section 10(a), the rights to
indemnification provided by this Agreement are personal to Indemnitee and are
non-transferable by Indemnitee, and no party other than the Indemnitee is
entitled to indemnification under this Agreement.
(c) If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid and legal.
11. SECURITY
---------
To ensure that the Company's obligations pursuant to this
Agreement can be enforced by Indemnitee, the Company may, at its option,
establish a trust pursuant to which the Company's obligations pursuant to this
Agreement and other similar agreements can be funded.
7
<PAGE> 8
12. NOTICES
-------
All notices and other communications hereunder shall be in
writing and shall be personally delivered or sent by recognized overnight
courier service (a) if to the Company, to the then-current principal executive
offices of the Company (Attention: General Counsel) or (b) if to the Indemnitee,
to the last known address of Indemnitee as reflected in the Company's records.
Either party may change its address or the delivery of notices or other
communications hereunder by providing notice to the other party as provided in
this Section 12. All notices shall be effective upon actual delivery by the
methods specified in this Section 12.
13. GOVERNING LAW
-------------
This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without giving effect to the
principles of conflict of laws thereof.
14. MODIFICATION
------------
This Agreement and the rights and duties of the Indemnitee and
the Company hereunder may be modified only by an instrument in writing signed by
both parties hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
THE ELDER-BEERMAN STORES CORP.
By
----------------------------------------
Title:
------------------------------------
------------------------------------------
[Signature of Indemnitee]
8
<PAGE> 9
EXHIBIT 1
---------
INDEMNIFICATION STATEMENT
-------------------------
STATE OF ________________)
) SS
COUNTY OF _______________)
I, ________________ , being first duly sworn, do depose and say as
follows:
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated __________ __ 1997, between The Elder-Beerman
Stores Corp., an Ohio corporation (the "Company"), and the undersigned.
2. I am requesting indemnification against costs, charges, expenses
(which may include fees and expenses of attorneys and/or others), judgments,
fines, and amounts paid in settlement (collectively, "Liabilities"), which have
been actually and reasonably incurred by me in connection with a claim referred
to in Section 3 of the aforesaid Indemnification Agreement.
3. With respect to all matters related to any such claim, I am entitled
to be indemnified as herein contemplated pursuant to the aforesaid
Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I am
requesting indemnification against Liabilities which have or may arise out of
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for said
County and State, this ____ day of ____________, 1997.
----------------------------
[Seal]
My commission expires the ____ day of _____________, 19__.
<PAGE> 10
EXHIBIT 2
---------
UNDERTAKING
-----------
STATE OF ________________
SS
COUNTY OF ______________
I, _____________________ , being first duly sworn, do depose
and say as follows:
l. This Undertaking is submitted pursuant to the
Indemnification Agreement, dated __________ __ , 1997, between The Elder-Beerman
Stores Corp., an Ohio corporation (the "Company") and the undersigned.
2. I am requesting payment of costs, charges, and expenses
which I have reasonably incurred or will reasonably incur in defending an
action, suit or proceeding, referred to in Section 2(a) or 2(b) or any claim
referred to in Section 3, or pursuant to Section 8, of the aforesaid
Indemnification Agreement.
3. The costs, charges, and expenses for which payment is
requested are, in general, all expenses related
to
----------------------------------------------------------------------------
- -----------------------------------------------------------------------------.
4. PART A(1)
I hereby undertake to (a) repay all amounts paid pursuant hereto if it
is proved by clear and convincing evidence in a court of competent jurisdiction
that my action or failure to act which is the subject of the matter described
herein involved an act or omission undertaken with deliberate intent to cause
injury to the Company or undertaken with reckless disregard for the
- ----------------------------------
(1) The Indemnitee shall not be eligible to execute Part A of this Undertaking
if, at the time of the Indemnitee's act or omission at issue, the Amended
Articles of Incorporation or Amended Code of Regulations of the Company prohibit
such advances by specific reference to the Ohio Revised Code (the "ORC") Section
l70l.l3(E)(5)(a) or if the only liability asserted against the Indemnitee is in
an action, suit or proceeding on the Company's behalf pursuant to ORC Section
1701.95. In the event that the Indemnitee is eligible to and does execute both
Part A and Part B hereof, the costs, charges and expenses which are paid by the
Company pursuant hereto shall be required to be repaid by the Indemnitee only if
he is required to do so under the terms of both Part A and Part B hereof.
10
<PAGE> 11
best interests of the Company and (b) reasonably cooperate with the Company
concerning the action, suit, proceeding or claim.
-------------------------------------
[Signature of Indemnitee]
4. PART B
I hereby undertake to repay all amounts paid pursuant hereto if it
ultimately is determined that I am not entitled to be indemnified by the Company
under the aforesaid Indemnification Agreement or otherwise.
-------------------------------------
[Signature of Indemnitee]
Subscribed and sworn to before me, a Notary Public in and for said
County and State, this ____ day of ___________, 1997.
[Seal]
-------------------------------------
Notary
My commission expires the _____ day of _______________, 19__.
<PAGE> 1
EXHIBIT 10(i)
-------------
THE ELDER-BEERMAN STORES CORP.
EQUITY AND PERFORMANCE INCENTIVE PLAN
(Effective __________, 1997)
<PAGE> 2
THE ELDER-BEERMAN STORES CORP.
EQUITY AND PERFORMANCE INCENTIVE PLAN
(Effective _____________, 1997)
<TABLE>
<CAPTION>
Table of Contents
-----------------
Page
<S> <C>
ARTICLE I: Purpose and Definitions......................................................................1
1.1 Purpose......................................................................................1
1.2 Effective Date...............................................................................1
1.3 Definitions..................................................................................1
ARTICLE II: Shares Available Under the Plan..............................................................5
2.1 Shares Available Under the Plan..............................................................5
ARTICLE III: Long-Term Incentive Awards...................................................................6
3.1 Purpose......................................................................................6
3.2 Option Rights................................................................................6
3.3 Appreciation Rights..........................................................................8
3.4 Restricted Shares............................................................................9
3.5 Deferred Shares.............................................................................10
3.6 Performance Shares and Performance Units....................................................10
3.7 Transferability.............................................................................12
3.8 Participation by Employees of a Designated Subsidiary.......................................12
3.9 Awards on the Effective Date................................................................12
ARTICLE IV: Awards to Non-Employee Directors............................................................13
4.1 Purpose.....................................................................................13
4.2 Awards to Non-Employee Directors............................................................13
4.3 Awards on the Effective Date................................................................13
ARTICLE V: Annual Incentive Awards.....................................................................13
5.1 Purpose.....................................................................................13
5.2 Definitions.................................................................................13
5.3 Eligibility for Annual Incentive Award......................................................14
5.4 Annual Incentive Awards.....................................................................14
5.5 Deferral Election...........................................................................14
5.6 Grants of Restricted Shares.................................................................14
5.7 Retirement, Disability, Death, Termination of Employment, Change of
Ownership 14
5.8 Administration..............................................................................15
5.9 Claims Procedure............................................................................15
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VI: Administration; General Provisions..........................................................16
6.1 Adjustments.................................................................................16
6.2 Fractional Shares...........................................................................16
6.3 Withholding Taxes...........................................................................16
6.4 Administration of the Plan..................................................................16
6.5 Amendments, Etc.............................................................................17
6.6 Termination.................................................................................18
</TABLE>
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<PAGE> 4
THE ELDER-BEERMAN STORES CORP.
EQUITY AND PERFORMANCE INCENTIVE PLAN
ARTICLE I
Purpose and Definitions
-----------------------
1.1 PURPOSE. The purpose of the Equity and Performance Incentive Plan
(the "Plan") is to attract and retain directors, officers and key employees for
The Elder-Beerman Stores Corp. (the "Corporation") and its Subsidiaries and to
provide to such persons incentives and rewards for superior performance.
1.2 EFFECTIVE DATE. The Plan will be effective on the confirmation date
of the Joint Plan of Reorganization of The Elder-Beerman Stores Corp. and its
Subsidiaries (the "Joint Plan of Reorganization"). As of the date the Plan
becomes effective, the Plan will be deemed authorized and approved in all
respects and for all purposes, as provided in the Joint Plan of Reorganization,
without any requirements of further action by any shareholders or directors of
The Elder-Beerman Stores Corp.
1.3 DEFINITIONS. As used in the Plan,
"Appreciation Right" means a right granted pursuant to Section
3.3 of the Plan, and includes both Tandem Appreciation Rights and Free-Standing
Appreciation Rights.
"Bankruptcy Code" means 11 U.S.C. Sections 101-1330.
"Board" means the Board of Directors of the Corporation and, to
the extent of any delegation by the Board to a committee (or subcommittee
thereof) pursuant to Section 6.5 of the Plan, such committee (or subcommittee
thereof).
"Change of Ownership" means any of the following events:
(a) The sale to any purchaser unaffiliated with the Corporation
of all or substantially all of the assets of the Corporation;
(b) The sale, distribution, or accumulation of more than 50% of
the outstanding voting stock of the Corporation to/by any acquiror or group of
affiliated acquirors that are unaffiliated with the Corporation;
(c) Individuals who, on the completion of the Corporation's
chapter 11 reorganization under the Bankruptcy Code, constitute the Board of
Directors (the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to such completion whose election or nomination for election was
approved by
<PAGE> 5
a vote of at least two-thirds of the Incumbent Directors then on the Board
(either by a specific vote or by approval of the proxy statement of the
Corporation in which such person is named as a nominee for director, without
objection to such nomination) will be an Incumbent Director; provided, however,
that no individual elected or nominated as a director of the Corporation
initially as a result of an actual or threatened election contest with respect
to directors or any other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board will be deemed to be
an Incumbent Director; or
(d) The merger or consolidation of the Corporation with another
entity (as such term is defined in section 101(16) of the Bankruptcy Code) (an
"Entity") unaffiliated with the Corporation if, immediately after such merger or
consolidation, less than a majority of the combined voting power of the then
outstanding securities of such Entity are held, directly or indirectly, in the
aggregate by the holders immediately prior to such transaction of the then
outstanding securities of the Corporation entitled to vote generally in the
election of directors.
(e) In no event may "Change of Ownership" be construed to include
any change of control of the Corporation or any Subsidiary that occurs solely as
a result of any exchange or distribution of equity securities of the Corporation
or any Subsidiary upon consummation of a plan of reorganization for the
Corporation or any Subsidiary in its chapter 11 case.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" means the committee described in Section 6.4.
"Common Shares" means shares of common stock, $0.01 par value per
share, of the Corporation or any security into which such Common Shares may be
changed by reason of any transaction or event of the type referred to in Section
6.1 of the Plan.
"Covered Employee" means a Participant who is, or is determined
by the Board to be likely to become, a "covered employee" within the meaning of
Section 162(m) of the Code (or any successor provision).
"Date of Grant" means the date specified by the Board on which a
grant of Option Rights, Appreciation Rights, Performance Shares or Performance
Units or a grant or sale of Restricted Shares or Deferred Shares will become
effective (which date may not be earlier than the date on which the Board takes
action with respect thereto) and may also include the date on which a grant of
Option Rights to a Non-Employee Director becomes effective pursuant to Section
4.2 of the Plan.
"Deferral Period" means the period of time during which Deferred
Shares are subject to deferral limitations under Section 3.5 of the Plan.
"Deferred Shares" means an award made pursuant to Section 3.5 of
the Plan of the right to receive Common Shares or cash in lieu thereof at the
end of a specified Deferral Period.
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<PAGE> 6
"Designated Subsidiary" means a Subsidiary that is (i) not a
corporation or (ii) a corporation in which at the time the Corporation owns or
controls, directly or indirectly, less than 80% of the total combined voting
power represented by all classes of stock issued by such corporation.
"Exercise Right" means the price payable upon exercise of a
Free-Standing Appreciation Right.
"Free-Standing Appreciation Right" means an Appreciation Right
not granted in tandem with an Option Right.
"Incentive Stock Options" means Option Rights that are intended
to qualify as "incentive stock options" under Section 422 of the Code or any
successor provision.
"Market Value per Share" means, as of any particular date, the
fair market value of the Common Shares as determined by the Board, except that,
with respect to options granted pursuant to Section 3.9, Market Value per Share
will be $14.80.
"Non-Employee Director" means a Director of the Corporation who
is not an employee of the Corporation or any Subsidiary.
"Optionee" means the optionee named in an agreement evidencing
an outstanding Option Right.
"Option Price" means the purchase price payable on exercise of
an Option Right.
"Option Right" means the right to purchase Common Shares upon
exercise of an option granted pursuant to Section 3.2 or Section 4.2 of the
Plan.
"Participant" means a person who is selected by the Board to
receive benefits under the Plan and who is at the time an officer, or other key
employee of the Corporation or any one or more of its Subsidiaries, or who has
agreed to commence serving in any of such capacities within 90 days of the Date
of Grant, and also includes each Non-Employee Director who receives an award of
Option Rights pursuant to Section 4.2 of the Plan; provided, however, that for
purposes of Articles III and V of the Plan, Participant does not include such
Non-Employee Director.
"Performance Objectives" means the measurable performance
objective or objectives established pursuant to the Plan for Participants who
have received grants of Performance Shares or Performance Units or, when so
determined by the Board, Option Rights, Appreciation Rights, Restricted Shares
and dividend credits pursuant to the Plan. Performance Objectives may be
described in terms of Corporation-wide objectives and/or objectives that are
related to the performance of the individual Participant or of the Subsidiary,
division, department, region, store or function within the Corporation or
Subsidiary in which the Participant is employed. The Performance Objectives may
be made relative to the performance of other corporations. The
3
<PAGE> 7
Performance Objectives applicable to any award to a Covered Employee will be
based on specified levels of or growth in one or more of the following criteria:
1. earnings;
2. earnings before interest, tax, depreciation and
amortization;
3. earnings per share (earnings per share will be calculated
without regard to any change in accounting standards that
may be required by the Financial
Accounting Standards Board after the goal is established);
4. share price;
5. total shareholder return;
6. return on invested capital, equity, or assets;
7. operating earnings;
8. sales growth.
Except where a modification would result in an award no longer
qualifying as performance based compensation within the meaning of Section
162(m) of the Code, if the Board determines that a change in the business,
operations, corporate structure or capital structure of the Corporation, or the
manner in which it conducts its business, or other events or circumstances
render the Performance Objectives unsuitable, the Board may in its discretion
modify such Performance Objectives or the related minimum acceptable level of
achievement, in whole or in part, as the Board deems appropriate and equitable.
"Performance Period" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 3.6 of the
Plan within which the Performance Objectives relating to such Performance Share
or Performance Unit are to be achieved.
"Performance Share" means a bookkeeping entry that records the
equivalent of one Common Share awarded pursuant to Section 3.6 of the Plan.
"Performance Unit" means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 3.6 of the Plan.
"Reload Option Rights" means additional Option Rights granted
automatically to an Optionee upon the exercise of Option Rights pursuant to
Section 3.2(g) of the Plan.
"Restricted Shares" means Common Shares granted or sold pursuant
to Section 3.4 or Section 4.2 of the Plan as to which neither the substantial
risk of forfeiture nor the prohibition on transfers referred to in Section 3.4
of the Plan has expired.
"Spread" means the excess of the Market Value per Share on the
date when an Appreciation Right is exercised, or on the date when Option Rights
are surrendered in payment of the Option Price of other Option Rights, over the
Option Price provided for in the related Option Right or Free-Standing
Appreciation Right, respectively.
4
<PAGE> 8
"Subsidiary" means a corporation, company or other entity (i)
more than 50% of whose outstanding shares or securities (representing the right
to vote for the election of directors or other managing authority) are, or (ii)
which does not have outstanding shares or securities (as may be the case in a
partnership, joint venture or unincorporated association), but more than 50% of
whose ownership interest representing the right generally to make decisions for
such other entity is, now or hereafter, owned or controlled, directly or
indirectly, by the Corporation, except that for purposes of determining whether
any person may be a Participant for purposes of any grant of Incentive Stock
Options, "Subsidiary" means any corporation in which at the time the Corporation
owns or controls, directly or indirectly, more than 50% of the total combined
voting power represented by all classes of stock issued by such corporation.
"Tandem Appreciation Right" means an Appreciation Right granted
in tandem with an Option Right.
"Voting Shares" means at any time the then-outstanding securities
entitled to vote generally in the election of directors of the Corporation.
ARTICLE II
Shares Available Under the Plan
-------------------------------
2.1 SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as
provided in Section 6.1 of the Plan, the number of Common Shares that may be
issued or transferred (i) upon the exercise of Option Rights or Appreciation
Rights, (ii) as Restricted Shares and released from substantial risks of
forfeiture thereof, (iii) as Deferred Shares, (iv) in payment of Performance
Shares or Performance Units that have been earned, (v) as awards to Non-Employee
Directors or (vi) in payment of dividend equivalents paid with respect to awards
made under the Plan may not exceed in the aggregate 2,250,000 shares plus any
shares relating to awards that expire or are forfeited or canceled. Such shares
may be shares of original issuance or treasury shares or a combination of the
foregoing. Upon the payment of any Option Price by the transfer to the
Corporation of Common Shares or upon satisfaction of any withholding amount by
means of transfer or relinquishment of Common Shares, there will be deemed to
have been issued or transferred under the Plan only the net number of Common
Shares actually issued or transferred by the Corporation.
(b) The number of shares available in Subsection (a) of this
Section will be adjusted to account for shares relating to awards that expire;
are forfeited; or are transferred, surrendered, or relinquished upon the payment
of any Option Price by the transfer to the Corporation of Common Shares or upon
satisfaction of any withholding amount.
(c) Notwithstanding anything in this Section or elsewhere in the
Plan to the contrary, the aggregate number of Common Shares actually issued or
transferred by the Corporation upon the exercise of Incentive Stock Options may
not exceed 200,000 shares, subject to adjustments as provided in Section 6.1 of
the Plan. Further, no Participant may be granted Option Rights for more
5
<PAGE> 9
than 300,000 Common Shares during any calendar year, subject to adjustments as
provided in Section 6.1 of the Plan.
(d) Upon payment in cash of the benefit provided by any award
granted under the Plan, any shares that were covered by that award will again be
available for issue or transfer hereunder.
(e) Notwithstanding any other provision of the Plan to the
contrary, in no event may any Participant in any calendar year receive more than
300,000 Appreciation Rights, subject to adjustments as provided in Section 6.1
of the Plan.
(f) Notwithstanding any other provision of the Plan to the
contrary, in no event may any Participant in any calendar year receive more than
75,000 Restricted Shares or 5,000 Deferred Shares, subject to adjustments as
provided in Section 6.1 of the Plan.
(g) Notwithstanding any other provision of the Plan to the
contrary, in no event may any Participant in any calendar year receive an award
of Performance Shares or Performance Units having an aggregate maximum value as
of their respective Dates of Grant in excess of $1,000,000.
ARTICLE III
Long-Term Incentive Awards
--------------------------
3.1 PURPOSE. The purpose of the long-term incentive awards provided
under this Article is to provide the Corporation a means to devise tailored
long-term stock and other incentive awards to officers and other key employees
of the Corporation or a Subsidiary, which will provide incentive for such
employees to act in the best interests of the Corporation's shareholders, will
reinforce such employees' mutuality of interest with shareholders, and will
promote the long-term interests of the Corporation and its Subsidiaries.
3.2 OPTION RIGHTS. The Board may, from time to time and upon such terms
and conditions as it may determine, authorize the granting to Participants of
options to purchase Common Shares. Each such grant may utilize any or all of the
authorizations, and will be subject to all of the requirements, contained in the
following provisions:
(a) Each grant will specify the number of Common Shares to which
it pertains subject to the limitations set forth in Section 2.1 of the Plan.
(b) Each grant will specify an Option Price per share, which may
be equal to or more or less than (but not less than 75% of) the Market Value per
Share on the Date of Grant, except that the Option Price per share for any
Incentive Stock Option will not be less than 100% of the Market Value per Share
on the Date of Grant.
6
<PAGE> 10
(c) Each grant will specify whether the Option Price will be
payable (i) in cash or by check acceptable to the Corporation, (ii) by the
actual or constructive transfer to the Corporation of nonforfeitable,
unrestricted Common Shares owned by the Optionee (or other consideration
authorized pursuant to Subsection (d) of this Section) having a value at the
time of exercise equal to the total Option Price, or (iii) by a combination of
such methods of payment.
(d) The Board may determine, at or after the Date of Grant, that
payment of the Option Price of any option (other than an Incentive Stock Option)
may also be made in whole or in part in the form of Restricted Shares or other
Common Shares that are forfeitable or subject to restrictions on transfer,
Deferred Shares, Performance Shares (based, in each case, on the Market Value
per Share on the date of exercise), other Option Rights (based on the Spread on
the date of exercise) or Performance Units. Unless otherwise determined by the
Board at or after the Date of Grant, whenever any Option Price is paid in whole
or in part by means of any of the forms of consideration specified in this
Subsection, the Common Shares received upon the exercise of the Option Rights
will be subject to such risks of forfeiture or restrictions on transfer as may
correspond to any that apply to the consideration surrendered, but only to the
extent of (i) the number of shares or Performance Shares, (ii) the Spread of any
unexercisable portion of Option Rights, or (iii) the stated value of Performance
Units surrendered.
(e) Any grant may provide for deferred payment of the Option
Price from the proceeds of sale through a bank or broker on a date satisfactory
to the Corporation of some or all of the shares to which such exercise relates.
(f) Any grant may provide for payment of the Option Price, at the
election of the Optionee, in installments, with or without interest, upon terms
determined by the Board.
(g) Any grant may, at or after the Date of Grant, provide for the
automatic grant of Reload Option Rights to an Optionee upon the exercise of
Option Rights (including Reload Option Rights) using Common Shares or other
consideration specified in Subsection (d) of this Section. Reload Option Rights
will cover up to the number of Common Shares, Deferred Shares, Option Rights or
Performance Shares (or the number of Common Shares having a value equal to the
value of any Performance Units) surrendered to the Corporation upon any such
exercise in payment of the Option Price or to meet any withholding obligations.
Reload Options may have an Option Price that is no less than the applicable
Market Value per Share at the time of exercise and will be on such other terms
as may be specified by the Board, which may be the same as or different from
those of the original Option Rights.
(h) Successive grants may be made to the same Participant whether
or not any Option Rights previously granted to such Participant remain
unexercised.
(i) Each grant will specify the period or periods of continuous
service by the Optionee with the Corporation or any Subsidiary following the
grant which is necessary before the Option Rights or installments thereof will
become exercisable and may provide for the earlier exercise of such Option
Rights in the event of retirement, disability or death of the Participant or a
Change of Ownership or other similar transaction or event.
7
<PAGE> 11
(j) Any grant of Option Rights may specify Performance Objectives
that must be achieved as a condition to the exercise of such rights.
(k) Option Rights granted under the Plan may be (i) options,
including, without limitation, Incentive Stock Options, that are intended to
qualify under particular provisions of the Code, (ii) options that are not
intended so to qualify, or (iii) combinations of the foregoing.
(l) The Board may, at or after the Date of Grant of any Option
Rights (other than Incentive Stock Options), provide for the payment of dividend
equivalents to the Optionee on either a current or deferred or contingent basis
or may provide that such equivalents will be credited against the Option Price.
(m) The exercise of an Option Right will result in the
cancellation on a share-for-share basis of any Tandem Appreciation Right
authorized under Section 3.3 of the Plan.
(n) No Option Right may be exercised more than 10 years from the
Date of Grant.
(o) Each grant of Option Rights will be evidenced by an agreement
executed on behalf of the Corporation by an officer and delivered to the
Optionee and containing such terms and provisions, consistent with the Plan, as
the Board may approve.
3.3 APPRECIATION RIGHTS. (a) The Board may also authorize the granting
to any Optionee of Tandem Appreciation Rights in respect of Option Rights
granted hereunder at any time prior to the exercise or termination of such
related Option Rights; provided, however, that a Tandem Appreciation Right
awarded in relation to an Incentive Stock Option must be granted concurrently
with such Incentive Stock Option. A Tandem Appreciation Right will be a right of
the Optionee, exercisable by surrender of the related Option Right, to receive
from the Corporation an amount determined by the Board, which will be expressed
as a percentage of the Spread (not exceeding 100%) at the time of exercise.
(b) The Board may also authorize the granting to any Participant
of Free-Standing Appreciation Rights. A Free-Standing Appreciation Right will be
a right of the Participant to receive from the Corporation an amount determined
by the Board, which will be expressed as a percentage of the spread (not
exceeding 100%) at the time of exercise.
(c) Each grant of Appreciation Rights may utilize any or all of
the authorizations, and will be subject to all of the requirements, contained in
the following provisions:
(i) Any grant may specify that the amount payable on
exercise of an Appreciation Right may be paid by the Corporation in
cash, in Common Shares or in any combination thereof and may either
grant to the Participant or retain in the Board the right to elect among
those alternatives.
(ii) Any grant may specify that the amount payable on
exercise of an Appreciation Right may not exceed a maximum specified by
the Board at the Date of Grant.
8
<PAGE> 12
(iii) Any grant may specify waiting periods before exercise
and permissible exercise dates or periods and will provide that no
Appreciation Right may be exercised except at a time when the related
Option Right (if applicable) is also exercisable and at a time when the
Spread is positive.
(iv) Any grant may specify that such Appreciation Right may
be exercised only in the event of retirement, disability or death of the
Participant or a Change of Ownership or other similar transaction or
event.
(v) Each grant of Appreciation Rights will be evidenced by
an agreement executed on behalf of the Corporation by an officer and
delivered to and accepted by the Participant, which agreement will
describe such Appreciation Rights, identify the related Option Rights
(if applicable), state that such Appreciation Rights are subject to all
the terms and conditions of the Plan, and contain such other terms and
provisions, consistent with the Plan, as the Board may approve.
(vi) Any grant of Appreciation Rights may specify
Performance Objectives that must be achieved as a condition of the
exercise of such rights.
3.4 RESTRICTED SHARES. The Board may also authorize the grant or sale to
Participants of Restricted Shares. Each such grant or sale may utilize any or
all of the authorizations, and will be subject to all of the requirements,
contained in the following provisions:
(a) Each such grant or sale will constitute an immediate transfer
of the ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to voting, dividend and
other ownership rights, but subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than Market Value per Share at the Date of Grant.
(c) Each such grant or sale will provide that the Restricted
Shares covered by such grant or sale will be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code except (if the Board so
determines) in the event of retirement, disability or death of the Participant
or a Change of Ownership or other similar transaction or event, for a period of
not less than 3 years as determined by the Board at the Date of Grant.
(d) Each such grant or sale will provide that during the period
for which such substantial risk of forfeiture is to continue, the
transferability of the Restricted Shares will be prohibited or restricted in the
manner and to the extent prescribed by the Board at the Date of Grant (which
restrictions may include, without limitation, rights of repurchase or first
refusal in the Corporation or provisions subjecting the Restricted Shares to a
continuing substantial risk of forfeiture in the hands of any transferee).
9
<PAGE> 13
(e) Any grant of Restricted Shares may specify Performance
Objectives which, if achieved, will result in termination or early termination
of the restrictions applicable to such shares and each grant may specify in
respect of such specified Performance Objectives, a minimum acceptable level of
achievement and will set forth a formula for determining the number of
Restricted Shares on which restrictions will terminate if performance is at or
above the minimum level, but falls short of full achievement of the specified
Performance Objectives.
(f) Any such grant or sale of Restricted Shares may require that
any or all dividends or other distributions paid thereon during the period of
such restrictions be automatically deferred and reinvested in additional
Restricted Shares, which may be subject to the same restrictions as the
underlying award.
(g) Each grant or sale of Restricted Shares will be evidenced by
an agreement executed on behalf of the Corporation by an officer and delivered
to and accepted by the Participant and will contain such terms and provisions,
consistent with the Plan, as the Board may approve. Unless otherwise directed by
the Board, all certificates representing Restricted Shares will be held in
custody by the Corporation until all restrictions thereon have lapsed, together
with a stock power executed by the Participant in whose name such certificates
are registered, endorsed in blank and covering such Shares.
3.5 DEFERRED SHARES. The Board may also authorize the granting or sale
of Deferred Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and will be subject to all of the requirements
contained in the following provisions:
(a) Each such grant or sale will constitute the agreement by the
Corporation to deliver Common Shares to the Participant in the future in
consideration of the performance of services, but subject to the fulfillment of
such conditions during the Deferral Period as the Board may specify.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is equal
to or less than the Market Value per Share at the Date of Grant.
(c) Each such grant or sale will be subject to a Deferral Period
of not less than one year, as determined by the Board at the Date of Grant,
except (if the Board so determines) in the event of retirement, disability,
hardship or death of the Participant or a Change of Ownership or other similar
transaction or event.
(d) During the Deferral Period, the Participant will have no
right to transfer any rights under his or her award and will have no rights of
ownership in the Deferred Shares and will have no right to vote them, but the
Board may, at or after the Date of Grant, authorize the payment of dividend
equivalents on such Shares on either a current or deferred or contingent basis,
either in cash or in additional Common Shares.
10
<PAGE> 14
(e) Each grant or sale of Deferred Shares will be evidenced by an
agreement executed on behalf of the Corporation by any officer and delivered to
and accepted by the Participant and will contain such terms and provisions,
consistent with the Plan, as the Board may approve.
3.6 PERFORMANCE SHARES AND PERFORMANCE UNITS. The Board may also
authorize the granting of Performance Shares and Performance Units that will
become payable to a Participant upon achievement of specified Performance
Objectives. Each such grant may utilize any or all of the authorizations, and
will be subject to all of the requirements, contained in the following
provisions:
(a) Each grant will specify the number of Performance Shares or
Performance Units to which it pertains, which number may be subject to
adjustment to reflect changes in compensation or other factors; provided,
however, that no such adjustment will be made in the case of a Covered Employee.
(b) The Performance Period with respect to each Performance Share
or Performance Unit will be such period of time (not less than one year, except
in the event of retirement, disability or death of the Participant or a Change
of Ownership or other similar transaction or event, if the Board so determines)
commencing with the Date of Grant as is determined by the Board at the Date of
Grant.
(c) Any grant of Performance Shares or Performance Units will
specify Performance Objectives which, if achieved, will result in payment or
early payment of the award, and each grant may specify in respect of such
specified Performance Objectives a minimum acceptable level of achievement below
which no payment will be made and will set forth a formula for determining the
number of Performance Shares or Performance Units that will be earned if
performance is at or above the minimum level, but falls short of full
achievement of the specified Performance Objectives. The grant of Performance
Shares or Performance Units will specify that, before the Performance Shares or
Performance Units are earned and paid, the Board must certify that the
Performance Objectives have been satisfied.
(d) Each grant will specify a minimum acceptable level of
achievement in respect of the specified Performance Objectives below which no
payment will be made and will set forth a formula for determining the amount of
payment to be made if performance is at or above such minimum but short of full
achievement of the Performance Objectives.
(e) Each grant will specify the time and manner of payment of
Performance Shares or Performance Units which have been earned. Any grant may
specify that the amount payable with respect thereto may be paid by the
Corporation in cash, in Common Shares or in any combination thereof and may
either grant to the Participant or retain in the Board the right to elect among
those alternatives.
(f) Any grant of Performance Shares may specify that the amount
payable with respect thereto may not exceed a maximum specified by the Board at
the Date of Grant. Any grant of
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Performance Units may specify that the amount payable or the number of Common
Shares issued with respect thereto may not exceed maximums specified by the
Board at the Date of Grant.
(g) The Board may, at or after the Date of Grant of Performance
Shares, provide for the payment of dividend equivalents to the holder thereof on
either a current or deferred or contingent basis, either in cash or in
additional Common Shares.
(h) Each grant of Performance Shares or Performance Units will be
evidenced by an agreement executed on behalf of the Corporation by any officer
and delivered to and accepted by the Participant, which agreement will state
that such Performance Shares or Performance Units are subject to all the terms
and conditions of the Plan, and contain such other terms and provisions,
consistent with the Plan, as the Board may approve.
3.7 TRANSFERABILITY. (a) Except as otherwise determined by the Board on
a case-by-case basis, no Option Right, Appreciation Right or other derivative
security granted under the Plan will be transferable by an Optionee other than
by will or the laws of descent and distribution, except (in the case of a
Participant who is not a Director or officer of the Corporation) to a fully
revocable trust of which the Optionee is treated as the owner for federal income
tax purposes. Except as otherwise determined by the Board on a case-by-case
basis, Option Rights and Appreciation Rights will be exercisable during the
Optionee's lifetime only by him or her or by his or her guardian or legal
representative.
(b) The Board may specify at the Date of Grant that part or all
of the Common Shares that are (i) to be issued or transferred by the Corporation
upon the exercise of Option Rights or Appreciation Rights, upon the termination
of the Deferral Period applicable to Deferred Shares or upon payment under any
grant of Performance Shares or Performance Units or (ii) no longer subject to
the substantial risk of forfeiture and restrictions on transfer referred to in
Section 3.4 of the Plan, will be subject to further restrictions on transfer.
3.8 PARTICIPATION BY EMPLOYEES OF A DESIGNATED SUBSIDIARY. As a
condition to the effectiveness of any grant or award to be made hereunder to a
Participant who is an employee of a Designated Subsidiary, regardless whether
such Participant is also employed by the Corporation or another Affiliate, the
Board may require the Designated Subsidiary to agree to transfer to the
Participant (as, if and when provided for under the Plan and any applicable
agreement entered into between the Participant and the Designated Subsidiary
pursuant to the Plan) the Common Shares that would otherwise be delivered by the
Corporation upon receipt by the Designated Subsidiary of any consideration then
otherwise payable by the Participant to the Corporation. Any such grant or award
may be evidenced by an agreement between the Participant and the Designated
Subsidiary, in lieu of the Corporation, on terms consistent with the Plan and
approved by the Board and the Designated Subsidiary. All Common Shares so
delivered by or to a Designated Subsidiary will be treated as if they had been
delivered by or to the Corporation for purposes of Section 2.1 of the Plan and
all references to the Corporation in the Plan are deemed to refer to the
Designated Subsidiary except with respect to the definitions of the Board and
the Committee and in other cases where the context otherwise requires.
12
<PAGE> 16
3.9 AWARDS ON THE EFFECTIVE DATE. Long-term incentive awards pursuant to
this Article will be initially made on the Effective Date as provided in Exhibit
A hereto, with such awards to each applicable employee based on gain objective
and salary.
ARTICLE IV
Awards to Non-Employee Directors
--------------------------------
4.1 PURPOSE. The purpose of providing awards to non-employee directors
is to provide the Corporation a means to attract and retain qualified directors,
provide an incentive for such directors to act in the best interests of the
Corporation's shareholders, reinforce such directors' mutuality of interest with
shareholders and promote the long-term interests of the Corporation.
4.2 AWARDS TO NON-EMPLOYEE DIRECTORS. The Board may, from time to time
and upon such terms and conditions as it may determine, authorize the granting
to Non-Employee Directors of Option Rights (other than Incentive Stock Options)
and may also authorize the grant or sale of Restricted Shares to Non-Employee
Directors. A grant of Option Rights may be in lieu of all or a portion of such
Non-Employee Director's annual retainer, as elected by the Non-Employee
Director. Each grant of Option Rights awarded pursuant to this Section will be
upon terms and conditions consistent with Section 3.2 of the Plan. Each grant or
sale of Restricted Shares pursuant to this Article will be upon terms and
conditions consistent with Section 3.4 of the Plan.
4.3 AWARDS ON THE EFFECTIVE DATE. Awards to non-employee directors will
be initially made on the Effective Date as provided in Exhibit A hereto.
ARTICLE V
Annual Incentive Awards
-----------------------
5.1 PURPOSE. The purpose of the annual incentive awards provided under
the Plan is to provide for the grant of short-term performance awards to certain
key employees of the Corporation or a Subsidiary based on their attainment of
predetermined goals which will further the interests of the Corporation and its
shareholders.
5.2 DEFINITIONS. As used in this Article,
"Annual Incentive Award" means an award made pursuant to this
Article.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Goal" means the threshold or thresholds to be satisfied in order
for a Participant to qualify for all or a portion of an Annual Incentive Award,
as determined by the Board.
13
<PAGE> 17
"Retirement" means termination of employment on or after
attainment of age 55 with a combined total of age and service with the Company
equal to at least 64.
5.3 ELIGIBILITY FOR ANNUAL INCENTIVE AWARD. The Board annually will
select Participants eligible to receive an Annual Incentive Award, based on the
impact of the employee's position on Corporation performance, the measurability
of such impact, and the Participant's performance and potential.
5.4 ANNUAL INCENTIVE AWARDS. (a) As soon as practicable (but not later
than the April 15) following the end of the Corporation's fiscal year, the Board
will determine whether and to what extent the Goals have been met and what
Annual Incentive Awards have been earned, and will notify each Participant of
his entitlement, if any, to an Annual Incentive Award. Except as provided in
this Article, an Annual Incentive Award will become nonforfeitable upon such a
determination by the Board that such Award has been earned.
(b) In the event of special or unusual events or circumstances
affecting the application of one or more performance measures to an annual
incentive award, the Board may revise the performance measures and/or underlying
factors and criteria applicable to the Annual Incentive Awards affected, to the
extent deemed appropriate by the Board, in its sole discretion, to avoid
unintended windfalls or hardship.
(c) Annual Incentive Awards earned will be paid in cash as soon
as practicable following the determination by the Board of such Award, subject
to any deferral election made pursuant to Section 5.5 of the Plan. Anything in
this Article to the contrary notwithstanding, the Corporation will have no
obligation to make payment of any Annual Incentive Award in the event the
Participant's employment is terminated for Cause.
5.5 DEFERRAL ELECTION. A Participant entitled to receive an Annual
Incentive Award may elect to defer up to 50% of such Award (in whole
percentages). Any such election must be made prior to the last business day of
July of the year for which such Award may be earned and will be irrevocable with
respect to such Annual Incentive Award; provided, however, that for the Annual
Incentive Award applicable to the fiscal year in which the Effective Date
occurs, such election must be made by January 15, 1998. The portion of an Annual
Incentive Award deferred pursuant to this Subsection will be converted and
granted as Deferred Shares under Section 3.5 of the Plan using the Market Value
per Share on the last day of the Corporation's fiscal year for which such Award
is earned.
5.6 GRANTS OF RESTRICTED SHARES. The Corporation will grant Restricted
Shares under Section 3.4 of the Plan to each Participant who defers a percentage
of his Annual Incentive Award pursuant to Section 5.5 of the Plan. The number of
Restricted Shares so granted will be equal in value, using the Market Value per
Share on the last day of the Corporation's fiscal year to which the Award
relates, to 25% of the deferred portion of such Award deferred.
5.7 RETIREMENT, DISABILITY, DEATH, TERMINATION OF EMPLOYMENT, CHANGE
OF OWNERSHIP. (a) In the event of the Retirement, disability or death of any
Participant prior to the determination
14
<PAGE> 18
of any Annual Incentive Award, and in the event the Board determines that the
Goal(s) set for the Participant are attained, such Participant or such
Participant's beneficiary, as the case may be, will be eligible to receive a pro
rata portion of his Annual Incentive Award, such portion determined by
multiplying the Annual Incentive Award by a fraction, the numerator of which is
the number of days during the year prior to his Retirement, disability or death
and the denominator of which is 365.
(b) OTHER TERMINATION OF EMPLOYMENT. If a Participant's
employment is terminated (by him or by the Corporation or a Subsidiary) prior to
the date on which any Annual Incentive Award is paid for any reason other than
Retirement, disability or death, the Participant will forfeit any right to an
Annual Incentive Award or any portion thereof; provided, however, that in
unusual circumstances the Board in its sole discretion may waive the forfeiture
in whole or in part.
(c) CHANGE OF OWNERSHIP. If a Participant is employed on the date
a Change of Ownership occurs, the Participant will be eligible to receive an
Annual Incentive Award for the year in which such Change of Ownership occurs of
not less than the Annual Incentive Award payable for the year immediately
preceding such year.
5.8 ADMINISTRATION. (a) This Article will be administered by the Board,
which is the "administrator" for purposes of, and to the extent required by,
ERISA (the "Administrator"). The Board will have such powers as may be necessary
to discharge its duties hereunder, including, but not by way of limitation, to
construe and interpret any provision of this Article or related provisions of
the Plan or of any related agreement, notification or document (including,
without limitation, by supplying omissions from, correcting deficiencies in, or
resolving inconsistencies or ambiguities in the language of this Article or
related provisions of the Plan or such agreement, notification or document), to
determine the rights and status under this Article of Participants and other
persons, to decide disputes arising under this Article and to make any
determinations and findings with respect to benefits under this Article and the
persons entitled thereto as may be required for the purposes of this Article.
(b) The Board may, from time to time, employ and/or designate
agents and delegate to them such administrative duties as it sees fit, and may
from time to time consult with legal counsel who may be counsel to the
Corporation. No member of the Board may act in respect of his own interests
under this Article. All decisions and determinations by the Administrator will
be final and binding on all parties. All decisions of the Board will be made by
the vote of the majority, including actions in writing taken without a meeting.
(c) All elections, notices and directions under this Article by a
Participant must be made on such forms and in such manner as the Board
prescribes.
5.9 CLAIMS PROCEDURE. To the extent required by ERISA, the Board will
provide to any Participant or beneficiary whose claim for benefits under this
Article has been fully or partially denied (the "claimant") a written notice
setting forth (a) the specific reasons for such denial, (b) a designation of any
additional material or information required and (c) an explanation of this claim
review procedure. Such notice will state that the claimant is entitled to
request a review in writing, by the Board, of the decision denying the claim.
The claim will be reviewed by the Board who may,
15
<PAGE> 19
but need not, grant the claimant a hearing. On review, the claimant may have
legal representation, examine pertinent documents and submit issues and comments
in writing. The decision on review will be made within 120 days following the
request, will be provided in writing to the claimant and will be final and
binding on all parties concerned.
ARTICLE VI
Administration; General Provisions
----------------------------------
6.1 ADJUSTMENTS. The Board may make or provide for such adjustments in
the numbers of Common Shares covered by outstanding Option Rights, Appreciation
Rights, Deferred Shares, and Performance Shares granted hereunder, in the prices
per share applicable to such Option Rights and Appreciation Rights and in the
kind of shares covered thereby, as the Board, in its sole discretion, exercised
in good faith, may determine is equitably required to prevent dilution or
enlargement of the rights of Participants or Optionees that otherwise would
result from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Corporation, or
(b) any merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or (c) any other
corporate transaction or event having an effect similar to any of the foregoing.
Moreover, in the event of any such transaction or event, the Board, in its
discretion, may provide in substitution for any or all outstanding awards under
the Plan such alternative consideration as it, in good faith, may determine to
be equitable in the circumstances and may require in connection therewith the
surrender of all awards so replaced. The Board may also make or provide for such
adjustments in the numbers of shares specified in Section 2.1 of the Plan and in
the number of Option Rights to be granted pursuant to Section 4.2 of the Plan as
the Board in its sole discretion, exercised in good faith, may determine is
appropriate to reflect any transaction or event described in this Section.
Notwithstanding any other provision of the Plan, following any adjustment
pursuant to this Section, the total percent of share equivalents to be made
available under the Plan will be 15% of shares outstanding after such
adjustment.
6.2 FRACTIONAL SHARES. The Corporation will not be required to issue any
fractional Common Shares pursuant to the Plan. The Board may provide for the
elimination of fractions or for the settlement of fractions in cash.
6.3 WITHHOLDING TAXES. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under the Plan, and
the amounts available to the Corporation for such withholding are insufficient,
it will be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Corporation for payment of the balance of such taxes required to be
withheld, which arrangements (in the discretion of the Board) may include
relinquishment of a portion of such benefit. The Corporation and a Participant
or such other person may also make similar arrangements with respect to the
payment of any taxes with respect to which withholding is not required.
16
<PAGE> 20
6.4 ADMINISTRATION OF THE PLAN. (a) Except as otherwise provided in
Section 5.8 of the Plan, the Plan will be administered by the Board, which may
from time to time delegate all or any part of its authority under the Plan to a
committee of the Board (or subcommittee thereof). A majority of the committee
(or subcommittee thereof) will constitute a quorum, and the action of the
members of the committee (or subcommittee thereof) present at any meeting at
which a quorum is present, or acts unanimously approved in writing, will be the
acts of the committee (or subcommittee thereof). To the extent of any such
delegation, references in the Plan to the Board (other than in Section 6.5(a) of
the Plan) are deemed to be references to any such committee or subcommittee.
(b) The interpretation and construction by the Board of any
provision of the Plan or of any agreement, notification or document evidencing
the grant of Option Rights, Appreciation Rights, Restricted Shares, Deferred
Shares, Performance Shares or Performance Units and any determination by the
Board pursuant to any provision of the Plan or of any such agreement,
notification or document will be final and conclusive. No member of the Board
may be liable for any such action or determination made in good faith.
6.5 AMENDMENTS, ETC. (a) The Board may at any time and from time to time
amend the Plan in whole or in part; provided, however, that any amendment which
must be approved by the shareholders of the Corporation in order to comply with
applicable law or the rules of any national securities exchange upon which the
Common Shares are traded or quoted will not be effective unless and until such
approval has been obtained. Presentation of the Plan or any amendment thereof
for shareholder approval may not be construed to limit the Corporation's
authority to offer similar or dissimilar benefits under other plans without
shareholder approval.
(b) The Board will not, without the further approval of the
shareholders of the Corporation, authorize the amendment of any outstanding
Option Right to reduce the Option Price. Furthermore, no Option Right may be
canceled and replaced with awards having a lower Option Price without further
approval of the shareholders of the Corporation. This Subsection is intended to
prohibit the repricing of "underwater" Option Rights and may not be construed to
prohibit the adjustments provided for in Section 6.1 of the Plan.
(c) The Board also may permit Participants to elect to defer the
issuance of Common Shares or the settlement of awards in cash under the Plan
pursuant to such rules, procedures or programs as it may establish for purposes
of the Plan. The Board also may provide that deferred issuances and settlements
include the payment or crediting of dividend equivalents or interest on the
deferral amounts.
(d) The Board may condition the grant of any award or combination
of awards authorized under the Plan on the surrender or deferral by the
Participant of his or her right to receive a cash bonus or other compensation
otherwise payable by the Corporation or a Subsidiary to the Participant.
(e) In case of termination of employment by reason of death,
disability or normal or early retirement, or in the case of hardship or other
special circumstances, of a Participant who holds an Option Right or
Appreciation Right not immediately exercisable in full, or any Restricted Shares
17
<PAGE> 21
as to which the substantial risk of forfeiture or the prohibition or restriction
on transfer has not lapsed, or any Deferred Shares as to which the Deferral
Period has not been completed, or any Performance Shares or Performance Units
which have not been fully earned, or who holds Common Shares subject to any
transfer restriction imposed pursuant to Section 3.7(b) of the Plan, the Board
may, in its sole discretion, accelerate the time at which such Option Right or
Appreciation Right may be exercised or the time at which such substantial risk
of forfeiture or prohibition or restriction on transfer will lapse or the time
when such Deferral Period will end or the time at which such Performance Shares
or Performance Units will be deemed to have been fully earned or the time when
such transfer restriction will terminate or may waive any other limitation or
requirement under any such award.
(f) The Plan does not confer upon any Participant any right with
respect to continuance of employment or other service with the Corporation or
any Subsidiary, nor does it interfere in any way with any right the Corporation
or any Subsidiary would otherwise have to terminate such Participant's
employment or other service at any time.
(g) To the extent that any provision of the Plan would prevent
any Option Right that was intended to qualify as an Incentive Stock Option from
qualifying as such, that provision will be null and void with respect to such
Option Right. Such provision, however, will remain in effect for other Option
Rights and there will be no further effect on any provision of the Plan.
6.6 TERMINATION. No grant (other than an automatic grant of Reload
Option Rights) may be made under the Plan more than 10 years after the date on
which the Plan is first approved by the shareholders of the Corporation, but all
grants made on or prior to such date will continue in effect thereafter subject
to the terms thereof and of the Plan.
18
<PAGE> 22
EXHIBIT A
<TABLE>
<CAPTION>
NUMBER OF TOTAL OPTIONS
NUMBER RESTRICTED AND RESTRICTED
TITLE OF OPTIONS SHARES SHARES
- ---------------------------------------------------- ---------- ---------- --------------
<S> <C> <C> <C>
Chairman of the Board of Directors and
Chief Executive Officer..................... 193,917 47,087 241,004
President, Chief Operating Officer,
Chief Financial Officer, and 126,046 30,606 156,652
Director.................................... 60,599 -- 60,599
Executive Vice President - Stores................... 215,975 -- 215,975
Senior Vice Presidents (12)......................... 130,363 -- 130,363
Vice Presidents (23)................................ 12,120 -- 12,120
Other Key Employees (3)............................. 49,000 9,100 58,100
--------- -------- ---------
Outside Directors (7)...............................
TOTALS 788,020 86,793 874,813
======= ====== =======
<FN>
- ------------------------------------------
(1) The number of options and restricted shares assumes seven outside
directors and includes the annual stock option grant for three years.
</TABLE>
19
<PAGE> 1
EXHIBIT 10(j)
-------------
[NON-EMPLOYEE DIRECTOR]
----------------------
THE ELDER-BEERMAN STORES CORP.
EQUITY AND PERFORMANCE INCENTIVE PLAN
Restricted Stock Agreement
---------------------------
WHEREAS, ________________ (the "Grantee") is a Non-Employee
Director of The Elder- Beerman Stores Corp. (the "Corporation"); and
WHEREAS, the execution of a restricted stock agreement in the
form hereof (the "Agreement") has been authorized by a resolution of the Board
of Directors (the "Board") of the Corporation duly adopted on ____________,
1997;
NOW, THEREFORE, pursuant to the Corporation's Equity and
Performance Incentive Plan (the "Plan"), the Corporation grants, as of
_________________, 1997 (the "Date of Grant"), to the Grantee shares of the
Corporation's common stock, par value $0.01 per share (the "Stock"), subject to
the terms and conditions of the Plan and the following terms, conditions,
limitations and restrictions:
1. ISSUANCE OF STOCK. The Stock covered by this Agreement will be fully
paid and nonassessable and will be represented by a certificate(s) registered in
the name of the Grantee and bearing a legend referring to the restrictions
hereinafter set forth.
2. RESTRICTIONS ON TRANSFER OF STOCK. The Stock subject to this
Agreement may not be transferred, sold, pledged, exchanged, assigned or
otherwise encumbered or disposed of by the Grantee, except to the Corporation,
until it has become vested in accordance with Section 3; provided, however, that
the Grantee's interest in the Stock covered by this Agreement may be transferred
at any time by will or the laws of descent and distribution. Any purported
transfer, encumbrance or other disposition of the Stock covered by this
Agreement that is in violation of this Section will be null and void, and the
other party to any such purported transaction will not obtain any rights to or
interest in the Stock covered by this Agreement. When and as permitted by the
Plan, the Corporation may waive the restrictions set forth in this Section with
respect to all or any portion of the Stock covered by this Agreement.
3. VESTING OF STOCK. (a) The Stock covered by this Agreement will become
nonforfeitable upon the third anniversary of the Date of Grant, if the Grantee
remains a Non- Employee Director until the third anniversary of the Date of
Grant.
<PAGE> 2
(b) Notwithstanding the provisions of Subsection (a) of this
Section, all of the Stock covered by this Agreement will become immediately
nonforfeitable in the event of the Grantee's death or disability, or upon the
occurrence of a Change of Ownership that occurs while the Grantee is a
Non-Employee Director of the Corporation.
4. FORFEITURE OF STOCK. Any of the Stock covered by this Agreement that
has not become vested in accordance with Section 3 will be forfeited upon the
termination of the Grantee's service as a Non-Employee Director in circumstances
other than those described in Section 3(b), unless the Committee determines to
provide otherwise. In the event of a forfeiture, the certificates representing
all of the Stock covered by this Agreement that has not become vested in
accordance with Section 3 will be cancelled.
5. DIVIDEND, VOTING AND OTHER RIGHTS. The Grantee will have all of the
rights of a shareholder with respect to the Stock covered by this Agreement for
so long as the Grantee holds such Stock, including the right to vote the Stock
and receive any dividends that may be paid thereon. Any additional Stock that
the Grantee may become entitled to receive pursuant to a share dividend or a
merger or reorganization in which the Corporation is the surviving corporation
or any other change in the capital structure of the Corporation will be subject
to the same restrictions as the Stock covered by this Agreement.
6. RETENTION OF SHARE CERTIFICATE(S) BY CORPORATION. The certificate(s)
representing the Stock covered by this Agreement will be held in custody by the
Corporation, together with a stock power endorsed in blank by the Grantee with
respect thereto, until those shares have become vested in accordance with
Section 3.
7. COMPLIANCE WITH LAW. The Corporation will make reasonable efforts to
comply with all applicable federal and state securities laws; provided, however,
notwithstanding any other provision of this Agreement, the Corporation will not
be obligated to issue any restricted or unrestricted Stock pursuant to this
Agreement if the issuance thereof would result in a violation of any such law.
8. ADJUSTMENTS. The Committee may make any adjustments in the number or
kind of shares of stock or other securities covered by this Agreement that the
Committee, on its discretion, exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the Grantee's rights
under this Agreement that otherwise would result from (a) any stock dividend,
stock split, combination of shares, recapitalization or other change in the
capital structure of the Corporation, or (b) any merger, consolidation,
spin-off, split-off, spin-out, split-up, reorganization, partial or complete
liquidation or other distribution of assets, issuance of rights or warrants to
purchase securities, or (c) any other corporate transaction or event having an
effect similar to any of the foregoing. Moreover, in the event of any such
transaction or event, the Committee, in its discretion, may provide in
substitution for any or all of the Grantee's rights under this Agreement such
alternative consideration as it, in good faith, may determine to be equitable
under the circumstances and may require in connection therewith the surrender of
all grants so replaced.
2
<PAGE> 3
9. WITHHOLDING. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with any issuance
of restricted or unrestricted Stock or other securities pursuant to this
Agreement, and the amounts available to the Corporation for such withholding are
insufficient, it will be a condition to the receipt of such Stock that the
Grantee make arrangements satisfactory to the Corporation for payment of the
balance of such taxes required to be withheld. If necessary, the Committee may
require relinquishment of a portion of such Stock.
10. NOTICES. Any notice necessary under this Agreement must be addressed
to the Corporation or the Committee at the principal executive office of the
Corporation and to the Grantee at the address appearing in the personnel records
of the Corporation or a Subsidiary for such Grantee, or to either party at such
other address as either party may designate in writing to the other. Any such
notice will be deemed effective upon receipt thereof by the addressee.
11. AGREEMENT SUBJECT TO THE PLAN. The Stock granted under this
Agreement and all of the terms and conditions hereof are subject to all of the
terms and conditions of the Plan. In the event of any inconsistency between this
Agreement and the Plan, the terms of the Plan will govern.
12. AMENDMENTS. Any amendment to the Plan will be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment will adversely affect the rights of
the Grantee under this Agreement without the Grantee's consent.
13. SEVERABILITY. In the event that one or more of the provisions of
this Agreement is invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated will be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof will continue
to be valid and fully enforceable.
14. DEFINITIONS. All terms used herein with initial capital letters have
the meanings assigned to them in the Plan or in this Agreement.
15. GOVERNING LAW. This Agreement will be construed and governed in
accordance with the laws of the State of Ohio.
This Agreement is executed on __________________, _____.
THE ELDER-BEERMAN STORES CORP.
By:
------------------------------
3
<PAGE> 4
The undersigned Grantee hereby acknowledges receipt of an
executed original of this Restricted Stock Agreement and accepts the right to
receive the Stock subject to the terms and conditions of the Plan and the terms
and conditions hereinabove set forth.
-----------------------------
Grantee
4
<PAGE> 1
EXHIBIT 10(k)
-------------
THE ELDER-BEERMAN STORES CORP.
EQUITY AND PERFORMANCE INCENTIVE PLAN
Restricted Stock Agreement
--------------------------
WHEREAS, ________________ (the "Grantee") is an employee of The
Elder-Beerman Stores Corp. (the "Corporation") or a Subsidiary; and
WHEREAS, the execution of a restricted stock agreement in the
form hereof (the "Agreement") has been authorized by a resolution of the Board
of Directors (the "Board") of the Corporation duly adopted on ____________,
1997;
NOW, THEREFORE, pursuant to the Corporation's Equity and
Performance Incentive Plan (the "Plan"), the Corporation grants, as of
_________________, 1997 (the "Date of Grant"), to the Grantee shares of the
Corporation's common stock, par value $0.01 per share (the "Stock"), subject to
the terms and conditions of the Plan and the following terms, conditions,
limitations and restrictions:
1. ISSUANCE OF STOCK. The Stock covered by this Agreement will be fully
paid and nonassessable and will be represented by a certificate(s) registered in
the name of the Grantee and bearing a legend referring to the restrictions
hereinafter set forth.
2. RESTRICTIONS ON TRANSFER OF STOCK. The Stock subject to this
Agreement may not be transferred, sold, pledged, exchanged, assigned or
otherwise encumbered or disposed of by the Grantee, except to the Corporation,
until it has become vested in accordance with Section 3; provided, however, that
the Grantee's interest in the Stock covered by this Agreement may be transferred
at any time by will or the laws of descent and distribution. Any purported
transfer, encumbrance or other disposition of the Stock covered by this
Agreement that is in violation of this Section will be null and void, and the
other party to any such purported transaction will not obtain any rights to or
interest in the Stock covered by this Agreement. When and as permitted by the
Plan, the Corporation may waive the restrictions set forth in this Section with
respect to all or any portion of the Stock covered by this Agreement.
3. VESTING OF STOCK. (a) The Stock covered by this Agreement will become
nonforfeitable upon the third anniversary of the Date of Grant, if the Grantee
remains in the continuous employ of the Corporation or a Subsidiary until the
third anniversary of the Date of Grant. For the purposes of this Agreement, the
continuous employment of the Grantee with the Corporation or a Subsidiary will
not be deemed to have been interrupted, and the Grantee will not be deemed to
have ceased to be an employee of the Corporation or a Subsidiary, by reason of
(i) the
1
<PAGE> 2
transfer of his employment among the Corporation and its Subsidiaries or (ii)
an approved leave of absence.
(b) Notwithstanding the provisions of Subsection (a) of this
Section, all of the Stock covered by this Agreement will become immediately
nonforfeitable in the event of the Grantee's retirement, death or disability, or
upon the occurrence of a Change of Ownership that occurs while the Grantee is an
employee of the Corporation or a Subsidiary.
4. FORFEITURE OF STOCK. (a) Any of the Stock covered by this Agreement
that has not become vested in accordance with Section 3 will be forfeited upon
the termination of the Grantee's employment with the Corporation and all of its
Subsidiaries in circumstances other than those described in Section 3(b), unless
the Committee determines to provide otherwise. In the event of a forfeiture, the
certificates representing all of the Stock covered by this Agreement that has
not become vested in accordance with Section 3 will be cancelled.
(b) Notwithstanding the provisions of Subsection (a) of this
Section, the Committee may, in its sole discretion, require that, to the extent
the value of any of the Stock covered by this Agreement may not be deducted by
the Corporation, such Stock will be forfeited.
5. DIVIDEND, VOTING AND OTHER RIGHTS. The Grantee will have all of the
rights of a shareholder with respect to the Stock covered by this Agreement for
so long as the Grantee holds such Stock, including the right to vote the Stock
and receive any dividends that may be paid thereon. Any additional Stock that
the Grantee may become entitled to receive pursuant to a share dividend or a
merger or reorganization in which the Corporation is the surviving corporation
or any other change in the capital structure of the Corporation will be subject
to the same restrictions as the Stock covered by this Agreement.
6. RETENTION OF SHARE CERTIFICATE(S) BY CORPORATION. The certificate(s)
representing the Stock covered by this Agreement will be held in custody by the
Corporation, together with a stock power endorsed in blank by the Grantee with
respect thereto, until those shares have become vested in accordance with
Section 3.
7. COMPLIANCE WITH LAW. The Corporation will make reasonable efforts to
comply with all applicable federal and state securities laws; provided, however,
notwithstanding any other provision of this Agreement, the Corporation will not
be obligated to issue any restricted or unrestricted Stock pursuant to this
Agreement if the issuance thereof would result in a violation of any such law.
8. ADJUSTMENTS. The Committee may make any adjustments in the number or
kind of shares of stock or other securities covered by this Agreement that the
Committee, on its discretion, exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the Grantee's rights
under this Agreement that otherwise would result from (a) any stock dividend,
stock split, combination of shares, recapitalization or other change in the
capital structure of the Corporation, or (b) any merger, consolidation,
spin-off, split-off, spin-out, split-up, reorganization, partial or complete
liquidation or other distribution of assets, issuance of rights or warrants to
2
<PAGE> 3
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 Committee, in its discretion, may provide in
substitution for any or all of the Grantee's rights under this Agreement such
alternative consideration as it, in good faith, may determine to be equitable
under the circumstances and may require in connection therewith the surrender of
all grants so replaced.
9. WITHHOLDING. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with any issuance
of restricted or unrestricted Stock or other securities pursuant to this
Agreement, and the amounts available to the Corporation for such withholding are
insufficient, it will be a condition to the receipt of such Stock that the
Grantee make arrangements satisfactory to the Corporation for payment of the
balance of such taxes required to be withheld. If necessary, the Committee may
require relinquishment of a portion of such Stock.
10. EMPLOYMENT RIGHTS. The Plan and this Agreement will not confer upon
the Grantee any right with respect to the continuance of employment or other
service with the Corporation or any Subsidiary and do not interfere in any way
with any right that the Corporation or any Subsidiary otherwise has to terminate
any employment or other service of the Grantee at any time.
11. RELATION TO OTHER BENEFITS. Any economic or other benefit to the
Grantee under this Agreement will not be taken into account in determining any
benefits to which the Grantee may be entitled under any profit-sharing,
retirement or other benefit or compensation plan maintained by the Corporation
or a Subsidiary.
12. NOTICES. Any notice necessary under this Agreement must be addressed
to the Corporation or the Committee at the principal executive office of the
Corporation and to the Grantee at the address appearing in the personnel records
of the Corporation or a Subsidiary for such Grantee, or to either party at such
other address as either party may designate in writing to the other. Any such
notice will be deemed effective upon receipt thereof by the addressee.
13. AGREEMENT SUBJECT TO THE PLAN. The Stock granted under this
Agreement and all of the terms and conditions hereof are subject to all of the
terms and conditions of the Plan. In the event of any inconsistency between this
Agreement and the Plan, the terms of the Plan will govern.
14. AMENDMENTS. Any amendment to the Plan will be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment will adversely affect the rights of
the Grantee under this Agreement without the Grantee's consent.
15. SEVERABILITY. In the event that one or more of the provisions of
this Agreement is invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated will be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof will continue
to be valid and fully enforceable.
16. DEFINITIONS. All terms used herein with initial capital letters have
the meanings assigned to them in the Plan or in this Agreement.
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<PAGE> 4
17. GOVERNING LAW. This Agreement will be construed and governed in
accordance with the laws of the State of Ohio.
This Agreement is executed on _________________, _____.
THE ELDER-BEERMAN STORES CORP.
---------------------------------
By:
The undersigned Grantee hereby acknowledges receipt of an
executed original of this Restricted Stock Agreement and accepts the right to
receive the Stock subject to the terms and conditions of the Plan and the terms
and conditions hereinabove set forth.
---------------------------------
Grantee
4
<PAGE> 1
EXHIBIT 10(l)
THE ELDER-BEERMAN STORES CORP.
EQUITY AND PERFORMANCE INCENTIVE PLAN
DEFERRED SHARES AGREEMENT
WHEREAS, _____________ (the "Grantee") is an employee of The
Elder-Beerman Stores Corp. (the "Corporation") or a Subsidiary;
WHEREAS, the Grantee has elected to defer a portion of his
Annual Incentive Award under the Corporation's Equity and Performance Incentive
Plan (the "Plan") pursuant to a deferral election filed with the Committee
("Deferral Election"); and
WHEREAS, the execution of a deferred shares agreement in the
form hereof (the "Agreement") has been authorized by a resolution of the Board
of Directors (the "Board") of the Corporation duly adopted on ____________,
1997;
NOW, THEREFORE, pursuant to the Plan, the Corporation awards, as
of _________________, 1997 (the "Date of Award"), to the Grantee Deferred Shares
("Shares"), each Share equal to one share of the Corporation's common stock, par
value $0.01 per share, subject to the terms and conditions of the Plan and the
following terms, conditions, limitations and restrictions:
1. ESTABLISHMENT OF ACCOUNT. The Corporation will establish an account
in the name of the Grantee on its books and records (the "Account") and credit
the Account with ________ Shares which may be exercised separately or in the
aggregate in accordance with the terms and conditions hereof.
2. VESTING OF SHARES. The Shares covered by this Agreement will be fully
vested at all times.
3. FORFEITURE OF SHARES. Notwithstanding the provisions of Section 2 of
this Agreement, the Committee may, in its sole discretion, require that, to the
extent the value of any of the Shares covered by this Agreement may not be
deducted by the Corporation, such Shares will be forfeited.
4. EXERCISE OF SHARES. Shares may be exercised by the Grantee on the
following basis:
(a) Upon the earliest of (i) the third anniversary of the Date
of Award, (ii) the termination of employment of the Grantee with the Corporation
and its Subsidiaries, for reasons other than death, or (iii) the death of the
Grantee, as designated by the Grantee in his Deferral
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Election, the Grantee, or his legal representative, if applicable, may exercise
all Shares then credited to his Account.
(b) In the event that the Committee, upon written petition of
the Grantee, determines, in its sole discretion, that the Grantee has suffered
an unforeseeable financial emergency, the Grantee will be permitted to exercise
the number of Shares in his Account necessary to meet the emergency. For
purposes of this Subsection, an "unforeseeable financial emergency" means an
unexpected need for cash arising from an illness, disability, casualty loss,
sudden financial reversal or other such unforeseeable occurrence. Cash needs
arising from foreseeable events such as the purchase of a house or education
expenses for children will not be considered to be the result of an
unforeseeable financial emergency.
5. PAYMENT UPON EXERCISE. The amount payable to the Grantee will be
equal to the Market Value per Share on the day of payment. Payment may be made
wholly in cash or wholly in Common Shares or partly in cash and partly in Common
Shares at the discretion of the Committee. Common Shares delivered pursuant to
this Section may be either treasury shares or authorized and unissued shares or
both.
6. DIVIDEND, VOTING AND OTHER RIGHTS. Prior to the delivery of the
Shares as described in Section 4, the Grantee will not have any voting rights or
the right to receive any dividends with respect to any Shares.
7. TRANSFERABILITY. The Shares may not be transferred except by will or
the laws of descent and distribution and may not be exercised during the
lifetime of the Grantee except by the Grantee or the Grantee's guardian or legal
representative acting on behalf of the Grantee in a fiduciary capacity under
state law and court supervision.
8. COMPLIANCE WITH LAW. The Corporation will make reasonable efforts to
comply with all applicable federal and state securities laws; provided, however,
notwithstanding any other provision of this Agreement, the Corporation will not
be obligated to issue any Common Shares pursuant to this Agreement if the
issuance thereof would result in a violation of any such law.
9. ADJUSTMENTS. The Committee may make any adjustments in the number of
Shares covered by this Agreement that the Committee, in its discretion exercised
in good faith, may determine is equitably required to prevent dilution or
enlargement of the Grantee's rights under this Agreement that otherwise would
result from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Corporation, or
(b) any merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or (c) any other
corporate transaction or event having an effect similar to any of the foregoing.
Moreover, in the event of any such transaction or event, the Committee, in its
discretion, may provide in substitution for any or all of the Grantee's rights
under this Agreement such alternative consideration as it, in good faith, may
determine to be equitable under the circumstances and may require in connection
therewith the surrender of all grants so replaced.
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<PAGE> 3
10. WITHHOLDING. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with any award or
exercise of Shares pursuant to this Agreement, and the amounts available to the
Corporation for such withholding are insufficient, it will be a condition to the
receipt of any distribution hereunder that the Grantee make arrangements
satisfactory to the Corporation for payment of the balance of such taxes
required to be withheld. If necessary, the Committee may require relinquishment
of a portion of any Stock to be distributed hereunder.
11. EMPLOYMENT RIGHTS. The Plan and this Agreement will not confer upon
the Grantee any right with respect to the continuance of employment or other
service with the Corporation or any Subsidiary and do not interfere in any way
with any right that the Corporation or any Subsidiary otherwise has to terminate
any employment or other service of the Grantee at any time.
12. RELATION TO OTHER BENEFITS. Any economic or other benefit to the
Grantee under this Agreement will not be taken into account in determining any
benefits to which the Grantee may be entitled under any profit-sharing,
retirement or other benefit or compensation plan maintained by the Corporation
or a Subsidiary.
13. NOTICES. Any notice necessary under this Agreement must be addressed
to the Corporation or the Committee at the principal executive office of the
Corporation and to the Grantee at the address appearing in the personnel records
of the Corporation or a Subsidiary for such Grantee, or to either party at such
other address as either party may designate in writing to the other. Any such
notice will be deemed effective upon receipt thereof by the addressee.
14. AGREEMENT SUBJECT TO THE PLAN. The Shares granted under this
Agreement and all of the terms and conditions hereof are subject to all of the
terms and conditions of the Plan. In the event of any inconsistency between this
Agreement and the Plan, the terms of the Plan will govern.
15. AMENDMENTS. Any amendment to the Plan will be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment will adversely affect the rights of
the Grantee under this Agreement without the Grantee's consent.
16. SEVERABILITY. In the event that one or more of the provisions of
this Agreement is invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated will be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof will continue
to be valid and fully enforceable.
17. DEFINITIONS. (a) Except as otherwise provided in this Section, all
terms used herein with initial capital letters have the meanings assigned to
them in the Plan or in this Agreement.
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(b) "Beneficiary" means:
(i) The person last designated as Beneficiary by the
Grantee in a writing on a form prescribed by the Committee;
(ii) If there is no designated Beneficiary or if the
person so designated does not survive the Grantee, the Grantee's spouse;
or
(iii) If no such designated Beneficiary and no spouse
is living upon the death of the Grantee, or if all such persons die
prior to the full distribution of the Grantee's Account, then the legal
representative of the last survivor of the Grantee and such persons, or,
if the Committee does not receive notice of the appointment of any such
legal representative within one year after such death, the heirs-at-law
of such survivor will be the Beneficiaries to whom the then remaining
Account will be distributed (in the proportions in which they would
inherit his intestate personal property).
Any Beneficiary designation may be changed from time to time by
the filing of a new form. No notice given under this Subsection will be
effective unless and until the Committee actually receives such notice.
18. GOVERNING LAW. This Agreement will be construed and governed in
accordance with the laws of the State of Ohio.
This Agreement is executed on _______________, _____.
THE ELDER-BEERMAN STORES CORP.
By:
---------------------------
The undersigned Grantee hereby acknowledges receipt of an
executed original of this Deferred Shares Agreement and accepts the right to
receive a distribution of such Shares subject to the terms and conditions of the
Plan and the terms and conditions hereinabove set forth.
-------------------------------
Grantee
4
<PAGE> 1
EXHIBIT 10(m)
-------------
[Non-Employee Director]
-----------------------
THE ELDER-BEERMAN STORES CORP.
EQUITY AND PERFORMANCE INCENTIVE PLAN
Nonqualified Stock Option Agreement
-----------------------------------
WHEREAS, (the "Optionee") is a Non-Employee Director of The Elder-
Beerman Stores Corp. (the "Corporation");
WHEREAS, the grant of a stock option to the Optionee has been duly
authorized by a resolution of the Board of Directors (the "Board") of the
Corporation duly adopted on _______________ (the "Date of Grant"); and
WHEREAS, the option granted hereunder is intended to be a
nonqualified stock option and will not be treated as an "incentive stock option"
within the meaning of that term under Section 422 of the Internal Revenue Code
of 1986 (the "Code").
NOW, THEREFORE, pursuant to the Corporation's Equity and
Performance Incentive Plan (the "Plan"), the Corporation hereby grants to the
Optionee an option (the "Option") pursuant to this Nonqualified Stock Option
Agreement (the "Agreement") to purchase shares of the Corporation's common
stock, par value $0.01 per share ("Stock"), at the price of Dollars ($ )
per share (the "Option Price"), and agrees to cause certificates for any shares
of Stock purchased hereunder to be delivered to the Optionee upon full payment
of the Option Price, subject to the applicable terms and conditions of the Plan
and this Agreement.
1. EXERCISE OF OPTION. (a) Unless and until terminated as hereinafter
provided, the Option will become exercisable to the extent of one-third of the
Stock hereinabove specified on each of the first 3 anniversaries of the Date of
Grant for so long as the Optionee remains a Non-Employee Director of the
Corporation.
(b) Notwithstanding the provisions of Subsection (a) of this
Section, the Option will become immediately exercisable in full upon the
occurrence of the Optionee's death or disability or a Change of Ownership.
2. PAYMENT OF OPTION PRICE. The Option Price is payable (a) in cash or by
certified or cashier's check or other cash equivalent acceptable to the
Corporation payable to the order of the Corporation, (b) by Stock (including by
attestation) owned by the Optionee for (i) more than one year prior to the date
of exercise and for more than 2 years from the date on which the option was
granted, if such Stock was originally acquired by the Optionee pursuant to the
exercise of an incentive stock option, or (ii) more than 6 months prior to the
date of exercise, if such Stock was
1
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originally acquired by the Optionee other than pursuant to the exercise of an
incentive stock option, or (c) by a combination of Stock and cash or certified
or cashier's check. The requirement of payment in cash will be deemed satisfied
if the Optionee has made arrangements satisfactory to the Corporation with a
bank or broker that is a member of the National Association of Securities
Dealers, Inc. to sell on the date of exercise a sufficient number of shares of
Stock being purchased so that the net proceeds of the sale transaction will at
least equal the aggregate Option Price and pursuant to which the bank or broker
undertakes to deliver the aggregate Option Price to the Corporation not later
than the date on which the sale transaction will settle in the ordinary course
of business.
3. TERM OF OPTION. The Option will terminate on the earliest of the
following dates:
(a) Three months after the Optionee ceases to be a Non-Employee
Director of the Corporation for any reason other than death or disability;
(b) One year after the death or disability of the Optionee, if the
Optionee dies or becomes disabled while a Non-Employee Director of the
Corporation;
(c) Ten years from the Date of Grant.
4. TRANSFERABILITY. The Option may not be transferred except by will or
the laws of descent and distribution and may not be exercised during the
lifetime of the Optionee except by the Optionee or the Optionee's guardian or
legal representative acting on behalf of the Optionee in a fiduciary capacity
under state law and court supervision.
5. COMPLIANCE WITH LAW. The Corporation will make reasonable efforts to
comply with all applicable federal and state securities laws; provided, however,
notwithstanding any other provision of this Agreement, the Corporation will not
be obligated to issue any Stock pursuant to this Agreement if the issuance
thereof would result in a violation of any such law.
6. ADJUSTMENTS. The Committee may make any adjustments in the Option
Price and in the numbers of shares of Stock covered by this Agreement as the
Committee, in its sole discretion, exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the Optionee's rights
under this Agreement that otherwise would result from (a) any stock dividend,
stock split, combination of shares, recapitalization or other change in the
capital structure of the Corporation, or (b) any merger, consolidation,
spin-off, split-off, spin-out, split-up, reorganization, partial or complete
liquidation or other distribution of assets, issuance of rights or warrants to
purchase securities, or (c) any other corporate transaction or event having an
effect similar to any of the foregoing. Moreover, in the event of any such
transaction or event, the Committee, in its discretion, may provide in
substitution for any or all of the Optionee's rights under this Agreement 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
grants so replaced.
7. WITHHOLDING. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with Stock
obtained upon the exercise of the Option, and the
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<PAGE> 3
amounts available to the Corporation for such withholding are insufficient, it
will be a condition to the receipt of such Stock that the Optionee make
arrangements satisfactory to the Corporation for payment of the balance of such
taxes required to be withheld. If necessary, the Committee may require
relinquishment of a portion of such Stock.
8. NOTICES. Any notice necessary under this Agreement must be addressed
to the Corporation or the Committee at the principal executive office of the
Corporation and to the Optionee at the address appearing in the personnel
records of the Corporation or a Subsidiary for such Optionee, or to either party
at such other address as either party may designate in writing to the other. Any
such notice will be deemed effective upon receipt thereof by the addressee.
9. AGREEMENT SUBJECT TO THE PLAN. The Option Rights granted under this
Agreement and all of the terms and conditions hereof are subject to all of the
terms and conditions of the Plan. In the event of any inconsistency between this
Agreement and the Plan, the terms of the Plan will govern.
10. AMENDMENTS. Any amendment to the Plan will be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment will adversely affect the rights of
the Optionee under this Agreement without the Optionee's consent.
11. SEVERABILITY. In the event that one or more of the provisions of this
Agreement is invalidated for any reason by a court of competent jurisdiction,
any provision so invalidated will be deemed to be separable from the other
provisions hereof, and the remaining provisions hereof will continue to be valid
and fully enforceable.
12. DEFINITIONS. All terms used herein with initial capital letters have
the meanings assigned to them in the Plan or in this Agreement.
13. GOVERNING LAW. This Agreement will be construed and governed in
accordance with the laws of the State of Ohio.
This Agreement is executed on _____________________, 1997.
THE ELDER-BEERMAN STORES CORP.
By:
-----------------------------------
The undersigned Optionee hereby acknowledges receipt of an
executed original of this Nonqualified Stock Option Agreement and accepts the
Option subject to the applicable terms and conditions of the Plan and the terms
and conditions hereinabove set forth.
-----------------------------------
Optionee
3
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EXHIBIT 10(n)
-------------
THE ELDER-BEERMAN STORES CORP.
EQUITY AND PERFORMANCE INCENTIVE PLAN
Nonqualified Stock Option Agreement
-----------------------------------
WHEREAS, (the "Optionee") is an employee of The Elder-Beerman
Stores Corp. (the "Corporation") or a Subsidiary;
WHEREAS, the grant of a stock option to the Optionee has been duly
authorized by a resolution of the Board of Directors (the "Board") of the
Corporation duly adopted on _______________ (the "Date of Grant"); and
WHEREAS, the option granted hereunder is intended to be a
nonqualified stock option and will not be treated as an "incentive stock option"
within the meaning of that term under Section 422 of the Internal Revenue Code
of 1986 (the "Code").
NOW, THEREFORE, pursuant to the Corporation's Equity and
Performance Incentive Plan (the "Plan"), the Corporation hereby grants to the
Optionee an option (the "Option") pursuant to this Nonqualified Stock Option
Agreement (the "Agreement") to purchase shares of the Corporation's common
stock, par value $0.01 per share ("Stock"), at the price of Dollars ($ )
per share (the "Option Price"), and agrees to cause certificates for any
shares of Stock purchased hereunder to be delivered to the Optionee upon full
payment of the Option Price, subject to the applicable terms and conditions of
the Plan and this Agreement.
1. EXERCISE OF OPTION. (a) Unless and until terminated as hereinafter
provided, the Option will become exercisable to the extent of 20% of the Stock
hereinabove specified on each of the first 5 anniversaries of the Date of Grant
for so long as the Optionee remains in the continuous employ of the Corporation
or a Subsidiary. For the purposes of this Agreement, the continuous employment
of the Optionee with the Corporation or a Subsidiary will not be deemed to have
been interrupted, and the Optionee will not be deemed to have ceased to be an
employee of the Corporation or a Subsidiary, by reason of (i) the transfer of
his employment among the Corporation and its Subsidiaries or (ii) an approved
leave of absence. To the extent that the Option becomes exercisable, it may be
exercised in whole or in part from time to time.
(b) Notwithstanding the provisions of Subsection (a) of this
Section, the Option will become immediately exercisable in full upon the
occurrence of the Optionee's retirement, death, disability or a Change of
Ownership.
2. PAYMENT OF OPTION PRICE. The Option Price is payable (a) in cash or by
certified or cashier's check or other cash equivalent acceptable to the
Corporation payable to the order of the
1
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Corporation, (b) by Stock (including by attestation) owned by the Optionee for
(i) more than one year prior to the date of exercise and for more than 2 years
from the date on which the option was granted, if such Stock was originally
acquired by the Optionee pursuant to the exercise of an incentive stock option,
or (ii) more than 6 months prior to the date of exercise, if such Stock was
originally acquired by the Optionee other than pursuant to the exercise of an
incentive stock option, or (c) by a combination of Stock and cash or certified
or cashier's check. The requirement of payment in cash will be deemed satisfied
if the Optionee has made arrangements satisfactory to the Corporation with a
bank or broker that is a member of the National Association of Securities
Dealers, Inc. to sell on the date of exercise a sufficient number of shares of
Stock being purchased so that the net proceeds of the sale transaction will at
least equal the aggregate Option Price and pursuant to which the bank or broker
undertakes to deliver the aggregate Option Price to the Corporation not later
than the date on which the sale transaction will settle in the ordinary course
of business.
3. TERM OF OPTION. The Option will terminate on the earliest of the
following dates:
(a) Three months after the Optionee ceases to be an employee of
the Corporation or a Subsidiary for any reason other than retirement, death or
disability;
(b) One year after the retirement, death or disability of the
Optionee, if the Optionee retires, dies or becomes disabled while an employee of
the Corporation or a Subsidiary;
(c) Ten years from the Date of Grant.
In the event that the Optionee's employment with the Corporation and its
Subsidiaries is terminated for Cause, the Option will terminate as of the time
of such termination, notwithstanding any other provision of this Agreement.
4. TRANSFERABILITY. The Option may not be transferred except by will or
the laws of descent and distribution and may not be exercised during the
lifetime of the Optionee except by the Optionee or the Optionee's guardian or
legal representative acting on behalf of the Optionee in a fiduciary capacity
under state law and court supervision.
5. COMPLIANCE WITH LAW. The Corporation will make reasonable efforts to
comply with all applicable federal and state securities laws; provided, however,
notwithstanding any other provision of this Agreement, the Corporation will not
be obligated to issue any Stock pursuant to this Agreement if the issuance
thereof would result in a violation of any such law.
6. ADJUSTMENTS. The Committee may make any adjustments in the Option
Price and in the numbers of shares of Stock covered by this Agreement as the
Committee, in its sole discretion, exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the Optionee's rights
under this Agreement that otherwise would result from (a) any stock dividend,
stock split, combination of shares, recapitalization or other change in the
capital structure of the Corporation, or (b) any merger, consolidation,
spin-off, split-off, spin-out, split-up, reorganization, partial or complete
liquidation or other distribution of assets, issuance of rights or warrants to
2
<PAGE> 3
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 Committee, in its discretion, may provide in
substitution for any or all of the Optionee's rights under this Agreement 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
grants so replaced.
7. WITHHOLDING. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with Stock
obtained upon the exercise of the Option, and the amounts available to the
Corporation for such withholding are insufficient, it will be a condition to the
receipt of such Stock that the Optionee make arrangements satisfactory to the
Corporation for payment of the balance of such taxes required to be withheld. If
necessary, the Committee may require relinquishment of a portion of such Stock.
8. EMPLOYMENT RIGHTS. The Plan and this Agreement do not confer upon the
Optionee any right with respect to the continuance of employment or other
service with the Corporation or any Subsidiary and do not interfere in any way
with any right that the Corporation or any Subsidiary otherwise has to terminate
any employment or other service of the Optionee at any time.
9. RELATION TO OTHER BENEFITS. Any economic or other benefit to the
Optionee under this Agreement will not be taken into account in determining any
benefits to which the Optionee may be entitled under any profit-sharing,
retirement or other benefit or compensation plan maintained by the Corporation
or a Subsidiary.
10. NOTICES. Any notice necessary under this Agreement must be addressed
to the Corporation or the Committee at the principal executive office of the
Corporation and to the Optionee at the address appearing in the personnel
records of the Corporation or a Subsidiary for such Optionee, or to either party
at such other address as either party may designate in writing to the other. Any
such notice will be deemed effective upon receipt thereof by the addressee.
11. AGREEMENT SUBJECT TO THE PLAN. The Option Rights granted under this
Agreement and all of the terms and conditions hereof are subject to all of the
terms and conditions of the Plan. In the event of any inconsistency between this
Agreement and the Plan, the terms of the Plan will govern.
12. AMENDMENTS. Any amendment to the Plan will be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment will adversely affect the rights of
the Optionee under this Agreement without the Optionee's consent.
13. SEVERABILITY. In the event that one or more of the provisions of this
Agreement is invalidated for any reason by a court of competent jurisdiction,
any provision so invalidated will be deemed to be separable from the other
provisions hereof, and the remaining provisions hereof will continue to be valid
and fully enforceable.
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14. DEFINITIONS. (a) Except as otherwise provided in this Section, all
terms used herein with initial capital letters have the meanings assigned to
them in the Plan or in this Agreement.
(b) "Cause" means "Cause" as defined in an employment agreement in
effect between the Corporation or a Subsidiary and the Optionee, or if no such
agreement is in effect, "Cause" means (i) an intentional act of fraud,
embezzlement, theft or any other material violation of law in connection with
the Optionee's duties or in the course of his employment with the Corporation or
a Subsidiary involving material harm to the Corporation or a Subsidiary; (ii)
intentional wrongful damage to material assets of the Corporation or a
Subsidiary; or (iii) physical or mental disability that causes the Optionee to
fail to perform his regular duties for a continuous period of 12 months. No act
or omission by the Optionee will be deemed "intentional" if it was due to
negligence and will be deemed "intentional" only if done, or omitted to be done,
by the Optionee not in good faith and without reasonable belief that his action
or omission was in or not opposed to the best interests of the Corporation and
its Subsidiaries. Failure to meet performance standards or objectives of the
Corporation or Subsidiary will not constitute "Cause" for purposes hereof.
15. GOVERNING LAW. This Agreement will be construed and governed in
accordance with the laws of the State of Ohio.
This Agreement is executed on _________________, _____.
THE ELDER-BEERMAN STORES CORP.
By:
-------------------------------------
The undersigned Optionee hereby acknowledges receipt of an
executed original of this Nonqualified Stock Option Agreement and accepts the
Option subject to the applicable terms and conditions of the Plan and the terms
and conditions hereinabove set forth.
-------------------------------------
Optionee
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<PAGE> 1
EXHIBIT 10(o)
-------------
THE ELDER-BEERMAN STORES CORP.
EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE
The Elder-Beerman Stores Corp. Employee Stock Purchase Plan
(the "Plan") is intended to advance the interests of The Elder-Beerman Stores
Corp. (the "Company") and its stockholders by strengthening the Company's
ability to attract and retain employees who have the training, experience and
ability to enhance the profitability of the Company and to reward employees of
the Company and its subsidiaries upon whose judgment, initiative and effort the
successful conduct and development of their business largely depend. The Company
further intends that options issued pursuant to the Plan shall constitute
options issued pursuant to an "employee stock purchase plan" within the meaning
of Section 423 of the Internal Revenue Code of 1986, as amended from time to
time (the "Code").
SECTION 2. ADMINISTRATION
The Plan shall be administered by a Committee that shall
consist of the members of the Board of Directors of the Company (the
"Committee"). The Committee may from time to time delegate all or any part of
its authority under the Plan to a committee of the Board of Directors (or
subcommittee thereof). To the extent of any such delegations, references in the
Plan to the Committee are deemed to be references to any such committee or
subcommittee. A majority of the Committee shall constitute a quorum, and the
action of a majority of the members of the Committee present at any meeting at
which a quorum is present, or acts unanimously approved in writing, shall be the
acts of the Committee.
The interpretation and construction by the Committee of any
provision of the Plan or of any option granted under it shall be final. The
Committee may establish any policies or procedures that in the discretion of the
Committee are relevant to the operation and administration of the Plan and may
adopt rules for the administration of the Plan. No member of the Committee shall
be liable for any action or determination made in good faith with respect to the
Plan or any option granted under it.
SECTION 3. ELIGIBILITY
(a) Options under the Plan to purchase the Company's common
stock, par value $0.01 ("Common Stock"), will be offered to:
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(i) all exempt and full-time non-exempt employees of
the Company or a subsidiary of the Company designated by the
Company who have completed their 90-day probationary period;
and
(ii) all part-time non-exempt employees of the
Company or a subsidiary of the Company designated by the
Company who have been employed by the Company or any
subsidiary thereof for two or more years;
provided, however, that no employee shall be granted an option under the Plan
if, immediately after the option was granted, such employee would own stock
possessing 5% or more of the total combined voting power or value of all classes
of stock of the Company. For purposes of this Subsection, stock ownership of an
individual shall be determined under the rules of Section 424(d) of the Code,
and stock that the employee may purchase under outstanding options shall be
treated as owned by the employee.
(b) An eligible employee may commence participation by
completing an authorization for payroll deduction on a form provided by the
Committee and filed with the Committee prior to the beginning of the Company's
fiscal quarter next following the date the employee first meets the requirements
of Subsection (a) of this Section. Such authorization will remain in effect,
unless changed by the eligible employee in accordance with Section 5(c), until
the last day of the Company's fiscal year. In order to participate during any
subsequent fiscal year, an eligible employee must file a new authorization for
payroll deduction within the time required by the Committee prior to the
beginning of such fiscal year.
(c) All payroll deductions made for an eligible employee will
be credited to an account maintained for him under the Plan by the Committee
(the "Account"). An eligible employee may not make any separate cash payment
into such Account except as may be expressly authorized by the Committee.
SECTION 4. STOCK
The stock subject to the options granted under the Plan shall
be fully registered, unrestricted shares of authorized and issued Common Stock.
The aggregate number of shares that may be purchased under the Plan will not
exceed 625,000 shares of Common Stock. In the event that the number of shares
subject to options to be granted pursuant to any offering under the Plan exceeds
the number of shares available to be purchased under the Plan, the shares
available to be purchased shall be allocated on a pro rata basis among the
options to be granted.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan will be evidenced by
agreements in such form as the Committee shall from time to time approve,
provided that all employees granted such options shall have the same rights and
privileges (except as otherwise provided in Subsections (a) and (e)
2
<PAGE> 3
of this Section). Options will be granted on the first day of each of the
Company's fiscal quarters and will comply with and be subject to the following
terms and conditions:
(a) NUMBER OF SHARES. Each option granted hereunder
shall state the number of shares to which it pertains, which number
shall be determined, prior to the date of granting of such option, with
respect to the employee to whom such option is offered, in accordance
with uniform policies and procedures established by the Committee;
provided, however, that the number of shares to which any option may
pertain shall not exceed a maximum number to be computed in accordance
with the following:
Each eligible employee shall be deemed to have been granted an
option to purchase a maximum number of whole shares of Common
Stock equal to: (i) that percentage of the eligible employee's
base compensation that he has elected to have withheld (but in
no event more than 10%) multiplied by (ii) the eligible
employee's base compensation (as hereinafter defined) not in
excess of $62,500 during the applicable fiscal quarter of the
Company (iii) divided by 85% of the fair market value of the
Common Stock on the exercise date (as defined in Subsection
(d) of this Section). If the number of shares computed in
accordance with the foregoing includes a fraction, such number
shall be rounded down to the next whole number. For purposes
of this Subsection, the term "base compensation" is the
quarterly cash compensation of the employee (assuming equal
payments over the offering period) excluding, without
limitation, any bonuses or awards under the Company's
management incentive program, but including any commissions or
productivity incentive, to be determined as of the pay period
immediately preceding a date 30 days prior to the date of
grant of such option.
Notwithstanding the above, the Committee shall, in
its discretion, have the authority to exclude, with respect to all
employees, any other form of compensation from the definition of "base
compensation," provided such exclusion shall comply with Section
423(b)(5) of the Code. In addition, the Committee shall, in determining
the number of shares subject to an option, have the authority, prior to
the date of grant of such option, to adjust the percentage to a
percentage from 1% to 10%, both inclusive. Further, the Committee may,
in its discretion, prior to any offering pursuant to the Plan, set a
maximum aggregate number of shares (subject to Section 4 of the Plan)
that may be purchased under options granted pursuant to the offering.
In the event an eligible employee elects to withhold funds from his
base compensation and/or reinvest dividends sufficient to purchase
shares in excess of such maximum number, such amount will be retained
in his Account and used to purchase shares in the next following fiscal
quarter of the Company in which shares may be purchased.
(b) OPTION PRICE. Each option will state the option
price, which shall be determined by the Committee; provided, however,
that such option price will not be an amount less than the lesser of
85% of the fair market value of the shares of Common Stock on the date
of the granting of the option or 85% of the fair market value of such
stock on the exercise date (as defined in Section 5(d) of the Plan).
During such time as the Common Stock is quoted as a National Market
Issue on the National Association of Securities Dealers
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<PAGE> 4
Automated National Market Quotation System ("NASDAQ"), the fair market
value per share shall be the average of the closing price of the Common
Stock as quoted by NASDAQ on the last three trading days before the day
the option is exercised. Subject to the foregoing, the Committee shall
have full authority and discretion in fixing the option price.
(c) MEDIUM AND TIME OF PAYMENT. The option price
shall be payable in full in United States dollars, pursuant to uniform
policies and procedures established by the Committee, on the exercise
date (as defined in Section 5(d) of the Plan) of such option. The funds
required for such payment will be derived from regular withholding from
an eligible employee's base compensation in approximately equal
installments over the term of the option or such other period as may be
approved by the Committee. Any such funds withheld from an employee's
compensation in excess of the actual option price shall be retained in
the eligible employee's Account and used to purchase shares in the next
following fiscal quarter of the Company. No interest shall accrue on
the employee funds held by the Company. An employee shall have the
right at any time to terminate his payroll deduction authorization from
his compensation of amounts to be paid toward the option price, or to
decrease the amount so withheld, by submitting a written request to the
Company; provided, however, that if an eligible employee terminates his
payroll deduction, he may not recommence a payroll deduction under the
Plan until the expiration of one full fiscal quarter of the Company. An
employee shall have the right to cancel his option in whole or in part
and to obtain a refund of amounts withheld from his compensation by the
Company by submitting a written request to the Company that must be
received by the Company prior to the exercise date. Such withheld
amounts shall thereafter be paid to the employee within a reasonable
period of time. No interest will accrue on such amounts.
(d) TERM OF OPTION. The date on which the Common
Stock to which an option pertains is to be purchased by the optionee
(the "exercise date") will be the last day of the term of the option,
except as otherwise provided in the Plan. The term of each option
granted hereunder will be one fiscal quarter of the Company. Except to
the extent an option has been canceled by the optionee prior to the
exercise date, it shall be deemed automatically exercised on the
exercise date to the extent of payments received from the optionee.
(e) ACCRUAL LIMITATION. No option shall permit the
rights of an optionee to purchase stock under all "employee stock
purchase plans" (as defined in the Code) of the Company to accrue at a
rate that exceeds $25,000 of fair market value of such stock
(determined at the time the option is granted) for each fiscal year of
the Company in which the option is outstanding at any time.
(f) TERMINATION OF EMPLOYMENT. In the event that an
optionee shall cease to be employed by the Company or any subsidiary of
the Company for any reason (including death) before the exercise date
such optionee's right to have his option exercised will be terminated.
Any amounts withheld from the optionee's base compensation for purposes
of the Plan that remain in the employee's Account will be refunded. No
interest will accrue on such amount.
(g) TRANSFER OF OPTION. No option shall be
transferrable by an optionee.
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<PAGE> 5
(h) ADJUSTMENTS. The Committee may make or provide
for such adjustments in the option price and in the number or kind of
shares of the Common Stock or other securities covered by outstanding
options as the Committee in its sole discretion, exercised in good
faith, may determine is equitably required to prevent dilution or
enlargement of the rights of optionees that would otherwise result from
(i) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the
Company, (ii) any merger, consolidation, spin-off, split-off, spin-out,
split-up, separation, reorganization, partial or complete liquidation,
or other distribution of assets, issuance of rights or warrants to
purchase stock, or (iii) 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 Committee, in its
discretion, may provide in substitution for any or all outstanding
awards under the Plan such alternative consideration as it, in good
faith, may determine to be equitable in the circumstances and may
require in connection therewith the surrender of all awards so
replaced, except that in no event shall the Committee substitute such
alternative consideration that would disqualify the Plan as an
"employee stock purchase plan" within the meaning of Section 423 of the
Code. The Committee may also make or provide for such adjustments in
the number or kind of shares of the Common Stock or other securities
that may be sold under the Plan as the Committee in its sole
discretion, exercised in good faith, may determine is appropriate to
reflect any transaction or event described in clause (i) of the
preceding sentence.
The grant of an option pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes in its
capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell or transfer all or any part of its business
or assets.
(i) RIGHTS AS A STOCKHOLDER. An optionee will have no
rights as a stockholder with respect to any Common Stock covered by his
option until the exercise date following payment in full. No adjustment
will be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for
which the record date is prior to the date of such exercise, except as
provided in Subsection (h) of this Section.
(j) OTHER PROVISIONS. The option agreements
authorized under the Plan shall contain such other provisions as the
Committee may deem advisable, provided that no such provisions may in
any way be in conflict with the terms of the Plan.
SECTION 6. TERM OF PLAN
Options granted pursuant to the Plan will be granted within a
period of 10 years from the confirmation date of the Joint Plan of
Reorganization of The Elder-Beerman Stores Corp. and its subsidiaries.
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SECTION 7. AMENDMENT OR TERMINATION OF THE PLAN
The Plan may be amended from time to time by the Board of
Directors of the Company, but without further approval of the stockholders, no
such amendment shall increase the aggregate number of shares of Common Stock
that may be issued and sold under the Plan (except that adjustments authorized
by the last sentence of the first paragraph of Section 5(h) of the Plan shall
not be limited by this provision) or change the designation of Section 3 of the
class of employees eligible to receive options. Furthermore, the Plan may not,
without further approval of the stockholders, be amended in any manner that
would cause options issued under it to fail to meet the requirements applicable
to "employee stock purchase plans" as defined in Section 423 of the Code. The
Plan may be terminated at any time by the Board of Directors of the Company,
subject to the rights of outstanding optionees.
SECTION 8. EFFECTIVE DATE OF PLAN
The Plan will take effect on the effective date of the Joint
Plan of Reorganization of The Elder-Beerman Stores Corp. and its subsidiaries.
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EXHIBIT 10(P)
-------------
COMPREHENSIVE SETTLEMENT AGREEMENT
----------------------------------
THIS COMPREHENSIVE SETTLEMENT AGREEMENT (this "Agreement") is entered
into as of ____________, 1997 by and among the Parties (as defined below). Any
capitalized terms not defined herein have the meanings assigned to them in the
Amended Joint Plan of Reorganization of The Elder-Beerman Stores Corp. and Its
Subsidiaries, dated November 7, 1997 (the "Plan").
THE PARTIES
-----------
The "Parties" to this Agreement are as follows:
1. The Debtors: The Elder-Beerman Stores Corp., an Ohio
corporation ("Elder-Beerman"); The El-Bee Chargit Corp., an Ohio corporation
("Chargit"); The Bee-Gee Shoe Corp., an Ohio corporation ("Bee-Gee"); Margo's
LaMode, Inc., a Texas corporation ("Margo's"); McCook Wholesale Corp., an Ohio
corporation ("McCook"); E-B Community Urban Redevelopment Corp., an Ohio
corporation ("E-B"); and EBA, Inc., an Ohio corporation ("EBA"). Elder-Beerman,
Chargit, Bee-Gee, Margo's, McCook, E-B, and EBA are referred to in this
Agreement collectively as the "Debtors."
2. The ESOP and the ESOP Committee: The Elder-Beerman Stores
Corp. Profit Sharing and Stock Ownership Plan (the "ESOP"), as represented by
The Elder Beerman Stores Corp. Profit Sharing and Stock Ownership Plan
Administration Committee (the "ESOP Committee").
3. The Shareholders of Elder-Beerman:
a. Beerman-Peal Holdings, Inc., an Ohio
corporation ("Beerman-Peal"), the holder of
all Old Common Stock of Elder-Beerman;
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b. Indirect Shareholders of Elder-Beerman
(1) as shareholders of Beerman-Peal and
former directors of Elder-Beerman,
Barbara B. Weprin ("BBW"), William
S. Weprin ("WSW"), and Leonard B.
Peal ("LBP"), collectively referred
to as the "Equity Directors";
(2) family members of and subsidiary or
affiliated entities wholly or
partially owned or controlled by the
Equity Directors (collectively with
the Equity Directors, the "Beerman
Family Entities").
RECITALS
--------
THE CHAPTER 11 CASES
---------------------
A. The Debtors filed their respective petitions for relief under
chapter 11 of the Bankruptcy Code, 11 U.S.C. Sections 101-1330 (the "Bankruptcy
Code"), in the United States Bankruptcy Court for the Southern District of Ohio
(the "Bankruptcy Court") on October 17, 1995 (the "Petition Date"). During their
chapter 11 cases, the Debtors operated and managed their respective businesses
as debtors in possession in accordance with sections 1107 and 1108 of the
Bankruptcy Code.
B. The Bankruptcy Court entered an order on __________, 1997 confirming
the Plan under section 1129 of the Bankruptcy Code. It is a condition to the
consummation of the Plan and occurrence of the Effective Date that each of the
Parties execute and deliver this Agreement.
REAL PROPERTY LEASE ISSUES
--------------------------
C. Twenty of the Debtors' locations are or were governed by leases
under which various Beerman Family Entities are or were the landlords. Exhibit A
to this Agreement lists these Beerman
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Family Entities and the corresponding Elder-Beerman or Bee-Gee locations.
Certain Beerman Family Entities have asserted claims against the Debtors'
estates for amounts allegedly due under such leases and allegedly arising both
before and after the Petition Date. A schedule of these claims (collectively,
the "Beerman Family Lease Claims"), including the holders of such claims and the
nature and amount of such claims, is part of Exhibit A.
D. Elder-Beerman is a tenant under two real property lease agreements
(collectively, the "Zane Leases") for retail space located in the Zane Plaza
Shopping Center ("Zane Plaza") in Chillicothe, Ohio. The first lease, dated
December 30, 1980 (the "1980 Agreement") and amended by agreement dated
September 29, 1992 (the "1992 Agreement"), is between Elder-Beerman as tenant
and Zane Development Co. In 1985, a Beerman Family Entity, Beerman-Chillicothe
Limited Partnership ("BCLP") acquired Zane Plaza and succeeded to Zane
Development Co.'s interest in the 1980 Agreement. The Beerman Corporation and
BBW each served as both general and limited partners of BCLP. In 1991, another
Beerman Family Entity, The Abco Land Development Corp. ("Abco"), and The Beerman
Corporation acquired Zane Plaza and became the lessors under the 1980 Agreement.
The 1992 Agreement amended the 1980 Agreement by terminating a then-existing
lease with Bee-Gee for a parcel contiguous with Elder-Beerman's store. The
second lease, dated November 8, 1990 (the "1990 Agreement"), was between BCLP as
landlord and Elder-Beerman as tenant. For purposes of the Zane Leases, Abco and
BCLP are referred to collectively as the "Zane Lessors."
E. The 1980 Agreement, as amended, contains options to extend the term
of the lease, exercised by Elder-Beerman giving the lessor written notice of its
intent to renew the lease at least six months before the current lease term
expired. The 1990 Agreement contains substantially similar language. The Zane
Leases were set to expire by their terms on January 31, 1996. Because Elder-
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Beerman gave no written notice to the Zane Lessors of its intention to renew the
Zane Leases, the Zane Lessors have asserted that the Zane Leases have expired.
Elder-Beerman disputes such assertion in light of, among other things,
Elder-Beerman's unequivocal oral representations to the Zane Lessors of its
intent to renew the Zane Leases and the Zane Lessors' continued acceptance of
Elder-Beerman's rental payments.
MISCELLANEOUS BEERMAN FAMILY CLAIMS
-----------------------------------
F. In addition to the Beerman Family Lease Claims, certain of the
Beerman Family Entities assert various claims in respect of contribution or
reimbursement, indemnification, and other miscellaneous matters. Exhibit B lists
these Beerman Family Entities and the corresponding claims asserted by these
entities (the "Miscellaneous Beerman Family Claims"). Conversely, Elder-Beerman
asserts claims against certain of the Beerman Family Entities in respect of
personal use of company aircraft and credit card charges. Exhibit C lists these
Beerman Family Entities and the corresponding claims asserted by Elder-Beerman
against these entities (collectively, the "Elder-Beerman Claims").
CLAIMS ARISING OUT OF EQUITY DIRECTORS' ACTIONS
-----------------------------------------------
G. During the course of the Reorganization Cases, Elder-Beerman learned
of previous communications between the Equity Directors and several competitor
retailers and one potential financial investor. The disclosures by the Equity
Directors to these entities included disclosure of confidential, proprietary
information concerning Elder-Beerman -- made without the knowledge or consent of
Elder-Beerman management -- in an effort by the Equity Directors to locate a
purchaser of the Debtors' assets and operations. The Debtors believe that such
actions may have constituted a breach of the Equity Directors' fiduciary duties
and violated certain confidentiality agreements between the Equity Directors and
Elder-Beerman. All potential claims arising from such
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actions, including equitable subordination claims, are referred to collectively
in this Agreement as the "Disclosure Claims."
FAIRBORN DISTRIBUTION CENTER
PURCHASE OPTION/RIGHT OF FIRST REFUSAL
--------------------------------------
H. Elder-Beerman also claims to hold a purchase option and a right of
first refusal (collectively, the "Fairborn Right") with respect to the purchase
of an approximately 18-acre parcel of real property adjacent to Elder-Beerman's
Fairborn distribution center. The principal terms of the Fairborn Right are set
forth in Exhibit D.
PREVIOUSLY RESOLVED CLAIMS BETWEEN THE
BEERMAN FAMILY ENTITIES AND ELDER-BEERMAN
-----------------------------------------
I. In addition to the Beerman Family Lease Claims, the dispute
regarding renewal of the Zane Leases, the Miscellaneous Beerman Family Claims,
the Elder-Beerman Claims, and the Disclosure Claims, Elder-Beerman and certain
of the Beerman Family Entities faced disputes regarding: (1) entitlement to
approximately $12.0 million of federal tax refunds and interest earned thereon;
(2) the repayment to Elder-Beerman of more than $600,000 in respect of an
unexercised option to acquire from Centerville Associates III Limited
Partnership the fee simple ownership of the Elder-Beerman department store in
Centerville, Ohio; and (3) the timeliness of a proof of claim filed by certain
Beerman Family Entities asserting rejection damage claims arising from Elder-
Beerman's rejection of its lease for its former Fairborn furniture store
(collectively, the "Previously Resolved Claims"). The Previously Resolved Claims
have been compromised and settled pursuant to orders of the Bankruptcy Court
entered on [DATE], 1997 and are not affected by this Agreement.
THE ESOP CLAIMS AND APPLICATION
-------------------------------
J. The ESOP holds its participants' interests in the Old Preferred
Stock of Elder-Beerman. In connection with its interests in the Old Preferred
Stock, the ESOP asserted prepetition
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<PAGE> 6
claims (collectively, the "ESOP Prepetition Claims") of approximately $16
million, as follows: (1) a claim of approximately $14 million against each of
the Debtors based on the Debtors' alleged obligations to provide a "guaranteed
minimum return" on the Old Preferred Stock held by the ESOP and (2) a claim of
approximately $2 million against each of the Debtors based on the Debtors'
alleged obligations to make a so-called "retirement security contribution" for
1995. The Debtors dispute their alleged liability under the ESOP Prepetition
Claims.
K. On June 27, 1996, the ESOP filed an Application for Payment of
Administrative Expenses (the "ESOP Application") in which it sought payment of
expenses related to (1) Elder-Beerman's alleged obligation to make a
postpetition retirement security contribution to the ESOP and (2) the fees and
expenses of the ESOP's professional advisors incurred in connection with the
Debtors' chapter 11 cases. In response to an objection by the Institutional
Lenders' Committee, the Bankruptcy Court vacated its own prior order granting
certain relief regarding the ESOP Application, and the parties have since been
unable to reach a resolution of the ESOP Application.
L. Although not formally asserted, the ESOP may also have certain
claims or causes of action against either (1) Elder-Beerman, (2) the present and
former directors and officers of Elder-Beerman, or (3) Beerman-Peal, arising
out of the creation of the ESOP or the failure to make retirement security
contributions for 1996 or 1997 (collectively, the "Potential ESOP Claims").
These Potential ESOP Claims are defined as broadly as possible to include all
possible claims, rights, and causes of action, in law or equity, of any nature
and accruing at any time, arising out of or in any way related to the ESOP.
SETTLEMENT AND RELEASE OF POTENTIAL CLAIMS AND DISPUTES AMONG THE PARTIES
-------------------------------------------------------------------------
M. Litigation of the factual and legal issues underlying the
various claims and disputes set forth above would prevent an efficient and
feasible reorganization of the Debtors' businesses and
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<PAGE> 7
would inure to the detriment of all Parties, as well as all of the creditors of
the Debtors. Accordingly, to avoid the possibility of costly and lengthy
litigation, with its attendant risks and uncertainties, in connection with
various claims and disputes set forth above, the Parties desire to enter into
this Agreement to settle and release all potential claims and disputes without
admitting liability of any kind and to any extent.
IN CONSIDERATION OF THE FOREGOING, the consideration provided under
this Agreement and under the Plan, each Party's execution and delivery of this
Agreement, and the mutual promises, settlements, releases, and other agreements
set forth below (the receipt, performance, and sufficiency of which are
acknowledged), the Parties agree as follows:
THE AGREEMENT
-------------
Section 1. AFFIRMATIVE OBLIGATIONS, WAIVERS, AND PROVISIONS. All
consideration for the mutual promises, settlements, releases, and other
agreements set forth below are provided in this Section 1 and the Plan. If any
provision in this Agreement directly conflicts with any provision of the Plan or
Disclosure Statement, the applicable provision in this Agreement governs.
Section 1.1. Tax Indemnification Obligations. The Debtors'
membership, before the Effective Date, in a consolidated group of companies of
which Beerman-Peal was the common parent requires a determination of the rights
and obligations of Beerman-Peal and its direct and indirect shareholders on the
one hand, and Reorganized Elder-Beerman and its surviving subsidiaries on the
other, with respect to certain federal income tax matters, including the filing
of returns, the conducting of audits, and the preservation and orderly
utilization of Reorganized Elder-Beerman's tax attributes in accordance with
applicable laws and regulations. The nature and extent of these rights and
obligations are fully set forth in the New Tax Indemnification Agreement (an
Exhibit to the Plan), which is incorporated herein by reference. On the
Effective Date, each of the Reorganized
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<PAGE> 8
Debtors and the Beerman Family Entities named therein shall execute and deliver
the New Tax Indemnification Agreement. The rights and obligations set forth in
the New Tax Indemnification Agreement provide certain consideration for certain
of the releases set forth below.
Section 1.2. Renewal of the Zane Leases. Notwithstanding the
merits of any theory or theories in law or equity regarding Elder-Beerman's
alleged failure to exercise the renewal option contained in the Zane Leases, the
Zane Lessors agree to waive any claims of any kind based on such theory or
theories. Accordingly, this Section 1.2 (the "Zane Leases Renewal") effects the
binding renewal by Elder-Beerman of the Zane Leases and the Zane Lessors'
consent to such renewal on the terms set forth in Exhibit E as though the
renewal option were duly and timely exercised in accordance with the Zane
Leases. Nothing in this Section 1.2 affects the validity of any Beerman Family
Lease Claims or any amounts with respect to the Zane Leases set forth on Exhibit
A hereto.
Section 1.3. Beerman Family Lease Claims. The Debtors and the
Beerman Family Entities agree that all Beerman Family Lease Claims are
disallowed or allowed in the stipulated, agreed amount set forth in Exhibit A in
the column labeled "Resolved Amount." Nothing in this Section 1.3 should be
construed to alter the respective rights of the lessors or lessees under the
leases set forth on Exhibit A, the treatment of such leases under the applicable
provisions of the Plan, or the rights of such lessors to assert (and the lessees
to dispute) claims for administrative rent and other obligations as provided for
in such leases accruing between the Petition Date and the Effective Date, except
as provided in Exhibit A with respect to the allowance or disallowance of any
postpetition amounts.
Section 1.4. Miscellaneous Beerman Family Claims. The
Debtors and the Beerman Family Entities agree that all Miscellaneous Beerman
Family Claims are disallowed, or allowed in the stipulated, agreed amount set
forth in Exhibit B in the column labeled "Resolved Amount."
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<PAGE> 9
Section 1.5. Elder-Beerman Claims. The Debtors and the Beerman
Family Entities agree that all Elder-Beerman Claims are compromised in the
stipulated, agreed amount set forth in Exhibit C in the column labeled "Resolved
Amount." The Debtors and the Beerman Family Entities acknowledge that the
compromised and stipulated, agreed amounts set forth in the columns labeled
"Resolved Amount" in Exhibits B and C reflect the net amount of the particular
claims after applying appropriate setoffs of corresponding claims asserted
between Elder-Beerman and certain corresponding Beerman Family Entities.
Accordingly, the Resolved Amount on either Exhibit B or Exhibit C is in full
satisfaction of both the claim to which it refers and the corresponding claim
between the same parties reflected on the other Exhibit.
Section 1.6. ESOP Prepetition Claims and ESOP Application. On
account of, and in complete satisfaction of, the ESOP Prepetition Claims, the
ESOP Application, and the ESOP's Old Preferred Stock Interests, the ESOP will
receive the consideration set forth in the Plan.
Section 1.7. Acknowledgment of Fairborn Right. Beerman-Peal
acknowledges the existence and enforceability of the Fairborn Right and agrees
that Reorganized Elder-Beerman may exercise the Fairborn Right on the terms set
forth in Exhibit D.
Section 2. EXCHANGE OF RELEASES AMONG THE PARTIES
Section 2.1. Releases Among the Debtors and the Beerman Family
Entities. In consideration of (a) the Equity Directors' execution and
performance of the New Tax Indemnification Agreement, (b) the allowance, in
accordance with the Plan, of certain claims as set forth on Exhibits A, B, and
C, (c) the distributions provided under the Plan in respect of Class E-2
Interests of Beerman-Peal, and (d) the settlement of all Beerman Family Lease
Claims, the Miscellaneous Beerman Family Claims, and the Elder-Beerman Claims
set forth in Exhibits A, B, and C, except as may be provided in the Plan or in
this Agreement, each of the Debtors and each of
9
<PAGE> 10
the Debtors' respective predecessors, successors, estates, assigns, directors,
officers, managers, employees, professionals, agents and other representatives
(in such capacities), on the one hand, and each of the Beerman Family Entities
and their respective estates, assigns, predecessors, successors, partners,
directors, officers, employees, professionals, agents, and other representatives
(in such capacities), on the other hand, releases and forever discharges one
another from all claims, remedies, debts, liabilities, obligations, demands,
damages, rights, actions, causes of action, agreements, and claims for
attorneys' fees whether known or unknown, now existing or that may arise in the
future arising from, involving, or relating to the Disclosure Claims, the
Beerman Family Lease Claims, the Miscellaneous Beerman Family Claims, the
Elder-Beerman Claims, the Debtors' chapter 11 cases, or any transaction, act, or
omission related to Elder-Beerman or the Debtors' chapter 11 cases occurring
before the Effective Date.
Section 2.2. Releases Among the Debtors, the ESOP, and the
ESOP Committee. In consideration of the settlement of the ESOP Prepetition
Claims, the ESOP Application, and the Potential ESOP Claims as set forth above
and in the Plan at Section III.B.2.c., except as may be provided expressly in
the Plan or in this Agreement, each of the Debtors and each of the Debtors'
respective predecessors, successors, estates, assigns, directors, officers,
employees, professionals, agents, and other representatives, and the ESOP, and
each of the members of the ESOP Committee, and their respective estates,
assigns, predecessors, successors, directors, officers, employees,
professionals, agents, and other representatives releases and forever discharges
one another from all claims, remedies, debts, liabilities, obligations, demands,
damages, rights, actions, causes of action, agreements, and claims for
attorneys' fees whether known or unknown, now existing or that may arise in the
future arising from, involving or relating to the ESOP Prepetition Claims, the
ESOP
10
<PAGE> 11
Application, the Potential ESOP Claims, the Debtors' chapter 11 cases, or any
transaction, action or omission occurring before the Effective Date.
Section 3. REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of Debtors.
Elder-Beerman represents and warrants to the other Parties that (a) it is a
corporation duly organized, validly existing, and in good standing under the
laws of the state of Ohio and (b) entry of the order of the Bankruptcy Court
confirming the Plan under section 1129 of the Bankruptcy Code (the "Confirmation
Order") authorizes Elder-Beerman's execution and delivery of this Agreement and
authorizes Elder-Beerman to perform its obligations under this Agreement.
Section 3.2. Representations and Warranties of the ESOP. The
ESOP represents and warrants to the other Parties that (a) it is an employee
stock ownership plan qualified under section 401(a) of the Internal Revenue Code
and as defined in section 4975(e)(7) of the Internal Revenue Code and (b) is
authorized to execute, deliver, and perform its obligations under this
Agreement.
Section 3.3. Representations and Warranties of the ESOP
Committee. The ESOP Committee represents and warrants to the other Parties that
it is authorized to execute, deliver, and perform its obligations under this
Agreement on behalf of the ESOP. The members of the ESOP Committee each
represent and warrant to the other Parties that the ESOP Committee is authorized
to execute, deliver, and perform the ESOP Committee's obligations under this
Agreement.
Section 3.4. Representations and Warranties of Beerman-Peal.
Beerman-Peal represents and warrants to the other Parties that (a) it is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Ohio and (b) is authorized to execute, deliver, and perform its
obligations under this Agreement.
11
<PAGE> 12
Section 3.5. Representations and Warranties of the Beerman
Family Entities. The Beerman Family Entities, including, the Beerman
Corporation, the Zane Lessors, and all lessors listed on Exhibit A hereto, each
represent and warrant to the other Parties that (a) it is a business entity
(corporation, partnership, limited partnership, or trust) duly organized,
validly existing, and in good standing under the laws of the state of Ohio, or
is a competent individual and (b) is authorized to execute, deliver, and perform
his, her, or its obligations under this Agreement. Each Beerman Family Entity
further represents and warrants that he, she, or it is authorized to execute
this Agreement, if it does so, on behalf of its respective subsidiaries and
affiliates, predecessors, and successors in interest, partners, officers,
directors, managers, agents, and employees.
Section 3.6. Representations and Warranties of the Equity
Directors. BBW, WSW, and LBP each represents and warrants to the other Parties
that he or she has all requisite power and authority to execute, deliver, and
perform his or her obligations under this Agreement. BBW, WSW, and LBP each
further represents and warrants that he or she is authorized to execute this
Agreement, if he or she does so, on behalf of any Beerman Family Entity.
Section 4. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AGREEMENT.
The effectiveness of this Agreement is expressly conditioned on the Bankruptcy
Court's approval of this Agreement by entry of an order (which may be, but does
not have to be, part of the Confirmation Order) not subject to any stay
authorizing the Debtors to enter into, implement, and consummate this Agreement
in accordance with Bankruptcy Rule 9019.
Section 5.REORGANIZED DEBTORS AS SUCCESSORS IN INTEREST TO THE DEBTORS.
From and after the Effective Date, Reorganized Elder-Beerman, Reorganized
Chargit, and Reorganized Bee-Gee (as defined in Article I of the Plan), as
successors in interest to the Debtors, will perform all of
12
<PAGE> 13
the obligations of each of the Debtors under this Agreement and succeed to the
Debtors rights under this Agreement.
Section 6. MISCELLANEOUS PROVISIONS
Section 6.1. Scope of Agreement. This Agreement does not
affect any rights or obligations under the Plan or any contract, instrument,
release, indenture, or other agreement or document delivered under the Plan.
Section 6.2. Entire Agreement; Modification; Waiver. This
Agreement constitutes the entire agreement among the Parties and, subject to the
provisions of Section 6.1 above, supersedes any prior or contemporaneous
agreements, representations, warranties, and understandings of the Parties,
whether oral, written or implied, as to the subject matter of this Agreement. No
amendment or modification of this Agreement or any of its provisions is binding
unless executed in writing by all Parties affected by such amendment or
modification and agreed to unanimously by the Parties. No waiver is binding
unless executed in writing by the Party making such waiver. No waiver of any of
the provisions of this Agreement constitutes or is to be deemed a waiver of any
other provision, whether or not similar to the provision waived, nor does any
waiver constitute a continuing waiver.
Section 6.3. Assignment. This Agreement is binding on, and
inures to the benefit of, the Parties and their respective predecessors,
successors, estates, heirs, and assigns, including all Reorganized Debtors as
successors in interest to the Debtors.
Section 6.4. Further Documents. Each of the Parties agrees to
execute all contracts, instruments, releases, agreements, or other documents and
to perform all acts necessary or appropriate to implement or further evidence
the provisions of this Agreement.
13
<PAGE> 14
Section 6.5. No Representations or Warranties. Except as
expressly set forth in this Agreement, none of the Parties makes, or is deemed
to have made, any representation or warranty, written or oral, express or
implied, to any other Party.
Section 6.6. Severability. If any term or provision of this
Agreement is held by the Bankruptcy Court or any other court or tribunal of
competent jurisdiction to be invalid, void, or unenforceable, the Bankruptcy
Court or such court or tribunal may alter and interpret such term or provision
to make it valid or enforceable to the maximum extent possible, consistent with
the original purpose of the term or provision held to be invalid, void, or
unenforceable, and such term or provision will then be applicable as so altered
or interpreted. Notwithstanding such holding, alteration, or interpretation, the
remainder of this Agreement remains in full force and will in no way be
affected, impaired, or invalidated by such holding, alteration, or
interpretation.
Section 6.7. Consent to Entry of Bankruptcy Court Orders. Each
of the Parties consents to the jurisdiction of the Bankruptcy Court to resolve
any cases, controversies, suits, or disputes arising in connection with the
implementation, interpretation, reformation, modification, remediation of any
defect in, or rescission of this Agreement or any portion of it and
determination or declaration of the rights or obligations of any Party arising
under this Agreement.
Section 6.8. No Admissions. Neither this Agreement or any of
its terms, nor any negotiations, proceedings, or other actions taken or not
taken by any Party in connection with this Agreement constitute or may be deemed
to evidence an admission on the part of any Party of any liability or wrongdoing
or the truth or falsity, merit, or lack of merit of any claim released by this
Agreement or any defense to such claim. If any claim similar to any claim
released by this Agreement arises after this Agreement becomes effective, this
Agreement may not be deemed a waiver or release of such later arising claim or
any evidence as to the legitimacy of such later arising
14
<PAGE> 15
claim or the propriety or legitimacy of the transactions, acts, omissions,
proceedings, matters, events, or dealings providing the basis for such later
arising claim.
Section 6.9. Applicable Law. This Agreement is governed in all
respects by the law of the State of Ohio, without giving effect to Ohio's
principles of conflict of laws.
Section 6.10. Notices. All notices, requests, demands, and
other communications in connection with this Agreement must be in writing and be
delivered personally or by facsimile transmission on the first business day
after mailing (if sent by overnight courier service) or on the third business
day after mailing (if mailed by first class mail, postage prepaid, or by
registered or certified mail) addressed as follows:
THE ELDER-BEERMAN STORES CORP. Kevin E. Irwin
3155 El-Bee Road KEATING, MUETHING & KLEKAMP
Dayton, Ohio 45439 1800 Provident Tower
(937) 296-2700 One East Fourth Street
Attn: General Counsel Cincinnati, Ohio 45402
(513) 579-6427
(Counsel to the ESOP Committee)
Richard M. Cieri Shawn M. Riley
JONES, DAY, REAVIS & POGUE McDONALD, HOPKINS, BURKE & HABER CO.
North Point LPA
901 Lakeside Avenue 2100 Bank One Center
Cleveland, Ohio 44114 600 Superior Avenue, NE
(216) 586-3939 Cleveland, Ohio 44114
(216) 348-5400
(Counsel to the Debtors and (Counsel to the Beerman Family
Reorganized Debtors) Entities, including Equity Directors
and Zane Lessors)
Section 6.11. Counterparts. This Agreement may be executed in
several counterparts, each of which is to be deemed an original, but all of
which together constitute one instrument.
15
<PAGE> 16
Section 6.12. Headings. The descriptive headings in this
Agreement are inserted for convenience of reference only and do not constitute
substantive provisions of this Agreement.
16
<PAGE> 17
IN WITNESS WHEREOF, the Parties have duly executed this
Agreement as of the date set forth above.
<TABLE>
<S> <C>
THE ELDER-BEERMAN STORES CORP. LEONARD B. PEAL
On behalf of itself and all Debtors
In his individual capacity ("LBP"); as 31%
By: owner of Beerman and 11% owner of Abco Land
- ------------------------------------------ Development Corp. ("ALD"); as trustee for
John A. Muskovich LPST and TWT; as beneficiary of the Rhea
Executive Vice President - Administration Peal Trust; and on behalf of all Beerman
Family Entities wholly or partially owned
THE ELDER-BEERMAN STORES CORP. and/or controlled by LBP
Profit Sharing and Stock Ownership Plan
By: -----------------------------------------------
--------------------------------------
THE ELDER-BEERMAN STORES CORP. BEERMAN-PEAL HOLDINGS, INC.
Profit Sharing and Stock Ownership Plan On its behalf and that of its wholly-owned
Administration Committee subsidiary, The Beerman-Peal Corporation
By: By:
---------------------------------------- ---------------------------------------------
Barbara B. Weprin
BARBARA B. WEPRIN [TITLE]
In her individual capacity ("BBW"); as 50% THE BEERMAN CORPORATION
owner of The Beerman Corporation
("Beerman"); trustee for The Leonard Peal By:
Stock Trust ("LPST"), The Todd Weprin Trust --------------------------------------------
("TWT"), and Barbara B. Weprin, Trustee Barbara B. Weprin
("BWTr"); and on behalf of all Beerman
Family Entities wholly or partially owned [TITLE]
and/or controlled by BBW
BEERMAN INVESTMENTS, INC.
By:
- -------------------------------------------
THE LEONARD PEAL STOCK TRUST
WILLIAM S. WEPRIN
By:
In his individual capacity ("WSW"), and on ----------------------------------
behalf of all Beerman Family Entities wholly Barbara B. Weprin
or partially owned and/or controlled by WSW Trustee
- -------------------------------------------
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
BARBARA B. WEPRIN, TRUSTEE POINT WEST III LIMITED PARTNERSHIP
By: By:
---------------------------------- ----------------------------------
Barbara B. Weprin Barbara B. Weprin
General Partner
ABCO LAND DEVELOPMENT CORP.
UNIVERSITY MALL ASSOCIATES
By: PARTNERSHIP
----------------------------------
Barbara B. Weprin By:
----------------------------------
[TITLE] William S. Weprin
General Partner
WILDCAT DEVELOPMENT LIMITED
PARTNERSHIP FAIRBORN COMMERCE CENTER II
LIMITED PARTNERSHIP
By:
---------------------------------- By:
Barbara B. Weprin ----------------------------------
General Partner Barbara B. Weprin
General Partner
CENTERVILLE ASSOCIATES LTD.
LIVE OAK ASSOCIATES LIMITED
By: PARTNERSHIP
----------------------------------
Barbara B. Weprin By:
Trustee of BWTr, General Partner ----------------------------------
Barbara B. Weprin
CENTERVILLE ASSOCIATES III LIMITED General Partner
PARTNERSHIP
By:
----------------------------------
Barbara B. Weprin
Trustee of BWTr, General Partner
</TABLE>
18
<PAGE> 19
EXHIBIT A -- BEERMAN FAMILY LEASE CLAIMS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
AMOUNT RESOLVED
CLAIMANT DEBTOR BASIS CLAIMED AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BWTr Elder-Beerman Broadmoor Plaza
a. Prepetition Real Estate $ 24,000.71
("R/E") Taxes 147,333.10
b. Lease Rejection Damages 7,639.15
c. Postpetition R/E Taxes ------------
$ 179,026.96
TOTAL
- -----------------------------------------------------------------------------------------------------------------------
BC Elder-Beerman Van Buren Shopping Center
a. Prepetition R/E Taxes $ 38,638.64 $ 38,638.64
b. Percentage Rent 109,847.75 109,847.75
c. Postpetition R/E Taxes 5,364.80 5,364.80
------------ -------------
TOTAL $ 153,851.19 $ 153,851.19
- -----------------------------------------------------------------------------------------------------------------------
The Beerman-Peal Elder-Beerman 1. Westgate Shopping Center
Corp. a. Prepetition R/E Taxes $ 106,558.83
b. Postpetition R/E Taxes 7,835.20
2. Woodville Mall
a. Prepetition R/E Taxes 32,528.17
b. Postpetition R/E Taxes 4,273.07
3. North Towne Shopping Center
a. Prepetition R/E Taxes 152,163.53
b. Postpetition R/E Taxes 11,188.50
------------
TOTAL $ 314,547.30
- -----------------------------------------------------------------------------------------------------------------------
Centerville Elder-Beerman Centerville Place Shopping Center
Associates III a. Prepetition R/E Taxes $ 76,387.91
Limited b. Postpetition R/E Taxes 10,606.12
Partnership ------------
TOTAL $ 86,994.03
- -----------------------------------------------------------------------------------------------------------------------
BC and ALD Elder-Beerman Zane Plaza Shopping Center
1. Dept. Store
a. Prepetition R/E Taxes $ 6,864.00 $ 6,864.00
b. Percentage Rent 73,050.42 73,050.42
c. Repairs 491.57 491.57
d. Postpetition R/E Taxes 953.04 953.04
2. Home Store
a. Prepetition R/E Taxes 5,667.20 5,667.20
b. Postpetition R/E Taxes 786.86 786.86
----------- -------------
TOTAL $ 87,813.09 $ 87,813.09
- -----------------------------------------------------------------------------------------------------------------------
Fairborn Elder-Beerman Elder-Beerman Distribution Center
Commerce Center Prepetition R/E Taxes $ 101,623.19
II Limited
Partnership
</TABLE>
1
<PAGE> 20
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
AMOUNT RESOLVED
CLAIMANT DEBTOR BASIS CLAIMED AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BBW, LBP, and Elder-Beerman Skyway Plaza Shopping Center
BC a. Insurance $ 2,407.14
b. Lease Rejection Damages 339,376.08
c. Contingent Claim unliquidated
d. Rent for 11/96-1/97 31,958.50
e. Prepetition R/E Taxes 22,523.23
f. Postpetition R/E Taxes 37,666.82
g. Damage to Premises 27,550.00
-------------
TOTAL $ 461,481.77
- -----------------------------------------------------------------------------------------------------------------------
University Mall Elder-Beerman University Mall Shopping Center
Associates a. Prepetition R/E Taxes $ 31,134.21 $ 31,134.21
Partnership b. Prepetition Insurance 1,888.59 1,888.59
c. Postpetition R/E Taxes 4,322.89 4,322.89
d. Postpetition Insurance 1,575.40 1,575.40
------------- -------------
TOTAL $ 38,921.09 $ 38,921.09
- -----------------------------------------------------------------------------------------------------------------------
Wildcat Elder-Beerman North Park Center
Development a. Prepetition R/E Taxes $ 76,658.91
Limited b. Prepetition Insurance 4,464.54
Partnership c. Prepetition Disposal Charge 859.78
d. Postpetition R/E Taxes 18,472.41
e. Prepetition Water Charge 390.86
f. Prepetition Late Charges 1,633.67
--------------
TOTAL $ 102,480.17
- -----------------------------------------------------------------------------------------------------------------------
BWTr Bee-Gee Eastown Strip Center
Postpetition Insurance $ 235.86 $ 235.86
- -----------------------------------------------------------------------------------------------------------------------
BC Bee-Gee Van Buren Shopping Center
Percentage Rent $ 3,668.85
- -----------------------------------------------------------------------------------------------------------------------
Centerville Bee-Gee Centerville Place Shopping Center $ 0.00
Associates Ltd.
- -----------------------------------------------------------------------------------------------------------------------
Point West III Bee-Gee Bee-Gee Corporate Offices
Limited a. 10/95 Rent $ 8,252.75
Partnership b. Lease Rejection Damages 159,465.64
c. Repairs 17,566.53
d. Lost Access Card 5.00
e. 3/96, 4/96 Rent 16,505.50
f. Maintenance Billing 612.20
--------------
TOTAL $ 202,407.62
- -----------------------------------------------------------------------------------------------------------------------
BBW, LBP, and Bee-Gee Skyway Plaza Shopping Center
BC Lease Rejection Damages $ 41,292.00 $ 41,292.00
- -----------------------------------------------------------------------------------------------------------------------
University Mall Bee-Gee University Mall Shopping Center
Associates a. Prepetition R/E Taxes $ 85.56 $ 85.56
Partnership b. Utilities 137.19 137.19
c. Claim unliquidated 0.00
-------------- ------------
TOTAL $ 222.75 $ 222.75
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 21
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT RESOLVED
CLAIMANT DEBTOR BASIS CLAIMED AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Wildcat Bee-Gee North Park Center
Development a. Postpetition Disposal $ 39.35 $ 39.35
Limited Charges 287.10 287.10
Partnership b. Prepetition Water 229.91 229.91
c. Postpetition Water unliquidated 0.00
d. Claim ------------ ------------
$ 556.36 $ 556.36
TOTAL
- -------------------------------------------------------------------------------------------------------------------------
Live Oak Margo's Margo's Headquarters
Associates a. Prepetition Rent $ 4,383.52 $ 4,383.52
Limited b. Prepetition Taxes 10,340.42 10,340.42
Partnership ------------- -------------
TOTAL $ 14,723.94 $ 14,723.94
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 22
EXHIBIT B -- MISCELLANEOUS BEERMAN FAMILY CLAIMS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
AMOUNT RESOLVED
CLAIMANT BASIS CLAIMED AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <S>
LBP Indemnification unliquidated
Guaranty $ 1,800,000.00
Deferred Compensation unliquidated
Wages 0.00
--------------
TOTAL $ 1,800,000.00
- ---------------------------------------------------------------------------------------------------------------------
BBW Indemnification unliquidated
Guarantee $ 1,800,000.00
ESOP (as former employee) unliquidated
Van Buren Shopping Center Parking
Lot 965.80
a. Prepetition R/E Taxes 133.10
b. Postpetition R/E Taxes 0.00
Wages --------------
$ 1,801,098.90
TOTAL
- ---------------------------------------------------------------------------------------------------------------------
WSW Indemnification unliquidated
Guarantee $ 1,800,000.00
--------------
TOTAL $ 1,800,000.00
- ---------------------------------------------------------------------------------------------------------------------
The Beerman Realty Co. 937 Patterson Boulevard
a. Repairs $ 4,857.45
b. Claim 8,636.90
c. Environmental Remediation 86,000.00
--------------
TOTAL $ 99,494.35
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 23
EXHIBIT C -- ELDER-BEERMAN CLAIMS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
AMOUNT RESOLVED
AFFILIATE BASIS CLAIMED AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LBP Personal Use of Company Airplane $ 14,552.49
Credit Card Balance 82,046.74
---------------
TOTAL $ 96,599.23
- ---------------------------------------------------------------------------------------------------------------------
BBW Personal Use of Company Airplane $ 39,954.11
- ---------------------------------------------------------------------------------------------------------------------
The Beerman Realty Co. Personal Use of Company Airplane $ 1,947.91
Credit Card Balance 192,379.27
---------------
TOTAL $ 194,327.18
</TABLE>
<PAGE> 24
EXHIBIT D -- FAIRBORN RIGHT TERMS
Subject Real Property: All of the real property contiguous to the real
property currently leased (the "Leased Parcel") to
Elder-Beerman by Fairborn Commerce Center II
Ltd. and east of Exchange Court (being
approximately 13.6 acres) and north of the Leased
Parcel (being approximately 4.3 acres).
Option to Purchase: At any time within the next 40 years, Elder-
Beerman will have the option to purchase the
Subject Real Property at a per acre cost calculated
at fair market value. If the parties cannot agree on
a fair market value, the determination of fair
market value will be determined in binding
arbitration.
Right of First Refusal: If Beerman Realty receives a bona fide offer to
purchase all or a portion of the Subject Real
Property, Beerman Realty shall provide notice of
such offer to Elder-Beerman within five days of
receipt of such offer and Elder-Beerman shall
have 30 days from receiving notice of such offer
in which to purchase the Subject Real Property
under the terms and conditions of such offer. The
Elder-Beerman offer and sale must be for all of
the Subject Real Estate.
<PAGE> 25
EXHIBIT E -- ZANE LEASE TERMS
Size: 80,000 sq. ft. (56,000 existing and 24,000
expansion).
Term: 40 years with a base term of 20 years and two 10
year options.
Rent: $4.50/sq. ft.1st 10 years (on 55,940 sq. ft. only).
$5.00/sq. ft.2nd 10 years (on 55,940 sq. ft. only).
Percentage Rent: 1st 10 years - 2% over $12,586,500 and 1 1/2%
over 14,586,500. Then adjusted each 10 years.
Common Area Maintenance: Five years $.40/sq. ft. on 80,000 sq. ft. with an
increase of five cents every five years.
Taxes: Pro rata share.
Insurance: Pro rata.
Maintenance: Roof and structure by landlord. All other
maintenance by tenant including glass and doors.
Operating Covenant: Ten years as "Elder-Beerman."
Recapture by Landlord: Tenant to turn over 17,609 sq. ft. Home Store
space and 3,000 sq. ft. Men's Store space to
landlord.
Construction: Tenant to build 24,000 sq. ft. expansion.
Estimated cost: $1,680,000. Landlord to raze
existing Goodyear building and compact soil for
tenant's building.
Land Purchase: Landlord to cover the $25,000 expense to acquire
adequate land to accommodate the building
expansion.
<PAGE> 1
EXHIBIT 10(q)
-------------
TAX INDEMNIFICATION AGREEMENT
-----------------------------
[THIS AGREEMENT ESTABLISHES THE RIGHTS AND OBLIGATIONS OF THE
ELDER-BEERMAN STORES CORP. AND BEERMAN-PEAL HOLDINGS, INC.
WITH RESPECT TO TAX MATTERS ARISING FROM THEIR MEMBERSHIP IN
THE SAME AFFILIATED GROUP OF COMPANIES PRIOR TO THE EFFECTIVE
DATE OF THE PLAN. THE RIGHTS AND OBLIGATIONS OF ELDER- BEERMAN
AND ITS SUBSIDIARIES GOING FORWARD ARE SET OUT IN A SEPARATE
AGREEMENT, THE TAX SHARING AGREEMENT.]
This Tax Indemnification Agreement dated as of October __,
1997 (this "Agreement") is made and entered into by and among The Elder-Beerman
Stores Corp., an Ohio corporation (initially "Elder-Beerman" and on and after
the Effective Date, as defined in Section 1.5 of this Agreement, "New
Elder-Beerman"); the direct and indirect subsidiaries of Elder-Beerman whose
names are set forth on the signature pages to this Agreement (collectively with
Elder-Beerman or New Elder-Beerman, as the case may be, the "Elder-Beerman
Subgroup"); Beerman-Peal Holdings, Inc., an Ohio corporation ("Holdings"); The
Beerman-Peal Corporation, an Ohio corporation and wholly-owned subsidiary of
Holdings ("BPC"); Beerman Investments, Inc. ("BII"), an Ohio corporation and
wholly-owned subsidiary of Holdings; The Beerman Corporation, an Ohio
corporation and shareholder of Holdings ("BC"); and the individuals,
partnerships, and trusts whose names are set forth on the signature pages to
this Agreement (collectively with BC, the "Holdings Shareholders").
1
<PAGE> 2
RECITALS
--------
WHEREAS, on October __, 1997 the United States Bankruptcy
Court for the Southern District of Ohio (the "Bankruptcy Court") entered an
order confirming the Joint Plan of Reorganization of The Elder-Beerman Stores
Corp. and Its Subsidiaries (the "Plan");
WHEREAS, Holdings, BPC, BII, and the members of the
Elder-Beerman Subgroup are members of an Affiliated Group (the "Holdings
Affiliated Group") for federal income tax purposes that files consolidated
federal income tax returns;
WHEREAS, the members of the Elder-Beerman Subgroup will cease
to be members of the Holdings Affiliated Group on and after the effective date
of the Plan (the "Effective Date"); and
WHEREAS, the Elder-Beerman Subgroup; each of Holdings, BPC,
and BII (collectively the "Holdings Subgroup"); and the Holdings Shareholders
wish to establish their respective rights and responsibilities with respect to
tax matters;
NOW, THEREFORE, in consideration of the mutual agreements set
forth in this Agreement, and, in the case of the Holdings Shareholders, the
provisions of the Plan with respect to the Elder-Beerman common stock, the
parties hereto agree as follows:
1. Definitions.
------------
The following terms as used in this Agreement shall have the
meaning set forth below:
1.1. "AFFILIATED GROUP" has the meaning given that term in
section 1504(a) of the Code.
2
<PAGE> 3
1.2. "BANKRUPTCY COURT" has the meaning given that term in the
first Recital paragraph of this Agreement.
1.3. "CODE" means the Internal Revenue Code of 1986, as
amended.
1.4. "CONSOLIDATED RETURN" has the meaning given that term in
Section 2.2(a) of this Agreement.
1.5. "EFFECTIVE DATE" has the meaning given that term in the
third Recital paragraph of this Agreement.
1.6. "ELDER-BEERMAN SUBGROUP" has the meaning given that term
in the introductory paragraph of this Agreement and shall include, where the
context requires, corporations that become members of the Subgroup after the
Effective Date.
1.7. "EXCESS LOSS ACCOUNT" has the meaning given that term in
Reg. Section 1.1502-19.
1.8. "GAINS" means taxable gains recognized by the Holdings
Affiliated Group or any member thereof as a result of transactions contemplated
by the Plan, including, without limitation, deferred gains recognized pursuant
to Reg. Section 1.1502-13 and Reg. Section 1.1502-14.
1.9. "HOLDINGS AFFILIATED GROUP" has the meaning given that
term in the second Recital paragraph of this Agreement.
1.10. "HOLDINGS SUBGROUP" has the meaning given that term in
the fourth Recital paragraph of this Agreement and shall include, where the
context requires, corporations that become members of the Subgroup after the
Effective Date.
1.11. "NOTICE" has the meaning given that term in Section 3.3
of this Agreement.
1.12. "OPEN RETURN" has the meaning given that term in Section
2.4(a) of this Agreement.
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<PAGE> 4
1.13. "PLAN" has the meaning given that term in the first
Recital paragraph of this Agreement.
1.14. "REG." refers to the Treasury regulations promulgated
under the Code.
1.15. "SUBGROUP" means, as the context requires, either the
Elder-Beerman Subgroup or the Holdings Subgroup.
1.16. "TAXES" means taxes imposed on or measured by net
income, including, without limitation, income, franchise, alternative minimum,
and federal environmental taxes, determined after taking into account all
available carryovers and carrybacks, regardless of their source, together with
interest, penalties, and additions to tax with respect thereto.
1.17. "TOLEDO STORES" means the three Elder-Beerman Stores
Corp. department stores, ownership of which was previously transferred from
Elder-Beerman to Holdings and by Holdings to BPC.
2. Tax Matters.
------------
2.1. PAYMENT OF ALLOWED CLAIMS. A claim for Taxes against any
member of the Elder-Beerman Subgroup that is treated as an allowed claim for
bankruptcy purposes shall be the responsibility of the Elder-Beerman Subgroup.
2.2. PREPARATION AND FILING OF INCOME TAX RETURNS.
(a) New Elder-Beerman shall prepare the consolidated
federal income tax returns on behalf of the Holdings Affiliated Group for the
Holdings Affiliated Group's consolidated federal income tax years ended on or
about each of January 31, 1997 and January 31, 1998 (each a "Consolidated
Return" and together the "Consolidated Returns"). The Consolidated Returns shall
include the income and losses of the Elder-Beerman Subgroup and
4
<PAGE> 5
the Holdings Subgroup, including, without limitation, any gains or income
attributable to an Excess Loss Account and any Gains.
(b) The Holdings Subgroup shall timely provide New
Elder-Beerman with all Holdings Subgroup information necessary for New
Elder-Beerman to complete the Consolidated Returns in accordance with the
Holdings Affiliated Group's past custom and practice. Holdings shall have the
opportunity to review and comment upon each Consolidated Return prior to its
filing to the extent that the return affects the Holdings Subgroup. Following
that review, and satisfaction of the condition set forth in Section 2.2(c)
hereof, Holdings shall sign the Consolidated Return and deliver it to New
Elder-Beerman for timely filing with the Internal Revenue Service. New
Elder-Beerman shall provide Holdings with a copy of each filed Consolidated
Return.
(c) As a condition to Holdings' obligation to sign
each Consolidated Return in the manner set forth in Section 2.2(b) hereof, New
Elder-Beerman shall certify in writing that sufficient authority exists for each
item or position reflected on such Consolidated Return, or sufficient disclosure
has been made with respect to such item or position, so as to protect Holdings
and the Holdings officer who signs the Consolidated Return from any and all
liability for penalties that the Internal Revenue Service may assert under the
Code with respect to the Consolidated Return. In the event that the Internal
Revenue Service asserts such a penalty and that penalty is sustained, New
Elder-Beerman shall indemnify, defend, and hold harmless each of Holdings and
the signing officer from any and all costs and expenses associated with the
penalty, PROVIDED, HOWEVER, that (x) New Elder-Beerman shall have the option, at
its sole cost and expense, to contest the penalty through any administrative or
judicial means provided by law, (y) New Elder-Beerman's obligation under this
Section 2.2(c) shall not extend to items or
5
<PAGE> 6
positions reflected on the Consolidated Return that are based wholly or in part
on information provided to New Elder-Beerman by Holdings or a member of the
Holdings Subgroup, and (z) New Elder-Beerman shall not be liable for any penalty
incurred by Holdings for failure to timely file a Consolidated Return if New
Elder-Beerman has provided Holdings with a completed Consolidated Return and at
least twenty business days in which to review, comment upon, and sign and file
or return to New Elder-Beerman for filing such Consolidated Return pursuant to
Section 2.2(b) hereof.
(d) In preparing the Consolidated Return for the
consolidated federal income tax year ending on or about January 31, 1998, New
Elder-Beerman shall have the option to apportion the Elder-Beerman Subgroup's
income between the period up to and including the Effective Date and the period
after the Effective Date by ratably allocating such income or loss for the full
consolidated year based on the number of days in each of the two periods in the
manner described in Reg. Section 1.1502-76(b)(2)(ii).
(e) For all tax periods, each of Holdings and New
Elder-Beerman shall be solely responsible for the preparation and filing of all
state and local tax returns of the members of its Subgroup.
2.3. PAYMENT OF TAXES SHOWN ON RETURNS.
(a) Each member of the Holdings Affiliated Group
shall be solely responsible, on a "separate entity" basis, for payment of any
Taxes shown to be due on a Consolidated Return. Each member of the Holdings
Affiliated Group whose income is included in a Consolidated Return shall pay
that portion of such Taxes which the taxable income of such member (computed on
a separate return basis without deduction of any net operating loss or capital
loss carryforward) for the period to which the Consolidated Return relates bears
to the
6
<PAGE> 7
aggregate taxable income of the members having taxable income included in such
return (as so computed) for such period. If the computation of taxable income of
a member under this Section 2.3(a) results in an excess of deductions over gross
income for the period, then such member's taxable income shall be deemed to be
zero for purposes of this Section 2.3(a).
(b) Holdings shall pay to New Elder-Beerman the
Taxes of any member of the Holdings Subgroup determined under Section 2.3(a).
Holdings shall make such payments on or before the date that the liability for
Taxes shown to be due on the Consolidated Return for the then-current
consolidated taxable year is payable to the Internal Revenue Service or, if
earlier, on the date on which an estimated tax payment is due with respect to
such liability. In the event that Holdings' payments to New Elder-Beerman under
this Section 2.3(b) exceed the liability for Taxes shown on the Consolidated
Return, New Elder-Beerman shall be entitled to retain the excess, but only to
the extent that the excess results from a net operating loss or net operating
loss carryover attributable to a member of the Elder-Beerman Subgroup.
(c) Each member of the Holdings Subgroup and the
Elder-Beerman Subgroup (except to the extent that two or more members of the
Elder-Beerman Subgroup are determined to be members of a unitary or consolidated
group for Illinois state tax purposes) shall be responsible for the payment of
its own state and local taxes.
2.4. RESPONSIBILITY FOR AUDITS AND AUDIT ADJUSTMENTS.
(a) Holdings shall allow New Elder-Beerman and its
professional advisors to participate, at New Elder-Beerman's expense, in any
audit of either a Consolidated Return or the Holdings Affiliated Group
consolidated federal income tax return for the consolidated tax year ended on or
about January 31, 1996 (each such return an "Open Return") and in any
administrative proceeding or litigation arising out of the audit of an Open
Return. Holdings shall
7
<PAGE> 8
not settle any issues raised on audit of an Open Return in a manner that would
adversely affect a member of the Elder-Beerman Subgroup unless New Elder-Beerman
consents in writing to such settlement, PROVIDED, HOWEVER, that if New
Elder-Beerman determines, in its sole discretion, that it will not consent to a
settlement, New Elder-Beerman shall be solely responsible for the cost of any
administrative proceeding or litigation undertaken to resolve the issue in
dispute.
(b) If a final determination of liability for Taxes relating
to an Open Return changes the treatment of any item of income, gain, loss,
deduction, or credit, then the payments due under Section 2.3 of this Agreement
shall be recomputed to reflect the revised treatment of the item. If the revised
treatment of the item results in an overpayment by any member of the Holdings
Subgroup under Section 2.3, New Elder-Beerman shall refund the amount of the
overpayment to Holdings. If the revised treatment of the item results in an
underpayment by any member of the Holdings Subgroup under Section 2.3, Holdings
shall pay the amount of the underpayment to New Elder-Beerman for payment on
Holdings' behalf to the Internal Revenue Service. Any payment by New
Elder-Beerman or Holdings pursuant to this Section 2.4(b) shall be accompanied
by interest equal to the amount of interest that would be payable if such
overpayment or underpayment, as the case may be, was an overpayment or
underpayment of federal Taxes for the taxable year or years to which the final
determination relates.
(c) If the Internal Revenue Service asserts that a member of
one Subgroup is liable under Reg. Section 1.1502-6 for Taxes for which a member
of the other Subgroup is responsible under this Agreement, the member that is
responsible for such Taxes under this Agreement shall indemnify, defend, and
hold harmless the member against which the Internal Revenue Service has
asserted liability to the extent that the indemnified member pays such Taxes.
8
<PAGE> 9
2.5. ELECTIONS.
(a) Holdings shall not elect to reattribute to
itself any net operating loss carryovers of the Elder-Beerman Subgroup under
Reg. Section 1.1502-20(g).
(b) Holdings shall make or join in the making of the
following tax elections if requested by New Elder-Beerman: (i) any election that
is required to effect the provisions of this Agreement, including, without
limitation, the election that Holdings as the common parent of the Holdings
Affiliated Group is required to make under Reg. Section 1.1502-76(b)(2)(ii)(D)
to effect the ratable allocation described in Section 2.2(c) of this Agreement,
and (ii) any other election if the making of the election does not have an
adverse effect on any member of the Holdings Subgroup.
2.6. TAX SHARING AGREEMENTS. Any tax sharing agreement between
any member of the Holdings Subgroup and any member of the Elder-Beerman
Subgroup, whether express or implied by a course of conduct, is terminated as of
the Effective Date and shall have no effect for any past, current, or future
taxable year. The tax sharing agreement between the members of the Elder-Beerman
Subgroup dated as of the date of this Agreement shall not be affected by this
Section 2.6.
2.7. TOLEDO STORES.
(a) In the event that (i) BPC or another member of
the Holdings Subgroup disposes of one or more of the Toledo Stores at any time
after the Effective Date in a transaction subject to section 1001 of the Code,
(ii) the net effect of such disposition is to generate a recognized loss for the
disposing member, and (iii) the Holdings Subgroup derives a federal income tax
benefit from that loss (whether from the application of the loss to the taxable
income of the disposing member or the taxable income of another member of the
Holdings Subgroup, or
9
<PAGE> 10
as a carryforward or carryback), Holdings shall give New Elder-Beerman prompt
notice of the disposition and pay New Elder-Beerman the amount of the tax
benefit so derived (subject to the limitation contained in Section 2.7(b) of
this Agreement) no later than the date on which the Holdings Subgroup's federal
income tax return for the year of the disposition is due.
(b) In the event that the tax benefit to Holdings
described in Section 2.7(a)(iii) exceeds the tax cost to the Elder-Beerman
Subgroup of the Gains associated with the Toledo Stores, Holdings shall be
entitled to retain such excess.
2.8. WORTHLESS STOCK DEDUCTIONS AND OTHER DISPOSITIONS.
(a) Holdings represents and warrants that prior to
the date of this Agreement it has not taken a worthless stock deduction under
section 165(g) of the Code with respect to its Elder-Beerman shares or otherwise
disposed of any or all of those shares in a transaction that, in and of itself
or in combination with other transactions, would cause Elder- Beerman to have
had an ownership change for purposes of Section 382 of the Code. Holdings
further covenants that it will not take any of the actions described in the
previous sentence during the period from and including the date of this
Agreement to and including the Effective Date.
(b) Each Holdings Shareholder represents and warrants
that prior to the date of this Agreement he, she, or it has not taken a
worthless stock deduction under section 165(g) of the Code with respect to his,
her, or its Holdings shares or otherwise disposed of any or all of those shares
in a transaction that, in and of itself or in combination with other
transactions, would cause Holdings to have had an ownership change for purposes
of Section 382 of the Code. Each Holdings Shareholder further covenants that he,
she, or it will not take any of the actions described in the previous sentence
during the period from and including the date of this Agreement to and including
the Effective Date.
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<PAGE> 11
(c) Each Holdings Shareholder holding shares in BC
represents and warrants that prior to the date of this Agreement he, she, or it
has not taken a worthless stock deduction under section 165(g) of the Code with
respect to his, her, or its BC shares or otherwise disposed of any or all of
those shares in a transaction that, in and of itself or in combination with
other transactions, would cause BC to have had an ownership change for purposes
of Section 382 of the Code. Each Holdings Shareholder holding shares in BC
further covenants that he, she, or it will not take any of the actions described
in the previous sentence during the period from and including the date of this
Agreement to and including the Effective Date.
2.9. COOPERATION. Each party to this Agreement will (i) make
personnel and records available as necessary for the filing of original or
amended tax returns and the conduct of any tax proceedings, (ii) retain all
appropriate books and records as long as they may be relevant, (iii) have the
right to inspect the books and records of each other party for any purpose under
this Agreement, and (iv) otherwise cooperate with the other parties to this
Agreement with respect to Taxes.
2.10. LIABILITY FOR TAXES; INDEMNIFICATION. It is the intent
of this Agreement that no member of the Holdings Subgroup shall be liable for
Taxes on income or gain arising out of the operations, transactions, or
activities of any member or former member of the Elder-Beerman Subgroup
occurring before, on, or after the Effective Date, and that no member of the
Elder-Beerman Subgroup shall be liable for Taxes on income or gain arising out
of the operations, transactions, or activities of any member or former member of
the Holdings Subgroup occurring before, on, or after the Effective Date. For
purposes of this Section 2.10, income or gains shall be treated as arising out
of the operations, transactions, or activities of a member or former member of a
Subgroup if such income or gains would properly be reported by such member on
11
<PAGE> 12
its own federal income tax return if such member were filing such return on a
separate entity basis. Each Subgroup shall indemnify, defend, and hold harmless
each member and former member of the other Subgroup against any and all
liability for Taxes of the members and former members of the indemnifying
Subgroup. Any payments pursuant to this Section 2.10 shall be made by the parent
of the indemnifying Subgroup to the parent of the indemnified Subgroup on or
before the date on which the parent of the indemnified Subgroup is obligated to
pay such Taxes to the Internal Revenue Service.
3. Miscellaneous.
--------------
3.1. AMENDMENT AND WAIVER. This Agreement may be amended,
modified, waived, discharged, or terminated only by an instrument in writing
signed by Holdings, Elder- Beerman or New Elder-Beerman, as the case may be, and
any other person against whom the amendment, modification, waiver, discharge, or
termination would operate. Each party to this Agreement will be bound by the
terms of any such amendment, modification, waiver, discharge, or termination.
3.2. SUCCESSORS AND ASSIGNS. This Agreement will be binding on
and inure to the benefit of the parties to this Agreement and to their
respective successors and permitted assigns, but will not be assignable or
delegable by any party without the prior written consent of each other party. In
the absence of prior written consent, any purported assignment or delegation of
any right or obligation under this Agreement will be null and void.
3.3. NOTICE. All notices, requests, waivers, releases,
consents, and other communications required or permitted by this Agreement
(collectively, a "Notice") must be in writing. A Notice will be deemed
sufficiently given for all purposes when delivered in person or when dispatched
by electronic facsimile transmission or on confirmation of receipt when
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<PAGE> 13
dispatched by a nationally recognized overnight courier service to the
appropriate party as follows: (a) if to any member of the Holdings Subgroup, at
11 West Monument Street, Dayton, Ohio 45402; (b) if to any member of the
Elder-Beerman Subgroup, at 3155 El-Bee Road, Dayton, Ohio 45439; and (c) if to a
Holdings Shareholder, in care of Holdings at the address set forth in clause (a)
above, or at such other address as a party to this Agreement may designate in
writing to the other parties. Any Notice given to Holdings or to Elder-Beerman
or, after the Effective Date, New Elder-Beerman will constitute notice to all
members of their respective subgroups.
3.4. TITLES AND HEADINGS. Titles and headings to sections in
this Agreement are inserted for convenience of reference only, and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
3.5. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter of this
Agreement. There are no agreements among the parties with respect to that
subject matter except as expressly set forth in this Agreement.
3.6. SEVERABILITY. In case any provision contained in this
Agreement is invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions will not in any way be affected or
impaired thereby.
3.7. GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of Ohio, without giving
effect to the principles of conflict of laws thereof.
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<PAGE> 14
3.8. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall constitute one and the same agreement.
4. Assumption and Condition.
-------------------------
This Agreement has been prepared and entered into by the
parties on the assumption that the Plan and the related disclosure statement on
file with the Bankruptcy Court will be approved by the Bankruptcy Court without
significant modification and that the Effective Date will be December 19, 1997.
Each party reserves the right to withdraw from this Agreement if the party is
materially and adversely affected by an amendment to the Plan or a change in the
Effective Date. For such withdrawal to be effective, the withdrawing party shall
give Notice to the other parties no later than 30 days after the date of the
amendment or the date on which the Effective Date is changed. Each party shall
use all reasonable efforts to make any changes in the form or substance of this
Agreement that may be required to take into account any amendment to the Plan or
the related disclosure statement or to accommodate any change in the Effective
Date.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
HOLDINGS SUBGROUP
-----------------
BEERMAN-PEAL HOLDINGS, INC.
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
14
<PAGE> 15
THE BEERMAN PEAL CORPORATION
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
BEERMAN INVESTMENTS, INC.
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
ELDER-BEERMAN SUBGROUP
----------------------
THE ELDER-BEERMAN STORES CORP.
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
THE EL-BEE CHARGIT CORP.
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
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<PAGE> 16
MARGO'S LAMODE, INC.
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
THE BEE-GEE SHOES CORP.
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
EBA, INC.
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
McCOOK WHOLESALE, CORP.
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
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<PAGE> 17
THE EL-BEE RECEIVABLES CORP.
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
HOLDINGS SHAREHOLDERS
---------------------
THE BEERMAN CORPORATION
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
WILLIAM WEPRIN
---------------------------------------
BARBARA WEPRIN
---------------------------------------
LEONARD PEAL
---------------------------------------
[Trusts, etc.]
17
<PAGE> 1
EXHIBIT 10(r)
-------------
TAX SHARING AGREEMENT
---------------------
[THIS AGREEMENT ESTABLISHES RESTRUCTURED ELDER-BEERMAN AND
SUBSIDIARIES' RIGHTS AND OBLIGATIONS WITH RESPECT TO THEIR OWN
CONSOLIDATED TAX LIABILITY FOLLOWING THE CONSUMMATION OF THE
PLAN. ELDER-BEERMAN'S RIGHTS AND OBLIGATIONS VIS-A-VIS
BEERMAN-PEAL HOLDINGS, WHICH IS NOT A PARTY TO THIS AGREEMENT,
ARE SET FORTH IN A SEPARATE AGREEMENT, THE TAX INDEMNIFICATION
AGREEMENT.]
This Tax Sharing Agreement dated as of October __, 1997 (this
"Agreement") is made and entered into by and among The Elder-Beerman Stores
Corp. ("Elder-Beerman") as Common Parent (as defined below) and The Bee-Gee Shoe
Corp. and The El-Bee Chargit Corp., each a wholly-owned subsidiary of
Elder-Beerman, as Members.
RECITALS
--------
WHEREAS, each party hereto consents to the filing of a
Consolidated Return (as defined below) for the Group (as defined below)
beginning with its first Taxable Year (as defined below);
WHEREAS, certain state and local combined or unitary income or
franchise tax returns may be filed for various Members (as defined below) or for
the Group; and
WHEREAS, the parties hereto wish to provide for the sharing of
the federal income tax liability and any state and local income and franchise
tax liabilities relating to such consolidated, combined, or unitary returns;
NOW, THEREFORE, in consideration of the mutual agreements set
forth in this Agreement, the parties hereto agree as follows:
<PAGE> 2
1. Definitions.
------------
The following terms as used in this Agreement shall have the
meaning set forth below:
1.1. "AFFILIATED GROUP" has the meaning given that term in
Section 1504(a) of the Code.
1.2. "CODE" means the Internal Revenue Code of 1986, as
amended.
1.3. "COMMON PARENT" has the meaning given that term by the
Consolidated Return Regulations. Common Parent initially means Elder-Beerman and
thereafter any other corporation that replaces Elder-Beerman (or any successor
corporation) as successor Common Parent of the Affiliated Group.
1.4. "COMPLETION", for any Taxable Year of the Group, means
the date on which the Consolidated Return of the Group for such Taxable Year is
completed.
1.5. "CONSOLIDATED RETURN", for any Taxable Year of the Group,
means a consolidated U.S. corporation income tax return filed pursuant to
Section 1501 of the Code by the Common Parent for such Taxable Year.
1.6. "CONSOLIDATED RETURN REGULATIONS" means Income Tax
Regulations Sections 1.1502-1 through 1.1502-100 (26 C.F.R.), as amended.
1.7. "CONSOLIDATED TAX LIABILITY" means the consolidated U.S.
corporation income tax liability of the Group for any Taxable Year for which the
Group files a Consolidated Return.
1.8. "CONSOLIDATED TAXABLE INCOME", for any Taxable Year of
the Group, means the consolidated U.S. corporation taxable income of the Group
for such Taxable Year, determined in the manner provided in the Code and in the
Consolidated Return Regulations.
2
<PAGE> 3
1.9. "EFFECTIVE DATE" means the effective date of the Joint
Plan of Reorganization of The Elder-Beerman Stores Corp. and Its Subsidiaries.
1.10. "FORMER MEMBER", as of any given date, means any
corporation (including any successor in interest to such corporation) which as
of such date is not a Member of the Group, but which at any time during one or
more Taxable Years of the Group was a Member; PROVIDED, however, that no Member
that ceases to exist as a Member hereunder solely as a result of a transaction
to which Section 381 of the Code applies shall for purposes of this Agreement be
considered to be a Former Member if the surviving or resulting corporation to
such transaction is a Member of the Group.
1.11. "GROUP", as of any particular date, means the Common
Parent and each Member of the Affiliated Group which is an Includible
Corporation as of such date.
1.12. "INCLUDIBLE CORPORATION" has the meaning given that term
in Section 1504(b) of the Code.
1.13. "INCOME TAX REGULATIONS" means the Regulations (26
C.F.R.), as amended, promulgated pursuant to the Code.
1.14. "IRS" means the Internal Revenue Service.
1.15. "LOSS ITEM", in the case of any Member, for any Taxable
Year of the Group, means such Member's excess credits against federal income
tax, net operating loss, or net capital loss for such Taxable Year, any or all
of which result from the determination of such Member's Separate Return Tax
Liability for such Taxable Year.
1.16. "MEMBER", for any Taxable Year of the Group, means any
corporation (or any predecessor or successor in interest to such corporation
under Section 381 of the Code that was or is an Includible Corporation) which at
any time during such Taxable Year is an Includible
3
<PAGE> 4
Corporation that is included in the Affiliated Group and shall include any such
corporation which at any time during such Taxable Year is the Common Parent.
1.17. "SEPARATE RETURN TAX LIABILITY", in the case of any
Member for any Taxable Year of the Group, means the liability of such Member
hereunder for federal income tax for such Taxable Year computed as if such
Member had filed a separate federal income tax return for such Taxable Year and
for all prior taxable years or periods and subsequent taxable years, after
taking into account all carryovers and carrybacks of losses and credits as if
such Member had filed a separate federal income tax return for all such taxable
years or periods, except that, in making such computation for any such taxable
year, such liability shall be determined:
(a) on the basis of the highest rate of corporate tax
in effect for such taxable year under Section 11 of the Code (after
giving effect, if applicable, to Section 15 of the Code), as though
such rate were the only income tax rate in effect for such taxable
year;
(b) on the assumption that the "exemption amount"
specified in Section 55(d)(2) of the code which is applicable to such
Member for such taxable year is zero; and
(c) on the further assumption that the amount
specified in Section 59A(a)(2) of the Code which is applicable to such
Member for such taxable year is zero.
1.18. "TAXABLE YEAR" means any period (a) of 12 consecutive
months or (b) of less than 12 consecutive months, for which a Consolidated
Return is or will be filed by the Group.
2. Allocation of Consolidated Tax Liability for Purposes of
Determining Earnings and Profits.
-------------------------------------------------------------
The Consolidated Tax Liability of the Group for each Taxable
Year of the Group shall, for purposes of determining the earnings and profits of
each Member, be allocated among the Members in accordance with the methods
prescribed in Section 1.1552-1(a)(2) of the Income Tax Regulations and Section
1.1502-33(d)(3) of the Consolidated Return Regulations. The fixed
4
<PAGE> 5
percentage to be used for purposes of Section 1.1502-33(d)(3)(i) of the
Consolidated Return Regulations shall be 100 percent. Elder-Beerman shall make
the election prescribed in Section 1.1552-1(c) of the Income Tax Regulations to
effect the allocation method described in this Section 2.
3. Payments by Members Of Separate Return Tax Liability.
-----------------------------------------------------
3.1. PAYMENTS BY MEMBERS GENERALLY. For each Taxable Year of
the Group, each Member shall make the payments specified in this Section 3.1 at
the time or times and in the manner provided below.
(a) In the case of any such Member whose estimated
Separate Return Tax Liability for such Taxable Year is greater than
zero, such Member shall make quarterly payments of its estimated
Separate Return Tax Liability for such Taxable Year. The amount of each
such quarterly payment shall be determined by such Member, and such
determination shall be made no later than ten days prior to the date on
which payment of the respective quarterly estimate of the Group's
Consolidated Tax Liability for such Taxable Year must be made to the
IRS. The amount of each such quarterly payment determined by such
Member shall equal the amount which such Member would be required under
Section 6655(d) of the Code (or under any successor Section of the
Code) to pay to the IRS for such quarter were such Member to make
installment payments of its estimated Separate Return Tax Liability for
such Taxable Year in accordance with the provisions of such Section.
(b) If the actual Separate Return Tax Liability of
any such Member for such Taxable Year exceeds the total estimated
payments, if any, which such Member made pursuant to Section 3.1(a)
hereof for such Taxable Year, such Member shall pay an amount equal to
the difference between its actual Separate Return Tax Liability for
such Taxable
5
<PAGE> 6
Year and the sum of the estimated payments, if any, that such Member
made pursuant to Section 3.1(a) hereof for such Taxable Year.
(c) In the case of any Member, each of the quarterly
payments required to be made by such Member pursuant to Section 3.1(a)
hereof shall be made in the manner provided in Section 6.1 hereof on or
before the due date for the payment of the respective quarterly
estimate of the Group's Consolidated Tax Liability for such Taxable
Year. Any amount required to be paid by such Member for such Taxable
Year pursuant to Section 3.1(b) hereof shall be paid by such Member in
the manner provided in Section 6.1 hereof as follows: (i) on the
fourteenth day of the third month after the end of such Taxable Year
such Member shall pay an amount equal to such Member's best estimate,
as determined by such Member, of the amount, if any, that such Member
owes pursuant to Section 3.1(b) hereof for such Taxable Year, and (ii)
on the thirtieth day after Completion for such Taxable Year such Member
shall pay an amount equal to the difference, if any, between (A) the
amount determined for such Taxable Year as the amount payable by such
Member pursuant to section 3.1(b) hereof for such Taxable Year and (B)
the amount, if any, paid by such Member for such Taxable Year pursuant
to clause (i) above, together with interest thereon on such amount at
the rate specified in Section 6.2 hereof from the date on which the
payment referred to in clause (i) above was made to such thirtieth day
following Completion.
3.2. MEMBER REFUNDS. If for any Taxable Year of the Group, any
Member of the Group is able to utilize in determining its Separate Return Tax
Liability pursuant to Section 3.1(b) hereof for such Taxable Year any credits or
deductions attributable to such Taxable Year which the Common Parent for such
Taxable Year is unable, due to limitations prescribed by the Code, to utilize in
computing the Group's Consolidated Tax Liability for such Taxable Year or any
prior Taxable
6
<PAGE> 7
Year, and if such Member in such circumstance is able to carry back such credits
or deductions to a prior taxable year or taxable years of such Member and to
obtain a refund of federal income tax as a result of such carryback, such Member
shall remit the amount of such refund, together with any interest that such
Member receives thereon, as herein provided. Such payment shall be made by such
Member in the manner provided in Section 6.1 hereof within ten days of the date
on which such refund is received by such Member from the IRS.
3.3. ADDITIONAL PAYMENTS BY MEMBERS. If for any Taxable Year
of the Group, the Common Parent anticipates in good faith that the Consolidated
Tax Liability of the Group will exceed the total of the payments to be made by
Members required under Section 3.1 hereof for such Taxable Year, then the Common
Parent may require each Member to make an additional payment at the time and in
the manner herein provided.
(a) The total of the payments by all Members for any
Taxable Year pursuant to this Section 3.3 shall be determined by the
Common Parent. The total of such payments from all Members for a
Taxable Year shall not exceed, but may be less than, the amount by
which the Common Parent anticipates that the Consolidated Tax Liability
of the Group will exceed the total of the payments by Members required
under Section 3.1 hereof for such Taxable Year.
(b) Each Member's additional payment for a Taxable
Year shall be calculated by multiplying the amount determined under
Section 3.3(a) hereof by a fraction, the numerator of which is the
gross receipts of such Member for the 12 months preceding the Taxable
Year for which a payment is required and the denominator of which is
the gross receipts of all Members for the 12 months preceding the
Taxable Year for which a payment is required.
7
<PAGE> 8
(c) Any payment due from a Member pursuant to this
Section 3.3 shall be made in the manner provided in Section 6.1 hereof.
All payments shall be made within 30 days of the date on which any
Member receives written notice of the amount payable pursuant to this
Section 3.3.
4. Payments To Members.
--------------------
4.1. PAYMENTS TO MEMBERS GENERALLY. For each Taxable Year of
the Group, the payments specified in this Section 4 shall, if applicable, be
made to each Member at the time or times and in the manner herein provided.
(a) If the payments made by any such Member pursuant
to Section 3.1(a) hereof of its estimated Separate Return Tax Liability
for such Taxable Year exceed its actual Separate Return Tax Liability
for such Taxable Year, such Member shall be paid an amount equal to the
difference between (i) the payments that such Member made pursuant to
Section 3.1(a) hereof for such Taxable Year and (ii) the amount of its
actual Separate Return Tax Liability for such Taxable Year.
(b) If any Member for a Taxable Year has a Loss Item
that such Member on a separate return tax basis would be entitled under
the applicable provisions of the Code to carry back to a prior taxable
year or taxable years, such Member shall be paid an amount equal to the
refund in federal income tax that such Member would have been entitled
to claim and receive had such Member filed a separate federal income
tax return for such prior taxable year or taxable years. A Member shall
not be entitled to receive any payment from the Common Parent pursuant
to this Section 4.1(b) with respect to a Loss Item to the extent such
Loss Item is eligible to be carried back by such Member to a prior
taxable year or taxable years for which such Member either (i) actually
filed a separate federal income tax
8
<PAGE> 9
return or (ii) was included in the consolidated return of another
Affiliated Group, and as to which such Member accordingly is entitled
to file, or have filed on its behalf, a claim for a refund of federal
income tax previously paid. In the event that a Member receives a
refund of federal income taxes with respect to a Loss Item described in
the previous sentence, such Member shall be entitled to retain the
refund.
4.2. MANNER AND TIMING OF PAYMENTS. In the case of any Member,
any payment that such Member may be entitled to receive from the Common Parent
for such Taxable Year pursuant to Section 4.1(a) or Section 4.1(b) hereof shall
be paid to such Member in the manner provided in Section 6.1 hereof on or before
the later of (i) the fifteenth day of the third month after the end of such
Taxable Year and (ii) 30 calendar days after Completion.
4.3. RETURN OF LOSS ITEM PAYMENTS. Any Member that receives a
payment pursuant to Section 4.2 hereof on account of a Loss Item as provided in
Section 4.1(b) hereof shall repay such payment in the event such Member ceases
(other than as a result of a transaction to which Section 381 of the Code
applies and in which the surviving or resulting corporation is also a Member) to
be a Member before the Common Parent has utilized in full such Loss Item in
determining the Group's Consolidated Taxable Income or Consolidated Tax
Liability for any Taxable Year or Taxable Years of the Group. If, as of the end
of the last Taxable Year of the Group in which such Member is a Member, the
Common Parent shall have partially utilized such Loss Item in determining the
Group's Consolidated Taxable Income or Consolidated Tax Liability for any
Taxable Year or Taxable Years of the Group, such Former Member shall repay a
proportionate part of such payment, determined by multiplying the amount of such
payment by a fraction, the numerator of which shall equal the amount of such
Loss Item which the Common Parent has not so utilized and the denominator of
which shall equal the aggregate amount of such Loss Item. For purposes of the
two preceding
9
<PAGE> 10
sentences, the extent, if any, to which any such Loss Item has been utilized by
the Common Parent in determining the Group's Consolidated Taxable Income or
Consolidated Tax Liability for the Taxable Year or Taxable Years of the Group
referred to in such sentences shall be determined in accordance with the
provisions of Section 1.1502-79 of the Consolidated Return Regulations. Any
payment due from a Former Member pursuant to this Section 4.3 shall be made in
the manner provided in Section 6.1 hereof by such Former Member within 15 days
of the date on which such Former Member receives written notice of the amount
payable by such Former Member pursuant to this Section 4.3.
5. Additional Obligations of Members.
----------------------------------
5.0. In addition to the obligation of each Member under
Section 4.3 hereof to return all or a portion of any Loss Item Payment in the
event that a Member receiving such payment leaves the Group before the Common
Parent is able to utilize in full such Loss Item in determining the Consolidated
Tax Liability for one or more Taxable Years of the Group, each Member shall
similarly be obliged to compensate the Common Parent for Loss Items, deductions,
credits, or carryovers used by a Member to determine its Separate Tax Liability
for purposes of this Agreement if such Member leaves the Group before the Loss
Items, deductions, credits, or carryovers are utilized in full by the Common
Parent in computing the Group's Consolidated Tax Liability. Such compensation
shall be calculated and paid to the Common Parent in the following manner:
5.1. MEMBER LOSS ITEMS NOT FULLY UTILIZED BY COMMON PARENT.
If:
(a) a Member generates for any Taxable Year a Loss
Item which such Member is unable in whole or in part to carry back
pursuant to Section 3.2 or Section 4.1(b) hereof;
10
<PAGE> 11
(b) is able subsequently to utilize (to the extent
not so carried back) all or any part of such Loss Item in determining
for any subsequent Taxable Year or Taxable Years its Separate Return
Tax Liability for such Taxable Year or Taxable Years; and
(c) ceases for any reason (other than as a result of
a transaction to which Section 381 of the Code applies and in which the
surviving or resulting corporation is also a Member) to be a Member
before the Common Parent has been able to utilize in full the amount of
such Loss Item (to the extent not so carried back), so utilized by such
Member, in determining the Group's Consolidated Taxable Income or
Consolidated Tax Liability for any Taxable Year or Taxable Years of the
Group then, in such event, such Member or Former Member shall with
respect to such Loss Item pay as herein provided an amount equal to the
amount determined pursuant to Section 5.4 hereof.
5.2. MEMBER CREDITS OR DEDUCTIONS NOT FULLY UTILIZED
BY COMMON PARENT. If:
(a) a Member generates for any Taxable Year any
credits or deductions which such Member is able for such Taxable Year
to utilize in determining its Separate Return Tax Liability for such
Taxable Year;
(b) such credits or deductions cannot be utilized by
the Common Parent for such Taxable Year in determining the Group's
Consolidated Tax Liability for such Taxable Year and cannot be carried
back either by the Common Parent to any prior Taxable Year or Taxable
Years or by such Member, pursuant to Section 3.2 or Section 4.1(b)
hereof, to any prior taxable year or taxable years; and
(c) such Member ceases, for any reason (other than as
a result of a transaction to which Section 381 of the Code applies and
in which the surviving or resulting corporation is also a Member) to be
a Member before the Common Parent has been able to
11
<PAGE> 12
utilize such credit or deduction in full in determining the Group's
Consolidated Tax Liability for any Taxable Year or Taxable Years, then,
in such event, such Member or Former Member shall with respect to such
credits or deductions pay as herein provided an amount equal to the
amount determined pursuant to Section 5.4 hereof.
5.3. MEMBER LOSS OR CREDIT CARRYOVERS OR DEDUCTIONS NOT FULLY
UTILIZED BY COMMON PARENT. If:
(a) in the case of any Member, such Member in
determining its Separate Return Tax Liability for a Taxable Year
utilizes (i) any loss or credit carryover which did not arise in a
Taxable Year or (ii) any deduction the utilization of which by the
Common Parent for any Taxable Year is subject to Section 1.1502-15T of
the Consolidated Return Regulations; and
(b) before the Common Parent has been able to utilize
in full the amount of such loss or credit carryover or deduction, so
utilized by such Member, in determining for any Taxable Year or Taxable
Years the Consolidated Taxable Income or Consolidated Tax Liability of
the Group either (i) such Member ceases for any reason (other than as a
result of a transaction to which Section 381 of the Code applies and in
which the surviving or resulting corporation is also a Member) to be a
Member of the Group or (ii) all or any part of such loss or credit
carryover or deduction expires under the provisions of the Code, then,
in such event, such Member or Former Member shall with respect to such
loss or credit carryover or deduction pay as therein provided an amount
equal to the amount determined pursuant to Section 5.5 hereof.
12
<PAGE> 13
5.4. PAYMENT AMOUNT: UNUTILIZED LOSS ITEMS, CREDITS, OR
DEDUCTIONS. If either Section 5.1 or Section 5.2 hereof is applicable to a
Member or a Former Member, such Member or Former Member shall pay in the manner
provided in Section 5.6 hereof an amount equal to the difference between (a) the
Separate Return Tax Liability of such Member for the Taxable Year or Taxable
Years involved computed without regard to the Loss Item, credit, or deduction
referred to in Sections 5.1 and 5.2, respectively, minus the Separate Return Tax
Liability of such Member for such Taxable Year or Taxable Years and (b) the
amount, if any, of the total reduction in Consolidated Tax Liability for the
then current and all prior Taxable Years of the Group attributable to the Common
Parent's utilization on behalf of the Group of such Loss Item, credit, or
deduction in determining the Group's Consolidated Taxable Income and
Consolidated Tax Liability for such Taxable Year or Taxable Years.
5.5. PAYMENT AMOUNT: UNUTILIZED LOSS OR CREDIT CARRYOVERS OR
DEDUCTIONS. If Section 5.3 hereof is applicable to a Member or a Former Member,
such Member or Former Member shall pay at the time and in the manner provided in
Section 5.7 hereof an amount equal to the difference between (a) the Separate
Return Tax Liability of such Member for the Taxable Year or Taxable Years
involved computed without regard to the loss or credit carryover or deduction
referred to in Section 5.3 above, minus the Separate Return Tax Liability of
such Member for such Taxable Year or Taxable Years and (b) the amount, if any,
equal to the total reduction in Consolidated Tax Liability for the then current
and all prior Taxable Years of the Group attributable to the Common Parent's
utilization on behalf of the Group of such loss or credit carryover or deduction
in determining the Group's Consolidated Taxable Income or Consolidated Tax
Liability for such Taxable Year or Taxable Years.
13
<PAGE> 14
5.6. MANNER AND TIMING OF PAYMENT: UNUTILIZED LOSS ITEMS,
CREDITS, OR DEDUCTIONS. Any payment due from a Member or Former Member pursuant
to Section 5.4 hereof shall be made in the manner provided in Section 6.1 hereof
by such Member or Former Member. All payments shall be made within 15 days of
the date on which any such Member or Former Member receives written notice of
the amount payable by such Member or Former Member pursuant to this Section 5.
5.7. MANNER AND TIMING OF PAYMENT: UNUTILIZED LOSS OR CREDIT
CARRYOVERS OR DEDUCTIONS. Any payment due pursuant to Section 5.5 hereof from a
Member or Former Member shall, in any case in which a Member ceases to be a
Member of the Group, be made within 15 days of the date on which the Member or
Former Member receives written notice of the amount payable by it pursuant to
Section 5.5 hereof, or, in any case in which a loss or credit carryover or
deduction expires unused be made on or before the fifteenth day of the third
month following the close of the Taxable Year in which the loss or credit
carryover or deduction referred to in Section 5.5 hereof expires unused. Any
payment due pursuant to this Section 5.7 from a Member or Former Member shall be
made by such Member or Former Member in the manner provided in Section 6.1
hereof.
5.8. OBLIGATIONS OF ACQUIRING MEMBERS. If a Member at any time
acquires the assets and properties of another Member pursuant to a transaction
to which Section 381 of the Code applies, the acquiring Member shall, from and
after the date of such acquisition, be responsible for all of the undertakings
and obligations of such other Member hereunder and shall, from and after such
date, be entitled to receive any and all payments that such other Member would
be entitled to receive hereunder. Provided such other Member ceases to exist
solely as a result of such transaction, such event shall not, except as
expressly provided herein, in any way result in any acceleration of the time at
which any payments hereunder are due to or from such other Member, and, except
as
14
<PAGE> 15
expressly provided herein to the contrary, all such payments shall be made to or
by the acquiring Member at the same time or times that such payments would be
payable to or by such other Member had such other Member continued to exist as a
Member hereunder.
6. Remittances by and to Members.
------------------------------
6.1. REMITTANCES GENERALLY. Until such time, if ever, as the
Common Parent notifies each other Member of the Group in writing to the
contrary, any and all payments that each such other Member agrees to make
hereunder shall be made and remitted by each such Member directly to Common
Parent. The Common Parent shall be responsible for making all payments required
to be made hereunder to Members.
6.2. INTEREST ON LATE PAYMENTS. Any payment required to be
made pursuant to Section 6.1 hereof by a Member or the Common Parent which is
not made on or before the date on which such payment is due under the terms of
this Agreement shall bear interest at the rate specified from time to time
pursuant to Section 6621(a)(2) of the Code, and any Member to whom such payment
is due shall be entitled to receive interest computed at such rate upon the late
payment of any such amount which is required at any time to be paid hereunder.
7. Subsequent Adjustments.
-----------------------
If any adjustment is made to any item of income, gain, loss,
deduction, or credit of any Member of the Group for a Taxable Year during which
such Member is a Member of the Group by reason of (a) the filing of an amended
Consolidated Return, (b) a claim for refund with respect to such Taxable Year,
or (c) an audit with respect to such Taxable Year by the IRS, then the amounts,
if any, due to or from such Member under this Agreement shall be redetermined by
taking into account such adjustment. If, as a result of such redetermination,
any amounts due to or from a Member under this Agreement differ from the amounts
previously paid, then except as herein
15
<PAGE> 16
provided, payment of such difference shall be made to such Member or by such
Member in the manner provided in Section 6.1 as follows: (y) in the case of an
adjustment resulting in a credit or refund of tax, within ten calendar days of
the date on which such refund or notice of such credit is received by the Common
Parent or such Member with respect to such adjustment, or (z) in the case of an
adjustment resulting in the assessment of a deficiency in tax, within ten
calendar days of the date on which such deficiency is paid. Any amounts due
under this Section 7 shall include any interest attributable thereto under
Sections 6601 or 6611 of the Code and any penalties or additional amounts which
may be imposed. Any amount due pursuant to this Section 7 from a Former Member
shall nevertheless be paid by such Former Member at the time indicated above and
in the manner provided in Section 6.1 hereof unless the Common Parent has agreed
in writing prior to the date on which any such payment would be due to release
such Former Member from such obligation. In the event the redetermination
referred to in this Section results in a Former Member being entitled to receive
a payment pursuant to this Section, such Former Member shall not be entitled to
receive any amount pursuant to this Section 7 unless the Common Parent has
agreed in writing prior to the date on which any such payment would be due to
permit such Former Member to receive such payment.
8. Carrybacks from Separate Return Years.
--------------------------------------
If, for any taxable year in the future of a Former Member,
such Former Member has a net operating loss, a net capital loss, or is entitled
to credits against tax which such Former Member, under applicable provisions of
the Code or the Consolidated Return Regulations, may carry back to a Taxable
Year or Taxable Years of the Group during which such Former Member was a Member
of the Group, the Common Parent shall have no obligation to pay to such Former
Member the amount of any refund or credit of federal income tax that the Common
Parent may receive as a result of the carryback by such Former Member of any
such losses or credits.
16
<PAGE> 17
9. Determinations and Computations.
--------------------------------
9.1. DETERMINATIONS AND COMPUTATIONS GENERALLY. All
determinations and computations required to be made hereunder, including,
without limitation, all computations of (a) Consolidated Taxable Income and
Consolidated Tax Liability for each Taxable Year of the Group and (b) the
Separate Return Tax Liability for each such Taxable Year of each Member shall be
made by the independent public accountants regularly employed by the Common
Parent at the time that any such determination or computation is required to be
made. The results of any such determination or computation so made by such
independent public accountants shall be binding and conclusive upon the parties
hereto for all purposes hereof absent manifest error.
9.2. FACT PATTERNS NOT SPECIFICALLY PROVIDED FOR. The purpose
of this Agreement is to ascertain in a reasonable and equitable manner the
income tax liability or refund of each Member. If a fact pattern arises in the
administration of this Agreement which requires a calculation or determination
that is not dealt with in the specific provisions hereof, the independent public
accountants regularly employed by the Common Parent shall be responsible for
performing such calculations or making such determinations. In making any such
calculation or determination, such independent public accountants shall attempt
to follow as closely as possible the general concepts set forth in this
Agreement by analogy to the specific provisions hereof. The results of any such
determination or computation so made by such independent public accounts shall
be binding and conclusive upon each of the parties hereto for all purposes
hereof absent manifest error.
9.3. MEMBER COMPUTATIONS MAY BE MADE IN MANNER MOST
BENEFICIAL. For each Taxable Year of the Group, each Member of the Group shall
compute its Separate Return Tax Liability in the manner most beneficial to such
Member notwithstanding that, in connection with the preparation of the Group's
Consolidated Return for such Taxable Year, the Common Parent may
17
<PAGE> 18
make contrary tax elections or other determinations with respect to items of
income, gain, loss, deduction, or credit incurred by such Member for such
Taxable Year in order to minimize the Group's Consolidated Tax Liability for
such Taxable Year. No such elections or determinations shall in any way affect
or change the Separate Return Tax Liability of any Member for such Taxable Year.
10. Procedural Matters.
-------------------
10.1. PAYMENTS TO IRS. The Common Parent shall be solely
responsible for making any estimated or final payments to the IRS in
satisfaction of the federal income tax liability (including additions to tax,
penalties and interest) of the Group and each of its Members for each Taxable
Year of the Group.
10.2. PREPARATION AND FILING OF CONSOLIDATED RETURN. The
Common Parent shall prepare and file, or shall cause the independent public
accountants that it regularly employs on behalf of the Group to prepare and on
its behalf file, the Consolidated Return and any other returns, documents, or
statements required to be filed with the IRS which pertain to the determination
of the Consolidated Tax Liability of the Group for each Taxable Year of the
Group. In its sole and absolute discretion, the Common Parent shall have the
right with respect to any Consolidated Return that it or such independent public
accountants has filed or will file: (a) to determine (i) the manner in which
such Consolidated Return, as well as any other documents or statements
incidental or related thereto, shall be prepared and filed, including, without
limitation, the manner in which any item of income, gain, loss, deduction, or
credit of any Member shall be reported therein or thereon, (ii) whether any
extensions with respect to any such Consolidated Return will be requested, and
(iii) the elections that will be made in any such Consolidated Return by any
Member; (b) to contest, compromise, or settle any adjustment or deficiency
proposed, asserted, or assessed as a result of any
18
<PAGE> 19
audit of such Consolidated Return by the IRS; (c) to file an amended
Consolidated Return and to prosecute, compromise, or settle any claim for refund
set forth therein; and (d) to determine whether any refunds to which the Group
may be entitled shall be paid by way of cash refund or credited against the
Consolidated Tax Liability of the Group for any Taxable Year or Taxable Years of
the Group. Each Member hereby irrevocably appoints the Common Parent as its
agent and attorney-in-fact to take any action (including the execution of
documents) as the Common Parent may deem appropriate to effect the foregoing.
10.3. MEMBER CLAIMS FOR REFUND. The Common Parent shall
prepare, or shall cause the independent public accountants that it regularly
employs on behalf of the Group to prepare, on behalf of each Member any and all
Corporation Applications for Tentative Refund (Form 1139), Amended U.S.
Corporation Income Tax Returns (Form 112OX), or Claims for Refund (Form 843)
that such Member is eligible to file with the IRS with respect to any prior
taxable year or taxable years of such Member. The Common Parent shall deliver,
or shall cause such public accountants to deliver, to such Member any such
completed Form as soon as practicable after such Form has been completed, and
such Member shall, within ten days of receiving such Form, sign such Form and
file the same with the appropriate office of the IRS.
10.4. COPIES OF MEMBERS' DETERMINATIONS OF ESTIMATED TAX
LIABILITY. Each Member that at any time makes a determination pursuant to
Section 3.1(a) hereof of its estimated Separate Return Tax Liability for any
Taxable Year shall, immediately after making any such determination, send a copy
of such determination to the independent public accountants that the Common
Parent regularly employs on behalf of the Group.
19
<PAGE> 20
11. Utilization of Member Tax Attributes in Determining
Consolidated Tax Liability.
---------------------------------------------------
11.1. UTILIZATION OF MEMBER TAX ATTRIBUTES GENERALLY. In
determining the Consolidated Taxable Income and Consolidated Tax Liability and
in preparing the Consolidated Return of the Group for any Taxable Year of the
Group, the Common Parent shall be entitled, and hereby is authorized, to utilize
on behalf of the Group all of the tax attributes and other items of income,
gain, loss, deduction, and credit of each Member arising in such Taxable Year or
which arose in another Taxable Year or Taxable Years (or other period or
periods) and which properly may be carried back or carried forward to such
Taxable Year. The Common Parent on behalf of the Group shall be entitled to
utilize each and all of such attributes and items of each Member of the Group,
without regard to whether such attributes and items are concurrently being, have
previously been, or may subsequently be utilized in determining for any Taxable
Year or Taxable Years, in the case of any Member, its Separate Return Tax
Liability. Except as expressly provided for herein, no Member of the Group shall
in any manner be entitled to receive any form of compensation by reason of the
Common Parent's utilization of such Member's tax attributes and items of income,
gain, loss, deduction, or credit on behalf of the Group in determining for any
Taxable Year or Taxable Years the Group's Consolidated Taxable Income and
Consolidated Tax Liability for such Taxable Year or Taxable Years, irrespective
of whether such Member has or has not itself previously utilized, or is or is
not itself concurrently utilizing, any of such attributes or items in
determining for any Taxable Year or Taxable Years, its Separate Return Tax
Liability.
11.2. MEMBERS LEAVING GROUP. In the event any Member ceases
for any reason to be a Member either (a) after any of its tax attributes or
items of income, gain, loss, deduction, or credit have been utilized by the
Common Parent on behalf of the Group in determining the Group's Consolidated
Taxable Income or Consolidated Tax Liability for any Taxable Year or Taxable
Years
20
<PAGE> 21
of the Group or (b) during the Taxable Year of the Group in which any of such
attributes or items is being utilized by the Common Parent on behalf of the
Group to determine the Group's Consolidated Taxable Income or Consolidated Tax
Liability for such Taxable Year, but in either such case before such Member has
itself utilized such attribute or item (in whole or in part) in determining for
any Taxable Year or Taxable Years, its Separate Return Tax Liability, the Common
Parent, except as expressly provided for herein, shall not in any such
circumstance be obligated or required to compensate such Member in any manner
for any amount as a result of the occurrence of such event and the Group's prior
or concurrent utilization of such attribute or item, notwithstanding that no
portion of such attribute or item may be apportioned to such Member under the
Consolidated Return Regulations as a consequence of its ceasing to be a Member
of the Group.
12. Additions to Group.
-------------------
If any Member of the Group shall at any time organize or
acquire any other corporation, provided that such corporation becomes a Member
of the Group, the Member of the Group that organizes such corporation or
consummates such acquisition shall obtain the agreement of such newly-organized
or acquired corporation to join in this Agreement and to be bound by all of the
terms hereof and shall cause such corporation to execute a written consent
substantially in the form of the consent attached hereto as ATTACHMENT A
evidencing its agreement to join in this Agreement and to be bound by the terms
hereof. Each of the parties hereto, and each corporation that subsequently
becomes a party to this Agreement, consents to such corporation joining in this
Agreement.
13. State Taxes.
------------
13.1. CONSOLIDATED, COMBINED, OR UNITARY TAX RETURNS. Each
Member agrees that upon the request of the Common Parent it will join with such
other Members as are designated by
21
<PAGE> 22
the Common Parent in any consolidated, combined, or unitary state or local
income or franchise tax return or report for any taxable year.
13.2. LIMITS ON MEMBER LIABILITY. For any taxable year for
which such a return is filed that includes a Member, this Agreement shall be
applied to all matters relating to the taxes relating to such return in a manner
similar to and consistent with its application to federal income tax matters.
Accordingly, a Member generally shall not be liable for any such taxes in an
amount greater than the amount that would be due (computed, to the extent
possible, under the assumptions and principles set forth above) if such taxes
were not computed on a consolidated, combined, or unitary basis with any member
of the Group.
14. Effective Date.
---------------
This Agreement shall be effective for all Taxable Years of the
Group beginning on or after the Effective Date.
15. Miscellaneous.
--------------
15.1. AMENDMENT OR MODIFICATION. No amendment or modification
of any of the terms of this Agreement shall be valid unless made by an
instrument signed in writing by an authorized officer of each Member which is a
Member at the time such instrument is to be executed.
15.2. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of each of the parties hereto and its
respective successors and assigns.
15.3. NOTICES. All notices and other communications hereunder
to any Member shall be deemed to have been duly given if delivered by hand;
mailed by first class mail, postage prepaid; or dispatched by electronic
facsimile transmission or nationally-recognized overnight courier service to the
Treasurer of such Member.
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<PAGE> 23
15.4. TITLES AND HEADINGS. Titles and headings to sections of
this Agreement are inserted for convenience only and shall not constitute a part
hereof.
15.5. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein.
15.6. SEVERABILITY. In case any provision contained in this
Agreement is invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions will not in any way be affected or
impaired thereby.
15.7. GOVERNING LAW. This Agreement has been made in and shall
be governed by, construed, and enforced in accordance with the laws of the state
of Ohio.
15.8. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE ELDER-BEERMAN STORES CORP.
----------------------------------------------
By:
-------------------------------------------
Title: ---------------------------------------
THE BEE-GEE SHOE CORP.
----------------------------------------------
By:
-------------------------------------------
Title: ---------------------------------------
23
<PAGE> 24
EL-BEE CHARGIT CORP.
----------------------------------------------
By:
-------------------------------------------
Title: ---------------------------------------
24
<PAGE> 25
Attachment 1
------------
Consent
[New Member] hereby consents to the terms and conditions of
that certain Tax Sharing Agreement dated as of August __, 1997 (the "Agreement")
by and among The Elder- Beerman Stores Corp., The Bee-Gee Shoe Corp., and El-Bee
Chargit Corp. and agrees to be bound by the Agreement as if [New Member] were a
signatory thereto.
[NEW MEMBER]
----------------------------------------------
By:
-------------------------------------------
Title: ---------------------------------------
25
<PAGE> 1
EXHIBIT 21
----------
THE ELDER-BEERMAN STORES CORP.
LIST OF SUBSIDIARIES(1)
-----------------------
JURISDICTION OF
NAME ORGANIZATION
---- -----------------
The El-Bee Chargit Corp. Ohio
The Bee-Gee Shoe Corp. Ohio
- --------
1 This Exhibit 21 to the Registration Statement sets forth the names of
all of the entities expected to be subsidiaries of The Elder-Beerman
Stores Corp. at the time such Registration Statement becomes effective.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE ELDER-BEERMAN STORES CORP.
AND ITS SUBSIDIARIES FOR THE THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> NOV-01-1997
<CASH> 8,882
<SECURITIES> 0
<RECEIVABLES> 134,306
<ALLOWANCES> 0
<INVENTORY> 188,604
<CURRENT-ASSETS> 357,094
<PP&E> 142,732
<DEPRECIATION> 85,093
<TOTAL-ASSETS> 421,998
<CURRENT-LIABILITIES> 185,287
<BONDS> 5,744
0
7
<COMMON> 6,511
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 421,998
<SALES> 386,179
<TOTAL-REVENUES> 405,980
<CGS> 283,127
<TOTAL-COSTS> 113,456
<OTHER-EXPENSES> 12,850
<LOSS-PROVISION> 4,187
<INTEREST-EXPENSE> 4,617
<INCOME-PRETAX> (12,257)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,257)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,257)
<EPS-PRIMARY> (1.88)
<EPS-DILUTED> 0
</TABLE>
