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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission File Number: 0-02788
THE ELDER-BEERMAN STORES CORP.
(Exact name of registrant as specified in its charter)
Ohio 31-0271980
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3155 El-Bee Road, Dayton, Ohio 45439
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (937) 296-2700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section
12(g) of the Act:
Common Stock, no par value
(Title of class)
Share Purchase Rights
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of April 23, 1998, the aggregate market value of the voting stock held
by non-affiliates of the registrant (based on the closing sale price of such
stock on such date) was approximately $311,789,475.*
The number of shares of Common Stock outstanding on April 23, 1998, was
12,671,777 shares.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES X NO
* Calculated by excluding all shares that may be deemed to be
beneficially owned by executive officers and directors of the
registrant, without conceding that all such persons are "affiliates" of
the registrant for purposes of the federal securities laws.
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TABLE OF CONTENTS
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PAGE
PART I
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ITEM 1. BUSINESS................................................................................................1
General Development of Business.........................................................................1
Background....................................................................................1
Chapter 11 Case...............................................................................2
Business ..............................................................................................2
Merchandising.................................................................................2
Pricing .....................................................................................3
Purchasing and Distribution...................................................................3
Information Systems...........................................................................3
Marketing.....................................................................................4
Credit Card Program...........................................................................4
Customer Service..............................................................................4
Expansion.....................................................................................4
Seasonality...................................................................................4
Competition...................................................................................4
Associates....................................................................................5
ITEM 2. PROPERTIES..............................................................................................5
ITEM 3. LEGAL PROCEEDINGS.......................................................................................8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....................................................8
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS................................................9
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA.....................................................................10
ITEM 7. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................11
Results of Operations..................................................................................11
Fiscal 1997 Compared to Fiscal 1996..........................................................11
Fiscal 1996 Compared to Fiscal 1995..........................................................12
Liquidity and Capital Resources........................................................................13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................................................15
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE......................16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.......................................................................16
Section 16(a) Beneficial Ownership Reporting Compliance................................................18
ITEM 11. EXECUTIVE COMPENSATION.................................................................................18
Cash Compensation Table................................................................................19
Fiscal 1997 Option Grants..............................................................................20
Fiscal 1997 Aggregated Option Exercises FY-End Option Values...........................................20
Employment and Severance Agreements With Certain Executives............................................21
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Compensation Committee Interlocks and Insider Participation............................................21
Director Compensation..................................................................................22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.........................................23
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................................................24
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K........................................24
SIGNATURES.......................................................................................................28
EXHIBIT INDEX....................................................................................................29
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PART I
This Annual Report on Form 10-K contains certain forward-looking
statements that are based on management's current beliefs, estimates and
assumptions concerning the operations, future results and prospects of
Elder-Beerman and the retail industry in general. All statements that address
operating performance, events or developments that management anticipates will
occur in the future, including statements related to future sales, profits,
expenses, income and earnings per share, future finance and capital market
activity, or statements expressing general optimism about future results, are
forward-looking statements. In addition, words such as "expects," "anticipates,"
"intends," "plans," "believes," "estimates," variations of such words and
similar expressions are intended to identify forward-looking statements.
The statements described in the preceding paragraph constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 (the "Securities Act"). Because these statements are based on a
number of beliefs, estimates and assumptions that could cause actual results to
materially differ from those in the forward-looking statements, there is no
assurance that forward-looking statements will prove to be accurate.
Any number of factors could affect future operations and results,
including the following: increasing price and product competition; fluctuations
in consumer demand and confidence; the availability and mix of inventory;
fluctuations in costs and expenses; the effectiveness of advertising, marketing
and promotional programs; weather conditions that affect consumer traffic in
stores; the continued availability and terms of financing; the outcome of
pending and future litigation; and general economic conditions, such as the rate
of employment, inflation and interest rates and the condition of the capital
market. This list of factors is not exclusive.
Forward-looking statements are subject to the safe harbors created in
the Securities Act. Elder-Beerman undertakes no obligation to update publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise.
ITEM 1. BUSINESS
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 48
department stores and two furniture stores, principally in smaller Midwestern
markets in Ohio, Indiana, Illinois, Michigan, Wisconsin, Kentucky, and West
Virginia, and Bee-Gee operates 60 stores (48 shoe outlets and 12 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 tastes and incomes.
GENERAL DEVELOPMENT OF BUSINESS
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 as 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. These 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.
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CHAPTER 11 CASE
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, which was amended three times on October 16, 1997, November 7, 1997 and
November 18, 1997 (the "Plan"). The Plan was confirmed by an order of the
Bankruptcy Court entered on December 16, 1997 (the "Confirmation Date"). The
Plan became effective on December 30, 1997, (the "Effective Date").
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 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 (e.g., Liz Claiborne, Estee Lauder, Tommy Hilfiger, Polo, Guess) 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 supply moderate
private label goods, which typically complement the Company's more upscale and
largely branded 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.
The Company's business strategy is 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 aggressively uses technology and business process changes
to reduce operating costs and improve operating performance through productivity
gains.
The Company's long-term business plan is designed to accomplish its
strategy by (a) focusing on its traditional strengths as the major retailer in
its markets; (b) emphasizing major vendor 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 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
The Company carries a broad assortment of goods to provide fashion,
selection, and variety found in 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. 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.
Certain departments in Elder-Beerman's department stores are leased to
independent third parties. These leased departments, which include the fine
jewelry, beauty salon, watch repair and maternity departments, provide high
quality service and merchandise where specialization and expertise are critical
and the Company's direct participation in the business is not economically
justifiable. Leased department sales are included in Elder-Beerman's total
sales. Management regularly evaluates the performance of the leased departments
and requires compliance with established customer service guidelines.
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Bee-Gee operates two distinct discount footwear formats that are
differentiated by varying degrees of fashion, value, and convenience. The
Company's 48 El-Bee Shoe stores offer primarily close-out and special purchase
budget footwear styles for women, men and children in a self-service, open-box
rack format. The 12 Shoebilee! family footwear stores offer national brands in
an updated shopping environment where moderate assortments are merchandised by
lifestyle and classification rather than by size and gender. Merchandise is
presented in a self-select caseline format and is promoted under a value-priced
promotional umbrella. The Company is in the process of converting several El-Bee
Shoe stores to the newer Shoebilee! format. Many Bee-Gee stores are positioned
near existing Elder-Beerman stores to leverage credit marketing and
cross-shopping opportunities.
For the 52 weeks ending January 31, 1998 ("Fiscal 1997"), the 53 weeks
ending February 1, 1997 ("Fiscal 1996") and the 52 weeks ending February 3, 1996
("Fiscal 1995"), the Company's department store percentages of net sales by
major merchandise category were as follows:
THE ELDER-BEERMAN STORES CORP.
RETAIL SALES BY DEPARTMENT
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1997 1996 1995
MERCHANDISE
CATEGORY % % %
- --------------------------------------- --------- --------- ---------
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WOMEN'S READY TO WEAR 34.0% 33.2% 32.1%
ACCESSORIES, SHOES & COSMETICS 21.7% 21.6% 21.4%
MENS & CHILDRENS 24.3% 25.1% 24.9%
HOME STORE 20.0% 20.1% 21.6%
--------- --------- ---------
TOTAL RETAIL 100.0% 100.0% 100.0%
========= ========= =========
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PRICING
All pricing decisions are made at the Company's corporate
headquarters. The Company's pricing strategy is designed to provide superior
quality/value appeal by offering competitive prices on fashion from premier
national brands. The Company has effectively been able to generate sales from
promotions with special pricing and of limited duration. The Company's
management information systems provide timely sales and gross margin reports
that identify sales and gross margins by stock keeping item and provide
management with the information and flexibility to adjust prices and inventory
levels as necessary.
PURCHASING AND DISTRIBUTION
During Fiscal 1997, the Company purchased merchandise from over 1,000
domestic and foreign manufacturers and suppliers. During that period, the top 25
vendors by dollar volume accounted for approximately 32% of net purchases. In
Fiscal 1997, the Company also purchased approximately 8% of its merchandise,
primarily private label merchandise, through Frederick Atkins, Inc. ("Atkins"),
a national association of major retailers that provides its members with group
purchase opportunities. Management believes it has good relationships with its
suppliers. No other vendor accounted for more than 5% of the Company's
purchases. The Company believes that alternative sources of supply are available
for each category of merchandise it purchases.
The Company owns a 20% limited partnership interest in Fairborn
Commerce Center II, a partnership that owns Elder-Beerman's 300,000 square foot
distribution center in Fairborn, Ohio. Merchandise is generally shipped from
vendors, through three consolidation points, to this distribution center.
Deliveries are made from the distribution center to each store two to seven
times per week depending on the store size and the time of year. Merchandise is
usually shipped ready for immediate placement on the selling floor.
INFORMATION SYSTEMS
The Company places great emphasis on its management information
systems. Currently, the Company's merchandising activities are controlled by a
series of on-line systems, including a point-of-sale and sales reporting system,
a purchase order management system, a receiving system and a merchandise
planning system. These integrated systems track merchandise from the order stage
through the selling stage and provide valuable "actual vs. plan" sales
information for management.
The Company is presently further 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
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ready" merchandise receipts; (d) eliminate paperwork through automatic invoice
processing; and (e) improve merchandise analysis and decision making.
MARKETING
The Company's marketing and advertising functions are centralized at
its corporate headquarters and, for the department stores, are focused on
communicating a timely and broad offering of premier branded merchandise, a
strong quality/value relationship, and outstanding customer service. A
comprehensive, multi-media advertising program is utilized including print and
broadcast as well as creative in-store displays, signage and special promotions.
The Company distributes sale catalogs utilizing insertion in Sunday and weekday
newspapers as well as direct mail to preferred charge customers. Catalogs are
supplemented by additional newspaper advertising to support sale events as
scheduled. The Company also uses television and radio in markets where it is
productive and cost efficient. Marketing activities for the Bee-Gee subsidiary
are limited primarily to newspaper, radio, coupons, and in-store displays
emphasizing price, seasonal assortments, and special promotions.
CREDIT CARD PROGRAM
As discussed above, the Company operates a private label credit card
program through its wholly-owned subsidiary, Chargit. During Fiscal 1997, the
Company issued 158,000 Elder-Beerman credit cards for newly opened accounts and
had approximately 450,000 Elder-Beerman active credit card accounts during
Fiscal 1997. The Company has made a significant investment in its credit card
program since it believes that Elder-Beerman credit card holders generally
constitute the Company's most loyal and active customers. Elder-Beerman credit
card holders shop more frequently with the Company and generally purchase more
merchandise than customers who pay with cash or third-party credit cards. During
Fiscal 1997, approximately 44% of Elder-Beerman's total sales were private label
credit card sales whereas cash sales and third party credit cards accounted for
33% and 23% of sales, respectively. Frequent use of the Elder-Beerman credit
card by customers is an important element in the Company's marketing and growth
strategies. 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.
All phases of the credit card operation are handled by Chargit except
the processing of customer mail payments, which is performed pursuant to a
retail lockbox agreement with a bank. Decisions whether to issue a credit card
to an applicant are made on the basis of a credit scoring system.
CUSTOMER SERVICE
Elder-Beerman has a strong tradition of providing quality customer
service. The Company is presently 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) making increased use of technology and
improved controls.
EXPANSION
The Company is currently 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. The Company recently announced the
relocation of its Southtowne Shopping Center store in Dayton, Ohio from a
132,000 square foot standalone site to a 212,000 square foot anchor store in the
Dayton Mall, and the acquisition of a 120,000 square foot mall anchor store in
Erie, Pennsylvania. The Company expects that both new stores will open in
Summer 1998.
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 shoe stores are in competition not
only with other department stores and
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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. The Elder-Beerman department stores
compete on the basis of quality, depth and breadth of merchandise, prices for
comparable quality merchandise, customer service and store environment. The
Bee-Gee shoe stores compete primarily on the basis of price and convenience.
ASSOCIATES
On January 31, 1998, the Company had approximately 8,140 regular and
part-time employees, approximately 7,600 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. None of
the Company's associates are represented by a labor union. The Company's
management considers its relationships with its associates to be satisfactory.
ITEM 2. PROPERTIES
Elder-Beerman currently operates 48 department stores and two
furniture stores, principally in smaller Midwestern markets in Ohio, Indiana,
Illinois, Michigan, Wisconsin, Kentucky, and West Virginia, and Bee-Gee operates
60 stores (48 shoe outlets and 12 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.
The following table sets forth certain information with respect to
Elder-Beerman's department store locations and Bee-Gee's shoe store locations,
operating as of January 31, 1998, the end of Elder-Beerman's and Bee-Gee's most
recently completed fiscal year:
THE ELDER-BEERMAN STORES CORP.
STORE SUMMARY BY REGION
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TOTAL
SQUARE DATE
STATE/CITY LOCATION FEET OPENED OWN/LEASE
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OHIO
Athens University Mall 42,829 09/88 Lease
Bowling Green Woodland Mall 40,700 04/87 Lease
Chillicothe Chillicothe Mall 55,940 05/81 Lease
Home Store 17,609 11/90 Lease
Cincinnati Forest Fair Mall 149,462 04/89 Lease
Dayton Centerville Place 191,400 08/66 Lease
Dayton Fairfield Commons 151,740 10/93 Lease
Dayton Southtowne Furniture 121,000 01/76 Lease
Dayton Northwest Plaza 217,060 02/66 Lease
Dayton Courthouse Plaza 125,390 11/75 Lease
Dayton Southtowne Center 131,637 11/72 Lease
Dayton Salem Furniture 124,987 11/72 Lease
Dayton Van Buren Shopping Center 101,604 08/63 Lease
Dayton Northpark Center 101,840 10/94 Lease
Defiance Northtowne Mall 48,000 04/86 Lease
Fairborn Distribution Center 300,000 12/90 Lease
Findlay Findlay Village Mall 74,825 07/90 Lease
Franklin Middletown (Towne Mall) 118,000 1977 Own
Hamilton Hamilton 167,925 04/74 Lease
Heath Indian Mound Mall 52,725 09/86 Lease
Lancaster River Valley Mall 52,725 09/87 Lease
Lima Lima Mall 103,350 11/65 Lease
Marion Southland Mall 74,621 11/84 Lease
</TABLE>
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THE ELDER-BEERMAN STORES CORP.
STORE SUMMARY BY REGION
(CONT'D)
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TOTAL
SQUARE DATE
STATE/CITY LOCATION FEET OPENED OWN/LEASE
---------- -------- ---- ------ ---------
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Moraine Corporate Offices 302,570 06/70 Own
New Philadelphia New Towne Mall 52,648 10/88 Lease
Piqua Miami Valley Center 59,092 09/88 Lease
Sandusky Sandusky Mall 38,773 03/83 Lease
Springfield Upper Valley Mall 71,868 10/92 Lease
Toledo Woodville 100,000 08/85 Lease
Toledo Westgate 154,000 08/85 Lease
Wooster Wayne Towne Plaza 53,689 6/94 Lease
Zanesville Colony Square 70,346 09/85 Own
INDIANA
Anderson Mounds Mall 66,703 07/81 Lease
Columbus Columbus Mall 53,446 02/90 Lease
Elkhart Concord Mall 104,000 11/85 Lease
Evansville Washington Square Mall 134,536 10/93 Lease
Kokomo Kokomo Mall 75,704 10/87 Lease
Marion North Park Mall 55,526 11/78 Lease
Muncie Muncie Mall 80,000 10/97 Lease
Home Store 22,912 10/89 Lease
Richmond Downtown 100,000 08/74 Lease
Terre Haute Honey Creek Mall 70,380 08/73 Lease
MICHIGAN
Adrian Adrian Mall 54,197 08/87 Lease
Benton Harbor The Orchards Mall 70,428 10/92 Lease
Jackson Westwood Mall 70,425 09/93 Lease
Midland Midland Mall 64,141 10/91 Lease
Monroe Frenchtown Square 99,219 04/88 Lease
Muskegon Lakeshore Marketplace 87,185 10/95 Lease
ILLINOIS
Danville Village Mall 77,300 07/86 Lease
Mattoon Cross Country Mall 54,375 03/78 Lease
WISCONSIN
Beloit Beloit Mall 62,732 10/93 Lease
Green Bay Bay Park Square Mall 75,000 09/95 Lease
KENTUCKY
Paducah Kentucky Oaks Mall 60,092 08/82 Lease
WEST VIRGINIA
Morgantown Morgantown Mall 70,790 09/90 Lease
</TABLE>
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THE BEE-GEE SHOE CORP.
STORE SUMMARY BY REGION
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TOTAL
SQUARE DATE
STATE/CITY LOCATION FEET OPENED OWN/LEASE
---------- -------- ---- ------ ---------
<S> <C> <C> <C> <C>
OHIO
Akron West Market 4,000 12/76 Lease
Alliance Carnation Mall 3,052 04/85 Lease
Athens University Mall 3,600 11/88 Lease
Centerville Centerville 6,938 11/94 Lease
Chillicothe Chillicothe Mall 3,600 10/85 Lease
Cincinnati Western Hills Shopping Center 7,800 08/91 Lease
Cincinnati Colerain Hills 4,500 08/72 Lease
Dayton Van Buren Shopping Center 4,355 01/70 Lease
Dayton Sugar Creek Plaza 3,200 03/90 Lease
Dayton Southtowne Shopping Center 10,000 08/74 Own
Dayton Northwest Plaza 4,400 03/76 Lease
Defiance Northtowne Mall 6,650 03/91 Lease
East Liverpool Summit Square Shopping Center 3,600 08/91 Lease
Englewood Northmont Plaza 4,200 12/72 Lease
Fairfield Forest Fair Mall 5,172 02/89 Lease
Fairfield Fairfield Plaza 2,910 03/81 Lease
Findlay Flag City Station 5,900 08/91 Lease
Greenville Buckeye Square 3,000 11/83 Lease
Heath Indian Mound Mall 3,319 09/91 Lease
Huber Heights North Park Center 6,700 11/94 Lease
Lancaster River Valley Mall 3,106 08/91 Lease
Lima Clocktower Shopping Center 3,200 04/92 Lease
Mansfield Johnny Appleseed 5,365 11/72 Lease
Marion Southland Mall 4,392 11/97 Lease
Middletown Eastgate Shopping Center 3,500 10/85 Lease
Milford Milford Shopping Center 3,750 10/74 Lease
New Philadelphia New Towne Mall 3,621 08/91 Lease
Piqua Miami Valley Mall 3,075 09/88 Lease
Sandusky Park Place 3,705 05/91 Lease
Sidney Westown Square 4,120 05/89 Lease
Springfield Springfield Mall 3,000 04/93 Lease
St. Mary's St. Mary's Shopping Center 3,200 08/94 Lease
Streetsboro Streetsboro Market Shopping Center 6,890 09/95 Lease
Tiffin Tiffin Mall 6,576 07/84 Lease
Toledo Spring Meadows Shopping Center 6,000 05/87 Lease
Troy Troy Town Center 3,892 08/90 Lease
Westerville Westerville Shopping Center 3,750 11/71 Lease
Wooster Wayne Towne Plaza 3,150 07/92 Lease
Xenia Xenia Towne Square 3,500 08/85 Lease
Zanesville Colony Square 5,571 11/85 Lease
</TABLE>
7
<PAGE> 11
THE BEE-GEE SHOE CORP.
STORE SUMMARY BY REGION
(CONT'D)
<TABLE>
<CAPTION>
TOTAL
SQUARE DATE
STATE/CITY LOCATION FEET OPENED OWN/LEASE
---------- -------- ---- ------ ---------
<S> <C> <C> <C> <C>
INDIANA
Columbus Fair Oaks Mall 3,730 08/90 Lease
Elkhart Concord Mall 6,340 09/90 Lease
Kokomo Markland Mall 5,000 05/88 Lease
Logansport Logansport Mall 3,600 04/90 Lease
Muncie Northwest Shopping Center 3,500 12/71 Lease
Plymouth Pilgrim Place 3,367 05/90 Lease
Richmond Richmond Square Mall 5,450 10/97 Lease
South Bend Scottsdale Mall 4,770 05/83 Lease
Warsaw Marketplace 3,000 11/86 Lease
ILLINOIS
Huntley Huntley Outlet Center 5,000 11/95 Lease
Mattoon Cross County Mall 4,175 08/92 Lease
Peru Peru Mall 3,129 11/92 Lease
Springfield Capital City Shopping Center 4,050 05/88 Lease
Springfield White Oaks 3,075 03/87 Lease
PENNSYLVANIA
Grove City Grove City Outlet 4,520 11/94 Lease
Mars Cranberry Mall 3,600 10/88 Lease
Pittsburgh Robinson Towne Center 3,500 08/89 Lease
MICHIGAN
Kalamazoo Maple Hill Mall 2,850 03/87 Lease
Mt. Pleasant Indian Hills Plaza 3,200 08/90 Lease
WEST VIRGINIA
Vienna Vienna 3,750 04/76 Lease
VIRGINIA
Harrisonburg Valley Mall 3,078 09/84 Lease
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in several legal proceedings arising from its
normal business activities and reserves have been established where appropriate.
Management believes that none of these legal proceedings will have a material
adverse effect on the financial condition, results of operations or cash flows
of the Company.
In addition, as a result of the Reorganization Cases, the Company
remains subject to the jurisdiction of the Bankruptcy Court for matters relating
to the consummation of the Plan.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
8
<PAGE> 12
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock, without par value, (the "Common Stock") is
listed on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") and is designated a NASDAQ/National Market System Security
trading under the symbol EBSC. The Common Stock did not begin trading, however,
until February 17, 1998. As a result, no historical high and low bid information
is available for Fiscal 1997. Prior to February 17, 1998, there was no
established public trading market for the Common Stock.
The number of shareholders of record as of April 17, 1998 was 1,667.
No dividends have been paid on the Common Stock. The Company intends
to reinvest earnings in the Company's business to support its operations and
expansion. The Company has no present intention to pay cash dividends in the
foreseeable future, and will determine whether to declare dividends in the
future in light of the Company's earnings, financial condition and capital
requirements. In addition, the Company has certain credit agreements that limit
the payment of dividends.
The Company issued Common Stock and a Series A Warrant and a Series B
Warrant, each convertible into Common Stock, pursuant to the Plan in
satisfaction of certain allowed claims against, or interests in, the Company in
the Reorganization Cases. Based upon the exemptions provided by section 1145 of
the Bankruptcy Code, the Company believes that none of these securities are
required to be registered under the Securities Act in connection with their
issuance and distribution pursuant to the Plan. The Company has no recent sales
of unregistered securities other than such issuances pursuant to the Plan.
9
<PAGE> 13
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth various selected financial information
for the Company as of and for the fiscal years ended January 31, 1998, February
1, 1997, February 3, 1996, January 28, 1995, and January 29, 1994. Such selected
consolidated financial information should be read in conjunction with the
consolidated financial statements of the Company, including the notes thereto,
set forth in Item 8 of this Form 10-K and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" set forth in Item 7 of this
Form 10-K.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------------------------------------
JAN 31, 1998 FEB 1, 1997 FEB 3, 1996 (a) JAN 28, 1995 JAN 29, 1994
------------ ----------- --------------- ------------ ------------
DOLLARS IN THOUSANDS
(EXCEPT PER SHARE DATA)
CONSOLIDATED
STATEMENT OF
OPERATIONS DATA
<S> <C> <C> <C> <C> <C>
Total Revenues $ 607,946 $ 597,008 $ 608,931 $ 647,326 $ 633,936
Income / (Loss) Before
Reorganization Items and Income
Tax Expense (Benefit) 11,931 11,579 (33,631) (4,590) 23,194
Reorganization Items 27,542 23,648 19,711 -- --
Income / (Loss) Before
Extraordinary Items and
Discontinued Operations (b) (c) (8,199) (12,429) (51,010) (2,064) 15,244
Net Income / (Loss) $ (28,952) $ (12,429) $ (63,286) $ (13,355) $ 15,865
Basic and Diluted
Earnings/(Loss) Per Common
Share:
Continuing Operations $ (6.58) $ (100.20) $ (411.25) $ (16.64) $ 122.90
Preferred Stock Dividend -- -- -- (7.43) (7.43)
Discontinued Operations 5.92 -- (98.97) (91.03) 5.01
Extraordinary Items (22.58) -- -- -- --
--------- --------- --------- ----------- -----------
Net Earnings/(Loss) $ (23.24) $ (100.20) $ (510.22) $ (115.10) $ 120.48
========= ========= ========= =========== ===========
Cash Dividends Paid:
Common $ -- $ -- $ -- $ 11.55 $ 10.50
Preferred $ -- $ -- $ -- $ 1.39 $ 1.39
BALANCE SHEET DATA
Total Assets $ 371,365 $ 368,609 $ 367,069 $ 267,822 $ 285,996
Short Term Debt 1,105 57,931 50,100 6,221 --
Liabilities Subject to Compromise -- 231,675 229,409 -- --
Long-Term Obligations 142,024 5,669 3,100 109,487 108,010
OTHER DATA
Sales Increase/(Decrease) From
Prior Period 2.1% (3.5%) (6.5%) 1.8% 5.6%
Dept. Store Comp. Sales Inc./
(Dec.) From Prior Period (d) 3.7% (1.2%) (8.4%) (3.8%) 0.6%
10
</TABLE>
<PAGE> 14
NOTES TO SELECTED HISTORICAL FINANCIAL DATA:
(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. And has
also been adjusted for elimination of any complete product
lines.
ITEM 7. MANAGEMENT'S DISCUSSIONS 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 Fiscal 1997, Fiscal 1996 and Fiscal 1995. The
Company's fiscal year ends on the Saturday closest to January 31. The discussion
and analysis that follows is based upon and should be read in conjunction with
the Company's Consolidated Financial Statements and the notes thereto included
in Item 8.
RESULTS OF OPERATIONS
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales for Fiscal 1997 increased by 2.1% to $581.4 million from
$569.6 million for Fiscal 1996. The increase is due to a 3.7% comparative store
sales (sales from stores open for at least one year) increase for the department
store division, offset partially by a 2.5% comparative stores sales decline for
the Bee-Gee Shoe outlet 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 $5.5 million in Fiscal 1996 sales that were
absent in Fiscal 1997. In addition, the Company closed the Northtowne Mall
department store located in Toledo, Ohio and the department store in Carbondale,
Illinois in November 1997, and liquidated the unprofitable electronics product
line in December 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
Fiscal 1997 decreased by 3.2% to $26.6 million from $27.5 million for Fiscal
1996. The decline is due to a 2.0% decrease in sales attributed to the Company's
private label 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 partially offset by an increase in late fees
charged.
Cost of goods sold, occupancy, and buying expenses increased to 72.9%
of net sales for Fiscal 1997 from 72.0% of net sales for Fiscal 1996. This
increase is due to $8.6 million in excess markdowns in cost of goods due to
store closings in Fiscal 1997. This increase in costs is partially offset by an
increase in the initial rate of mark-up on goods sold coupled with a decrease in
the markdown rate. In Fiscal 1997, the LIFO inventory valuation adjustment
reduced cost of goods sold by $1.4 million compared to a decrease in cost of
goods sold of $1.9 million in Fiscal 1996.
Selling, general, administrative (including key employee performance
bonus plan expense) and hiring and recruiting expenses for new executives
decreased by $5.9 million to $157.4 million for Fiscal 1997 from $163.3 million
for Fiscal 1996. This improvement is primarily due to a reduction in payroll and
suspension of ongoing payments on certain computer leases resulting from
settlements with the lessors in which such lessors received claims in the
Reorganization Cases, offset partially by an increase in sales promotion
expense. The payroll expense reduction is primarily attributable to a reduction
in store payroll as the Company implemented several technology driven programs
to eliminate store non-selling workload, such as automating the price change,
transfer and return to vendor processes as well as re-engineering the store cash
office and gift wrap functions. In addition, $4 million was incurred under the
key employee retention bonus program for Fiscal 1997 compared to $5.0 million
for Fiscal 1996. The decline is due to an increase in the profit threshold
11
<PAGE> 15
to which such bonus is tied. The expense savings above were partially offset by
an increase of $0.7 million in hiring and recruiting expenses for new
executives.
Provision for doubtful accounts increased to 1.5% of net sales for
Fiscal 1997 compared to 1.2% of net sales for Fiscal 1996. Consistent with
industry trends, net charge offs increased due to the rise in personal
bankruptcy filings and delinquent customer balances.
Interest Expense increased to $7.1 million for Fiscal 1997 from $6.5
million for Fiscal 1996. Interest expense increased due to the additional
borrowings to support working capital requirements and capital expenditures.
Other income fell from $1.1 million in Fiscal 1996 to $0.7 million in
Fiscal 1997. The Company had certain interest rate swap agreements (old swaps)
and was required to make adjustments to market value. For Fiscal 1997, the swap
adjustment to market resulted in an expense of $0.6 million compared to income
of $1.1 million in the prior period. Fiscal 1997's swap expense was offset by
$1.3 million in interest income generated by a federal income tax refund
received in 1997. With the emergence from bankruptcy protection, the old swaps
were bought out and no longer in force. Also, on December 30, 1997 the Company
entered into a new swap agreement with a notional amount of $115 million
(expiring September 28, 2001). This agreement has been matched to the Company's
securitization facility to reduce the impact of interest rate fluctuations.
Reorganization expense increased by $3.9 million to $27.5 million for
Fiscal 1997 from $23.6 million for Fiscal 1996. The Company expensed $6.9
million more in professional fees in Fiscal 1997 compared to Fiscal 1996. Also,
in Fiscal 1997 there was a $2.6 million expense recorded for an adjustment to
estimated allowed claims, and a $2.1 million expense recorded for reorganization
bonus that did not occur in Fiscal 1996. In Fiscal 1996 there was an expense
recorded of $7.4 million for equipment lease settlements which did not occur in
Fiscal 1997. There was also a reduction in financing cost expense of $2.4
million.
In Fiscal 1997 a state income tax expense provision was made for
approximately $0.5 million. Fiscal 1997 operating loss resulted in additional
federal net operating loss carryforwards ("NOLs"). The Company reviewed the
status of its deferred tax valuation allowance and determined that a deferred
tax asset of $7.9 million should be recognized. This results in a net income tax
benefit being recorded in Fiscal 1997. See the Company's Consolidated Financial
Statements and the accompanying notes set forth in Item 8.
The discontinued operations loss, net of tax, recorded in 1997 is for
the extinguishment of debt for Margo's. In December 1995 the Bankruptcy Court
approved the disposal of Margo's. The loss recorded represents the difference
between the amount of cash Margo's creditors received as part of the plan of
reorganization and the liabilities subject to settlement recorded by Margo's.
In Fiscal 1997 an extraordinary loss of $28.1 million was recorded in
connection with the extinguishment of the Company's prepetition liabilities. The
loss is based on the excess of the fair value of the stock and cash distributed
to the general unsecured creditors over the carrying amount of the liabilities
extinguished.
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 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 markdown rate for Fiscal 1996
compared to Fiscal 1995. In Fiscal 1995 increased
12
<PAGE> 16
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) and hiring and recruiting expenses for new
executives, decreased by $6.7 million to $163.3 million, or 28.7% 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.
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") financing agreement. The required borrowings under
the DIP after the Petition Date were significantly less than the total
indebtedness outstanding prior to the Petition Date, resulting in substantially
less interest expense for Fiscal 1996.
Other income for Fiscal 1996 relates to income recorded for a market
value adjustment in interest rate swaps.
Reorganization expense increased $3.9 million to $27.6 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 for which there were
no similar charges 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 expenses/(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.
Loss/income from 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 disposal of Margo's and reversal of the reserve for
discontinued operations set up for Bee-Gee in the 1994 fiscal year, 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).
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, and during the Reorganization Cases were cash
flow from operations and the DIP Credit Agreement.
Since the Effective Date, the Company's principal sources of funds are
cash flow from operations and borrowings under a three-year revolving credit
facility and receivable securitization facility ("New Credit Facilities"). The
Company's primary ongoing cash requirements are 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 and other debt instruments.
The new revolving credit facility with Citicorp USA, Inc. as the Agent
and Citibank N.A. as the Issuer (the "New Revolving Credit Facility"), provides
for revolving credit loans of up to $125.0 million for seasonal working capital
purposes (including a $30.0 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 is equal to (a) up
to 95% of cash and (b) eligible finished-goods inventory as follows:
January-October, up to 60%; and November-December, up to 65%, less such reserves
as the Arranger deems appropriate. As of the end of Fiscal 1997, the Company's
outstanding balance under the New Revolving Credit Facility was $11.0 million.
13
<PAGE> 17
The Company's new receivable securitization facility with Citicorp
North America, Inc., as agent (the "New Receivable Securitization Facility"), is
a three-year variable rate loan agreement, in which the Company's customer
accounts receivable serve as collateral. The New Receivable Securitization
Facility is a revolving arrangement whereby the Company can borrow up to $125.0
million. The borrowings under the New Receivable Securitization Facility are
subject to a borrowing base formula based primarily on outstanding customer
accounts receivable. Borrowings bear interest at approximately LIBOR plus 50
basis points. As of the end of Fiscal 1997, the Company's outstanding balance
under the New Receivable Securitization Facility was $123.0 million.
The Company's capital expenditures for Fiscal 1997 were $21.0 million,
of which $4.7 million related to data processing and the remaining $16.3 million
related to store maintenance, remodeling, and expansions.
The Company is in the process of reviewing its software inventory to
determine the effort necessary to ensure a smooth transition through the year
2000 event. The results indicate that the costs of this effort will not be
material. Third party software providers have either indicated that their
software is currently year 2000 compliant, or that it will be compliant well
before the year 2000. Third party providers are required to present their
certification statement or project plans to ensure compliance by mid-1998. The
Company is unable to ascertain any impact that the year 2000 event may have on
other principal suppliers of the Company, but it has no reason to believe that
any relationship with a principal supplier will be adversely affected.
14
<PAGE> 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS AS OF JANUARY 31, 1998 AND
FEBRUARY 1, 1997 AND FOR EACH OF THE THREE FISCAL YEARS IN THE
PERIOD ENDED JANUARY 31, 1998:
Balance Sheets 2 - 3
Statements of Operations 4
Statements of Shareholders' Equity 5
Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7 - 21
15
<PAGE> 19
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 (the "Company") as of January 31,
1998 and February 1, 1997 and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three fiscal years in the
period ended January 31, 1998. These financial statements are the responsibility
of the Company'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 Company as of January 31, 1998
and February 1, 1997 and the results of their operations and their cash flows
for each of the three fiscal years in the period ended January 31, 1998, in
conformity with generally accepted accounting principles.
As discussed in Note A to the financial statements, on December 16, 1997, the
Bankruptcy Court entered an order confirming the plan of reorganization, which
became effective after the close of business on December 30, 1997.
DELOITTE & TOUCHE LLP
April 10, 1998
Dayton, Ohio
16
<PAGE> 20
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
ASSETS (DOLLARS IN THOUSANDS)
Current assets:
<S> <C> <C>
Cash and equivalents $ 6,497 $ 7,091
Customer accounts receivable (less allowance for doubtful
accounts: fiscal 1997 - $4,177; fiscal 1996 - $3,800) 136,705 147,814
Merchandise inventories 137,507 126,850
Refundable income taxes 10,336
Assets of discontinued operations 3
Deferred tax asset 2,595
Other current assets 10,051 10,822
--------- ---------
Total current assets 293,355 302,916
--------- ---------
Property:
Land and improvements 1,030 1,177
Buildings and leasehold improvements 62,074 54,361
Furniture, fixtures and equipment 87,132 76,047
--------- ---------
Total cost 150,236 131,585
Less accumulated depreciation and amortization (86,980) (77,782)
--------- ---------
Property, net 63,256 53,803
--------- ---------
Other assets 14,754 11,890
--------- ---------
$ 371,365 $ 368,609
========= =========
</TABLE>
See notes to consolidated financial statements.
17
<PAGE> 21
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
(DOLLARS IN THOUSANDS,
LIABILITIES AND SHAREHOLDERS' EQUITY EXCEPT SHARE DATA)
<S> <C> <C>
Current liabilities:
Current portion of long-term obligations $ 1,105 $ 57,931
Accounts payable 49,005 22,345
Accrued liabilities:
Compensation and related items 8,562 8,696
Income and other taxes 6,581 6,421
Rent 2,079 2,009
Other 11,964 12,458
Liabilities of discontinued operations 10,216
--------- ---------
Total current liabilities 79,296 120,076
--------- ---------
Long-term obligations - less current portion 142,024 5,669
Deferred items 4,534 5,051
Liabilities subject to compromise 231,675
Commitments and contingencies
Shareholders' equity:
Series B convertible preferred stock, $.01 par value, 1,250,000 shares
authorized, 662,474 issued and outstanding at February 1, 1997 7
Common stock, no par, 12,583,789 shares in fiscal 1997
and 124,036, shares in fiscal 1996 issued and outstanding 199,351 6,511
Additional paid-in capital 23,283
Unearned compensation - restricted stock, net (1,225)
Deficit (52,615) (23,663)
--------- ---------
Total shareholders' equity 145,511 6,138
--------- ---------
$ 371,365 $ 368,609
========= =========
</TABLE>
18
<PAGE> 22
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
(DOLLARS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C> <C>
Revenues:
Net sales $ 581,372 $ 569,557 $ 590,018
Financing 26,574 27,451 18,913
----------- --------- ---------
Total revenues 607,946 597,008 608,931
----------- --------- ---------
Costs and Expenses:
Cost of merchandise sold, occupancy and buying expenses 423,542 410,067 457,122
Selling, general and administrative expenses 151,293 156,892 169,919
Key employees retention bonus plan expense 4,000 4,994
Hiring and recruiting expenses for new executives 2,121 1,435 86
Provision for doubtful accounts 8,636 6,680 5,878
Interest expense 7,084 6,467 9,557
Other income (661) (1,106)
----------- --------- ---------
Total costs and expenses 596,015 585,429 642,562
----------- --------- ---------
Income (loss) before reorganization items and
income tax expense (benefit) 11,931 11,579 (33,631)
Reorganization items (27,542) (23,648) (19,711)
----------- --------- ---------
Loss before income tax expense (benefit),
discontinued operations and extraordinary item (15,611) (12,069) (53,342)
Income tax expense (benefit) (7,412) 360 (2,332)
----------- --------- ---------
Loss from continuing operations (8,199) (12,429) (51,010)
Discontinued operations 7,378 (12,276)
----------- --------- ---------
Loss before extraordinary item (821) (12,429) (63,286)
Extraordinary item (28,131)
----------- --------- ---------
Net loss $ (28,952) $ (12,429) $ (63,286)
=========== ========= =========
Basic and diluted earnings (loss) per common share:
Loss from continuing operations $ (6.58) $ (100.20) $ (411.25)
Discontinued operations 5.92 (98.97)
Extraordinary item (22.58)
----------- --------- ---------
Net loss $ (23.24) $ (100.20) $ (510.22)
=========== ========= =========
Weighted average number of common shares outstanding 1,245,760 124,036 124,036
=========== ========= =========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 23
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNEARNED TOTAL
PREFERRED ADDITIONAL COMPENSATION - RETAINED SHARE-
STOCK COMMON PAID-IN RESTRICTED EARNINGS HOLDERS'
SERIES B STOCK CAPITAL STOCK (DEFICIT) EQUITY
Shareholders' equity at January 28, 1995
<S> <C> <C> <C> <C> <C> <C>
(124,036 common shares outstanding) $ 7 $ 6,511 $ 23,283 $ $ 52,052 $ 81,853
Net loss (63,286) (63,286)
--------- --------- --------- --------- --------- ---------
Shareholders' equity at February 3, 1996
(124,036 common shares outstanding) 7 6,511 23,283 (11,234) 18,567
Net loss (12,429) (12,429)
--------- --------- --------- --------- --------- ---------
Shareholders' equity at February 1, 1997
(124,036 common shares outstanding) 7 6,511 23,283 (23,663) 6,138
Net loss (28,952) (28,952)
Common stock issuance at bankruptcy
emergence (12,372,960 common shares) (7) 191,580 (23,283) 168,290
Restricted shares issued
(86,793 common shares) 1,260 (1,225) 35
--------- --------- --------- --------- --------- ---------
Shareholders' equity at January 31, 1998
(12,583,789 common shares
outstanding) $ $ 199,351 $ $ (1,225) $ (52,615) $ 145,511
========= ========= ========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 24
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (28,952) $ (12,429) $ (63,286)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Provision for doubtful accounts 8,636 6,680 5,878
Deferred income taxes (7,877) 5,270
Provision for depreciation and amortization 11,849 13,139 15,768
Loss on disposal of assets 665 1,737 6,640
Loss on equipment settlements 74 7,458
Stock-based compensation expense 85
Payment to general unsecured creditors (82,215)
Discontinued operations (7,378)
Extraordinary item 28,131
Changes in noncash assets and liabilities:
Customer accounts receivable 2,473 (10,118) (9,621)
Merchandise inventories (10,657) (7,545) 23,980
Refundable income taxes 10,336
Other current assets 2,308 (5,331) (2,841)
Other long-term assets 1,566 916 (1,202)
Discontinued operations 583
Accounts payable 16,423 (2,710) 66,850
Accrued liabilities 1,113 (2,478) 8,063
Deferred items 365 1,048
--------- --------- ---------
Net cash provided by (used in) operating activities (53,420) (10,316) 57,130
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures (20,994) (4,759) (11,401)
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 used in investing activities (20,994) (2,988) (123,401)
--------- --------- ---------
Cash flows from financing activities:
Net borrowings under asset securization agreement 123,015
Net borrowings (payments) on bankers' acceptance and revolving lines of credit 10,960 29,500
Payments on long-term obligations (748) (991) (1,200)
Debt acquisition costs (1,634) (1,052) (3,875)
Net borrowings (payments) under DIP Facility (57,773) 7,773 50,000
--------- --------- ---------
Net cash provided by financing activities 73,820 5,730 74,425
--------- --------- ---------
Increase (decrease) in cash and equivalents (594) (7,574) 8,154
Cash and equivalents - beginning of year 7,091 14,665 6,511
--------- --------- ---------
Cash and equivalents - end of year $ 6,497 $ 7,091 $ 14,665
========= ========= =========
Supplemental cash flow information:
Interest paid $ 6,945 $ 6,929 $ 11,053
Income taxes paid 497 335 300
Supplemental non-cash investing and financing activities:
Property acquired from lease incentives $ 44 $ 366 $ 1,956
Property acquired from lease settlements 235 3,142
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 25
THE ELDER-BEERMAN STORES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
A. CHAPTER 11 CASE
On October 17, 1995 (the "Filing Date") , The Elder-Beerman Stores Corp.
and its Subsidiaries (collectively, the "Company") filed petitions for
relief under chapter 11 of the United States Bankruptcy Code ("Chapter
11"). From that time until December 30, 1997, the Company operated its
business as a debtor in possession subject to the jurisdiction of the
United States Bankruptcy Court for the Southern District of Ohio, Western
Division (the "Bankruptcy Court").
On December 30, 1997 (the "Effective Date"), the Company substantially
consummated its Third Amended Joint Plan of Reorganization dated November
17, 1997, as amended, (the "Joint Plan"), which was confirmed by an order
of the Bankruptcy Court entered on December 16, 1997.
The consolidated financial statements of the Company during its Chapter 11
case are presented in accordance with American Institute of Certified
Public Accountants Statement of Position 90-7, Financial Reporting by
Entities in Reorganization under the Bankruptcy Code ("SOP 90-7"). As of
the Effective Date, the reorganization value of assets of the Company
exceeded total liabilities. As such, in accordance with SOP 90-7,
fresh-start accounting and reporting was not adopted.
The Joint Plan establishes a reorganized Company, including a new Board of
Directors, new benefit and compensation programs and agreements, a
reorganization bonus paid to certain executives, authorization and
issuance of shares of new common and preferred stock and the issuance of
warrants. In addition, the Joint Plan provides for the settlement of
prepetition liabilities subject to compromise, in the Company's Chapter 11
case in exchange for cash, shares of new common stock or reinstatement as
liabilities of the reorganized Company.
The cash disbursements upon the effectiveness of the Joint Plan are as
follows:
<TABLE>
<S> <C>
Holders of general unsecured claims $ 79,698
Holders of unsecured claims against the Company's
discontinued Margo's operations 2,517
-----------
Total payments made to general unsecured creditors $ 82,215
===========
The new common shares issued upon the effectiveness of the Joint Plan are
as follows:
Holders of general unsecured claims 12,279,611
Holders of old common stock interests 124,036
Reorganization bonus to certain executives 93,349
-----------
12,496,996
===========
</TABLE>
22
<PAGE> 26
In addition to receiving new common shares, the holders of common stock
prior to the Company's emergence from bankruptcy received 249,809 Series A
Stock Warrants and 374,713 Series B Stock Warrants at the Effective Date.
The holders of preferred stock prior to the Company's emergence from
bankruptcy were awarded allowed claims as general unsecured claimants and,
accordingly, are included in the general unsecured distributions described
above (see Note I).
The value of cash and common stock required to be distributed under the
Joint Plan to the Company's general unsecured creditors exceeded the value
of the liabilities settled. Therefore, the Company recorded an
extraordinary loss related to the discharge of these prepetition
liabilities. The extraordinary loss recorded by the Company is determined
as follows:
<TABLE>
<S> <C>
Cash distribution to general unsecured creditors pursuant to the Joint Plan $ 79,698
Fair value of new common stock issued to general unsecured creditors 178,300
---------
257,998
Less: General unsecured claims (229,867)
---------
Extraordinary loss $ 28,131
=========
</TABLE>
The February 1, 1997, consolidated balance sheet includes liabilities subject to
resolution in the Chapter 11 case. These liabilities are classified as
liabilities subject to compromise under reorganization proceedings, and are
comprised of the following:
<TABLE>
<CAPTION>
FEBRUARY 1,
1997
<S> <C>
Accounts payable and accrued liabilities $ 92,209
Unsecured debt 131,900
Secured debt 2,455
Capital lease obligations 2,834
Accrued interest 2,277
--------
$231,675
========
</TABLE>
B. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - The Company 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).
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.
23
<PAGE> 27
FISCAL YEAR - The Company's fiscal year ends on the Saturday nearest
January 31. Fiscal years 1997 and 1996 consist of 52 weeks, and fiscal
year 1995 consists of 53 weeks ended January 31, 1998, February 1, 1997
and February 3, 1996, respectively.
CASH AND EQUIVALENTS - The Company considers all highly liquid investments
with original 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 $6,657 at January 31,
1998 and $8,043 at February 1, 1997.
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. The estimated useful lives by class of asset
are:
Buildings 25 to 50 years
Leasehold improvements 10 to 20 years
Furniture, fixtures and equipment 3 to 10 years
OTHER ASSETS include the value assigned to lease agreements acquired in an
acquisition that is being amortized over the lease terms. The Company
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 Company 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 SFAS No. 121, the Company 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. Finance revenue is generated by outstanding customer accounts
receivable and recognized as interest is accrued on these outstanding
balances.
PRE-OPENING COSTS associated with opening new stores are expensed as
incurred.
ADVERTISING EXPENSE - The cost of advertising is expensed as incurred.
24
<PAGE> 28
NET EARNINGS (LOSS) PER COMMON SHARE are computed by dividing net earnings
(loss) by the weighted-average number of common shares outstanding during
the year. Stock options, restricted shares and warrants outstanding at
January 31, 1998, represent potential common shares and are not included
in computing diluted earnings per share as the effect on the current year
would be antidilutive. Share and per share amounts for all periods
presented have been restated to reflect the adoption of SFAS No. 128,
Earnings Per Share, and the effect of the issuance of new common stock
upon the Company's emergence from bankruptcy.
STOCK OPTIONS - The Company measures compensation cost for stock options
issued to employees using the intrinsic value based method of accounting
in accordance with Accounting Principles Board Opinion No. 25.
FINANCIAL INSTRUMENTS - The Company utilizes interest rate swap agreements
to manage its interest rate risks when receivables are sold under asset
securitization programs or other borrowings. The Company does not hold or
issue derivative financial instruments for trading purposes. The Company
does not have derivative financial instruments that are held or issued and
accounted for as hedges of anticipated transactions. Amounts currently due
to or from interest swap counterparties are recorded in interest expense
in the period in which they accrue. Gains or losses on terminated interest
rate swap agreements are included in long-term liabilities or assets and
amortized to interest expense over the shorter of the original term of the
agreements or the life of the financial instruments to which they are
matched. Gains or losses on the mark-to-market for interest rate swap
agreements that do not qualify for hedge accounting are recorded as income
or expense each period.
RECLASSIFICATIONS - Certain amounts in the fiscal 1996 and 1995 financial
statements have been reclassified to conform with the fiscal 1997
presentation.
C. CUSTOMER ACCOUNTS RECEIVABLE
Customer accounts receivable, which represent finance subsidiary
receivables (Note D), 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>
JANUARY 31, FEBRUARY 1,
TYPE OF ACCOUNT 1998 1997
<S> <C> <C>
Optional and other $ 131,825 $ 140,623
Deferred payment 9,736 12,239
--------- ---------
Total 141,561 152,862
Less:
Allowance for doubtful accounts (4,177) (3,800)
Unearned interest on deferred contracts (679) (1,248)
--------- ---------
Customer accounts receivable, net $ 136,705 $ 147,814
========= =========
</TABLE>
25
<PAGE> 29
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Allowance for doubtful accounts:
Balance, beginning of year $ 3,800 $ 3,200 $ 1,700
Provision 8,636 6,680 5,878
Charge offs, net of recoveries (8,259) (6,080) (4,378)
------- ------- -------
Balance, end of year $ 4,177 $ 3,800 $ 3,200
======= ======= =======
</TABLE>
Customer accounts receivable result from the Company's proprietary
credit card sales to customers residing principally in the midwestern
states. As such, the Company believes it is not dependent on a given
industry or business for its customer base and therefore has no
significant concentration of credit risk.
Deferred payment accounts include the remaining unearned interest
charge to be received. Unearned interest is amortized to finance income
using the effective interest method.
D. 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 (as of January 1998, 3%
discount). Customer accounts receivable held by the finance subsidiary
are included in Note C; purchase discounts are eliminated in
consolidation.
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
BALANCE SHEETS 1998 1997
<S> <C> <C>
Assets:
Customer accounts receivable - net $ 136,705 $ 147,814
Unamortized purchase discount (2,923) (3,057)
Intercompany - prepetition 4,845
Other assets 3,658 2,295
--------- ---------
Total $ 137,440 $ 151,897
========= =========
Liabilities and shareholder's equity:
Liabilities $ 519 $ 2,286
Intercompany - postpetition 7,230 114,769
Liabilities subject to compromise 445
Long-term financing 123,015
Shareholder's equity 6,676 34,397
--------- ---------
Total $ 137,440 $ 151,897
========= =========
</TABLE>
26
<PAGE> 30
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
STATEMENTS OF OPERATIONS 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Financing (net of securitization expense of $5,933,
for fiscal 1995) $ 26,574 $ 27,451 $ 18,913
Purchase discount 5,507 5,277 5,594
-------- -------- --------
Total revenues
32,081 32,728 24,507
-------- -------- --------
Expenses:
Occupancy costs 322 298 300
Selling, general and administrative 6,691 6,219 6,186
Provision for doubtful accounts 8,636 6,680 5,878
Other (income) expense 611 (1,106)
Interest expense 748
-------- -------- --------
Total expenses 17,008 12,091 12,364
-------- -------- --------
Income before reorganization items and income taxes 15,073 20,637 12,143
Reorganization items (31) (5,288)
-------- -------- --------
Income before income taxes and extraordinary item $ 15,042 $ 20,637 $ 6,855
======== ======== ========
</TABLE>
On December 30, 1997, Chargit entered into a three-year variable-rate
securitization loan agreement ("Securitization Facility") with a
commercial bank, in which Chargit's customer accounts receivable are
pledged as collateral under the related Securitization Facility (see
Note F). The Securitization Facility is a revolving arrangement whereby
Chargit can borrow up to $125,000. As of January 31, 1998, borrowings
on Chargit's financial statements were $123,015.
On December 30, 1997, as a requirement of the Securitization Facility,
the Company entered into an interest rate swap agreement with a
notional amount of $115,000, expiring September 28, 2001, to reduce the
impact of interest rate changes on future interest expense. This
agreement has been matched to the Securitization Facility to reduce the
impact of interest rate changes on cash flows.
Prior to the Filing Date, the Company had a variable rate asset
securitization agreement with a commercial bank whereby it could sell
up to $115,000 of customer accounts receivable. The Company 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 Company discontinued its accounts receivable
sale program and terminated its asset securitization agreement.
Upon termination of the accounts receivable sale program, the notional
amount of the effective interest rate swap agreements hedged against
receivables sold was $55,000. This notional amount was unmatched and a
$5,025 mark-to-market adjustment was recorded as reorganization expense
in fiscal 1995. For the period from the Filing Date to the Effective
Date, the estimated market value of the interest rate swaps were
recorded as liabilities subject to compromise. Mark-to-market
adjustments of $619 and ($1,106) are recorded as other expense (income)
in fiscal 1997 and 1996, respectively. The unmatched interest rate swap
agreement was paid off in December 1997.
27
<PAGE> 31
The Company utilizes interest rate swap agreements to effectively
establish long-term fixed rates on borrowings under the Securitization
Facility, thus reducing the impact of interest rate changes on future
income. These swap agreements involve 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 is accrued as interest rates change and is
recognized as an adjustment to interest expense. The Company has
outstanding swap agreements with notional amounts totaling $115,000 and
$55,000 for the fiscal years ended 1997 and 1996, respectively.
The Company is exposed to credit related losses in the event of
non-performance by the counterparties to the swap agreements. All
counterparties are rated A or higher by Moody's and Standard and Poor's
and the Company does not anticipate non-performance by any of its
counterparties.
E. OTHER ASSETS
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
----------- -----------
<S> <C> <C>
Deferred tax asset $ 5,282 $
Value assigned to lease agreements 3,042 3,554
Receivables from developers 2,380
Unamortized debt issuance costs 909 454
Import deposits 2,555 2,555
Other 2,966 2,947
----------- -----------
$ 14,754 $ 11,890
=========== ===========
</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 in fiscal 1996
because payment of certain construction reimbursements by the developer
to the Company are contingent on the Company's lease assumption and/or
payments for construction work performed. In fiscal 1997, these amounts
are classified as current because the Company expects to receive all
amounts in fiscal 1998.
F. LONG-TERM OBLIGATIONS
On December 30, 1997, the Company entered into a three-year $125,000
Revolving Credit Facility ("Credit Facility") and Securitization
Facility that effectively replaced the prior DIP Facility and paid
certain liabilities subject to compromise and administrative claims.
The Credit Facility provides for borrowings and letters of credit in an
aggregate amount up to $125,000, subject to a borrowing base formula
based primarily on merchandise inventories. There was a $30,000
sublimit for letters of credit, which was temporarily increased to
$60,000 in fiscal 1998. Borrowings bear interest at either prime plus
37.5 basis points or LIBOR plus 137.5 basis points through January
1999. Subsequent to January 1999, the interest rate on these borrowings
can fluctuate based on certain financial ratios of the Company. As of
January 31, 1998, the Company had $10,960 in outstanding borrowings,
$8,167 in outstanding letters of credit and approximately $51,000
available for additional borrowings under the Credit Facility.
The Securitization Facility provides for the Company to borrow up to
$125,000. The borrowings under this facility are subject to a borrowing
base formula based primarily on outstanding consumer accounts
receivable. Borrowings bear interest at approximately 1-month LIBOR,
plus 50 basis points.
28
<PAGE> 32
Certain financial covenants related to debt, capital expenditures,
interest and fixed charge expenditures are included in these
agreements. Additionally, there are certain other restrictive covenants
including limitations on the incurrence of additional liens,
indebtedness, payment of dividends, distributions or other payments on
and repurchases of outstanding capital stock, investments, mergers,
stock transfers and sales of assets. Certain ratios related to the
performance of the accounts receivable portfolio are also included.
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
-------- --------
<S> <C> <C>
DIP Facility $ $ 57,773
Revolving credit arrangement 3,600
Unsecured credit facility:
Eurodollar borrowings 40,000
Bankers' acceptances 13,300
Competitive bid advances 5,000
Unsecured senior notes payable, Series A-C 50,000
Unsecured senior notes payable 20,000
Mortgage note payable, 9.75% 2,669 2,727
Industrial development revenue bonds, variable rates based on published index of
tax-exempt bonds (5.15%) 4,260 5,555
Capital lease obligations (Note G) 2,225 2,834
Credit facility (8.0%) 10,960
Securitization facility (5.9%) 123,015
-------- --------
Total 143,129 200,789
Less:
Liabilities subject to compromise 137,189
DIP Facility 57,773
Current portion of long-term obligations, not subject
to compromise 1,105 158
-------- --------
Net long-term obligations $142,024 $ 5,669
======== ========
</TABLE>
Maturities of borrowings are $1,105 in 1998, $951 in 1999, $134,942 in
2000, $870 in 2001, $362 in 2002, and $4,899 thereafter.
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 $5,675 at January 31, 1998.
Mechanics' liens have been filed in respect of improvements made to
certain properties.
29
<PAGE> 33
G. LEASES
The Company leases retail store properties and certain equipment.
Generally, leases are net leases that 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.
Minimum annual rentals, for leases having initial or remaining
noncancelable lease terms in excess of one year at January 31, 1998,
are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
FISCAL YEAR LEASES LEASES
-------- --------
<S> <C> <C>
1998 $ 18,099 $ 824
1999 16,203 584
2000 13,676 525
2001 11,459 347
2002 10,358 174
Thereafter 77,872 121
-------- --------
Minimum lease payments $147,667 2,575
========
Less imputed interest 350
--------
Present value of net minimum lease payments $ 2,225
========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
RENT EXPENSE 1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Operating leases:
Minimum $17,677 $20,489 $23,228
Contingent 2,108 2,136 2,766
------- ------- -------
Total rent expense $19,785 $22,625 $25,994
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
ASSETS HELD UNDER CAPITAL LEASES 1998 1997
-------- --------
<S> <C> <C>
Buildings $ 11,033 $ 11,033
Equipment 235
Less accumulated depreciation and amortization
(9,997) (9,565)
-------- --------
Net $ 1,271 $ 1,468
======== ========
</TABLE>
Assets acquired under capital leases are included in the consolidated
balance sheets as property, while the related obligations are included
in long-term obligations (see Note F).
30
<PAGE> 34
H. INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal $ $ $(10,400)
State and local 465 360 504
-------- -------- --------
465 360 (9,896)
-------- -------- --------
Deferred:
Net operating losses and tax credit carryforwards (5,529) (13,560) (6,487)
Interest (6,119) 6,119
Deferred income 1,804 1,513 (270)
Discontinued operations 2,362 158 (274)
Other 3,364 (725) (4,200)
Valuation allowance (3,759) 6,495 20,787
-------- -------- --------
(7,877) 9,556
-------- -------- --------
Income tax expense (benefit) $ (7,412) $ 360 $ (340)
======== ======== ========
Income statement classification:
Continuing operations $ (7,412) $ 360 $ (2,332)
Discontinued operations 1,992
-------- -------- --------
Total $ (7,412) $ 360 $ (340)
======== ======== ========
</TABLE>
The current tax benefit in fiscal 1995 includes the carryback of net
operating losses for a refund of prior taxes paid. During fiscal 1997,
this income tax refund was received by the Company.
The following table summarizes the major differences between the actual
income tax provision attributable to continuing operations and taxes
computed at the federal statutory rates:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Federal statutory tax rate $ (5,464) $ (4,224) $(18,670)
State and local taxes 465 360 504
Valuation allowance (7,579) 3,767 15,824
Permanent items 5,166 457 10
-------- -------- --------
Income taxes $ (7,412) $ 360 $ (2,332)
======== ======== ========
Effective tax (benefit) rate (47.5)% --% (4.4)%
======== ======== ========
</TABLE>
31
<PAGE> 35
Deferred income taxes consist of the following:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating losses and tax credit carryforwards $ 25,576 $ 20,047
Discontinued operations 2,362
Deferred income 602 2,406
Bad debts 1,518 1,414
Other 4,280 7,517
-------- --------
31,976 33,746
Valuation allowance (23,523) (27,282)
Total deferred tax assets 8,453 6,464
-------- --------
Deferred tax liabilities:
Interest expense 6,119
Other 576 345
-------- --------
Total deferred tax liabilities
576 6,464
-------- --------
Net $ 7,877 $
======== ========
Included in the balance sheets:
Current assets - deferred tax asset $ 2,595 $
Other assets 5,282
-------- --------
Net deferred tax assets $ 7,877 $
======== ========
</TABLE>
Permanent items consist primarily of bankruptcy related expenses that
are not deductible for tax purposes. The net operating loss
carryforwards, tax credit carryforwards, and other deferred tax assets
will result in future benefits only if the Company has taxable income
in future periods. In accordance with SFAS No. 109, Accounting for
Income Taxes, a valuation allowance has been recorded for the tax
effect of a portion of the future tax deductions and tax credit
carryforwards.
The federal net operating loss carryforward is approximately $64,000
and is available to reduce federal taxable income through 2012. The tax
credit carryforward is approximately $2,600; of which $600 will expire
in 2009 and 2010, and the balance is an indefinite carryforward.
I. EMPLOYEE BENEFIT PLANS
A defined-contribution employee benefit plan (the "401(k) Plan") covers
substantially all employees. The Company 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 years 1997,
1996 and 1995. Eligible employees can make contributions to the Plan
through payroll withholdings of one to fifteen percent of their annual
compensation.
32
<PAGE> 36
The Plan includes an employee stock ownership component. At February 1,
1997, the Plan held all of the outstanding preferred shares of the
Company. These preferred shares were included in the settlement of the
general unsecured claims on December 30, 1997 (See Note A). The
preferred shares were settled with a distribution of $4,184 in cash and
issuance of 644,680 common shares.
A Stock Purchase Plan was established under the Joint Plan. The Stock
Purchase Plan provides for the Company's employees to purchase
Elder-Beerman common stock at a 15% discount. Employees can make
contributions to the Plan through payroll withholdings of one percent
to ten percent of their annual compensation, up to a maximum of $25 per
year. A total of 625,000 shares of common stock are registered and
unissued under this plan.
J. BONUS PLANS
In 1995, the Company established a key employee retention program (the
"KERP"). The KERP provided for bonus payments to be made during the
Company's bankruptcy proceedings based on operating results and
continued employment. Expenses of $4,000 and $4,994 were recorded in
fiscal years 1997 and 1996, respectively.
K. TRANSACTIONS WITH RELATED PARTIES
The Company leased real estate under operating leases from certain
affiliated entities, and made payments to these related parties
totaling $3,247, $3,742 and $4,129 in fiscal years 1997, 1996 and 1995,
respectively. As a result of the issuance of new common shares of the
Company as of the Effective Date (see Note A), these entities' are no
longer related parties at January 31, 1998. Balances with related
parties at February 1, 1997 were as follows:
<TABLE>
<S> <C>
Customer accounts receivable $368
Other current assets 60
Other long-term assets 460
Accounts payable and other liabilities 536
Liabilities subject to compromise 951
</TABLE>
L. SHAREHOLDERS' EQUITY
The Company authorized 25 million no par new common shares effective
with the Company's bankruptcy emergence. Under a Rights Agreement, each
outstanding common share presently has one right attached that trades
with the common share. Generally, the rights become exercisable and
trade separately after a third party acquires 20% or more of the common
shares or commences a tender offer for a specified percentage of the
common shares. Upon the occurrence of certain additional triggering
events specified in the Rights Agreement, each right would entitle its
holder (other than, in certain instances, the holder of 20% or more of
the common shares) to purchase common shares of the Company at an
exercise price of 50% of the then-current common share market value.
The rights expire on December 30, 1998, unless the Board of Directors
takes action prior to that date to extend the rights, and are presently
redeemable at $.01 per right.
At December 30, 1997, the Company issued shares of common stock to its
general unsecured claimants, which included 644,680 shares of common
stock issued in satisfaction of the claims of the old Series B
Preferred Shareholders. The Board of Directors has the authority to
issue five million shares of new preferred stock. At January 31, 1998,
these shares are unissued.
33
<PAGE> 37
M. STOCK-BASED COMPENSATION
During the fourth quarter of 1997, stock options and restricted shares
were granted to designated employees and nonemployee directors under
the new Equity and Performance Incentive Plan. This plan also
authorizes the Company's Board of Directors to grant appreciation
rights, deferred shares, performance shares and performance units.
Awards relating to 2,250,000 shares are authorized for issuance under
this plan and awards related to 1,310,000 shares have been issued as of
January 31, 1998.
On December 30, 1997, 773,000 stock options with an exercise price of
$10.89 per share were granted to directors, officers and key employees
under the Equity and Performance Incentive Plan. The options granted
have a maximum term of ten years and vest over a period of three to
five years. At January 31, 1998, none of the 773,000 stock options
outstanding are exercisable. The following table summarizes the fair
value of options granted using the Black-Scholes Option Pricing Model:
<TABLE>
<S> <C>
Fair value of options granted during the year $ 8.63
Weighted-average assumptions used for grants:
Expected dividend yield 0 %
Expected volatility 35 %
Risk-free interest rate 6.5 %
Expected life 7 years
</TABLE>
The Restricted Stock Plan provides for the issuance of restricted
common shares to certain employees and nonemployee directors of the
Company. These shares have a vesting period of three years. There were
86,793 shares awarded under this plan in January 1998. The fair value
of the restricted shares awarded is $1,260 and is being amortized over
the three year vesting period.
Total compensation costs charged to loss from continuing operations
before income taxes for all stock-based compensation awards was
approximately $85 in fiscal 1997. Had compensation costs been
determined based on the fair value method of SFAS No. 123 for all
plans, the Company's net loss and loss per common share would have been
reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 31,
1998
<S> <C>
Net loss:
As reported $ (28,952)
Pro forma (29,018)
Loss per common share:
As reported (23.24)
Pro forma (23.29)
</TABLE>
34
<PAGE> 38
N. DISCONTINUED OPERATIONS
In fiscal 1994, the Company 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 Company was
unsuccessful in its attempt to sell Margo's and decided to liquidate
the subsidiary. During fiscal 1996, management determined the value of
Bee Gee would be more effectively realized by retaining Bee Gee as a
part of the Company's ongoing operations.
Based on management's estimates and the change in the disposition
strategy of Margo's in 1995, the Company 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. Margo's
operating losses of $322, $451 and $16,419 were charged against the
reserve for discontinued operations for fiscal years 1997, 1996 and
1995, respectively. Margo's net sales were $34,227 in 1995. Margo's did
not have any sales subsequent to fiscal 1995.
The settlement of Margo's liabilities subject to compromise and other
liabilities upon the Company's emergence from bankruptcy during fiscal
1997 resulted in a net gain from discontinued operations of $7,378. The
Company was able to utilize operating loss carryforwards that were
fully reserved in prior years to offset the income tax expense related
to the gain on discontinued operations. Therefore, there is no income
tax expense recorded in connection with this gain.
O. REORGANIZATION ITEMS
Reorganization costs consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Professional fees $15,505 $ 8,612 $ 3,586
Equipment lease settlements 74 7,458
Restructuring 6,852 4,497 8,897
Adjustment to liabilities subject to compromise 2,326
Reorganization bonus 2,100
Financing costs 685 3,081 2,203
Market value adjustments of interest rate swaps 5,025
------- ------- -------
Total $27,542 $23,648 $19,711
======= ======= =======
</TABLE>
Subsequent to the Chapter 11 filings, the Company 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 closed a furniture store in fiscal 1996. In fiscal 1997
the Company closed two department stores and discontinued certain
departments. Property impairment, severance and certain store closing
costs are included in restructuring costs. The Company negotiated
various equipment lease settlements primarily during fiscal 1996.
Equipment lease settlement costs primarily resulted from renegotiated
leases where cash payments and unsecured claims satisfied under the
Joint Plan were granted in exchange for ownership of the equipment and
relief from other claims previously filed in connection with the
underlying leases.
35
<PAGE> 39
In 1995, the market value adjustments of interest rate swaps represent
the recognition of losses on interest rate swaps 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 - The carrying amount approximates fair value
as a result of the variable-rate based borrowings.
INTEREST RATE SWAP AGREEMENTS - The fair value of interest
rate swaps is based on the quoted market prices that the
Company would pay to terminate the swap agreements at the
reporting date. The following table summarizes the carrying
amount and estimated fair value of the interest rate swap
agreements.
<TABLE>
<CAPTION>
JANUARY 31, 1998 FEBRUARY 1, 1997
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C>
Financial instruments - interest rate
swaps $ -- $ -- $(1,415) $(1,415)
Unrecognized financial instruments -
interest rate swaps (1,548) (579) (844)
</TABLE>
Q. COMMITMENTS AND CONTINGENCIES
LITIGATION - The Company is a party to various legal actions and
administrative proceedings and subject to various claims arising in the
ordinary course of business. In addition, as a result of the bankruptcy
case, the Company remains subject to the jurisdiction of the Bankruptcy
Court for matters relating to the consummation of the Joint Plan.
Management believes the outcome of any of the litigation matters that
will have a material effect on the Company's results of operations,
cash flows or financial position have been appropriately accrued.
INSURANCE - The Company is self-insured for employee medical and
workers' compensation subject to limitations 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.
* * * * * *
36
<PAGE> 40
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding those persons
currently serving as the executive officers and directors of the Company.
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>
Frederick J. Mershad 55 Chairman of the Board and Chief Executive Officer
John A. Muskovich 51 President, Chief Operating Officer, Chief Financial Officer and Director
James M. Zamberlan 51 Executive Vice President, Stores
Steven D. Lipton 47 Senior Vice President, Controller
Perry J. Schiller 40 Senior Vice President and Treasurer
Scott J. Davido, Esq. 36 Senior Vice President, General Counsel, and Secretary
Stewart M. Kasen 58 Director
Steven C. Mason 62 Director
Thomas J. Noonan, Jr. 58 Director
Bernard Olsoff 69 Director
Laura H. Pomerantz 50 Director
Jack A. Staph 52 Director
John J. Wiesner 60 Director
</TABLE>
Frederick J. Mershad has served as Chairman of the Board of
Elder-Beerman since December 1997, as Chief Executive Officer of Elder-Beerman
since January 1997 and as President of Elder-Beerman from January 1997 to
December 1997. Prior to this time, Mr. Mershad served as President and Chief
Executive Officer of the Proffitt's division of 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 Stores, Inc. from
August 1993 to May 1994; and Executive Vice President, Merchandising and
Marketing of the McRae's Department Stores division of Proffitt's from June 1990
to August 1993.
John A. Muskovich has served as President, Chief Operating Officer,
Chief Financial Officer and a Director of Elder-Beerman since December 1997 and
served as Executive Vice President of Administration of Elder-Beerman from
February 1996 to December 1997. Prior to this time, Mr. Muskovich served as
Director of Business Process 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.
37
<PAGE> 41
Scott J. Davido, Esq. has served as Senior Vice President, General
Counsel, and Secretary of Elder-Beerman since January 1998. Prior to this time,
Mr. Davido was a partner with Jones, Day, Reavis & Pogue, a law firm, since
December 1996, and was employed as an associate with the firm since September
1987.
Stewart M. Kasen has served as a Director of Elder-Beerman since
December 1997. Currently, Mr. Kasen is a private investor. Mr. Kasen served as
Chairman of the Board, President, and Chief Executive Officer of Best Products
Co., Inc. ("Best Products"), a Richmond, Virginia, retail catalogue showroom
company, from June 1994 through April 1996, President and Chief Executive
Officer from June 1991 to June 1994, and President and Chief Operating Officer
from 1989 to June 1991. Best Products filed for protection under Chapter 11 of
the United States Bankruptcy Code in January 1991. Best Products' plan of
reorganization was confirmed in June 1994, and it filed a petition for
bankruptcy under Chapter 11 again on September 24, 1996. Mr. Kasen also
currently serves as Chairman of the Board of Directors of Factory Card Outlet
Corp., and as a Director of Markel Corp., O'Sullivan Industries Holdings, Inc.,
Bibb Co., and K2 Inc.
Steven C. Mason has served as a Director of Elder-Beerman since
December 1997. Mr. Mason retired from Mead Corp., a forest products company, in
November 1997. Prior to retirement, Mr. Mason served as Chairman of the Board
and Chief Executive Officer of Mead Corp., from April 1992 to November 1997. Mr.
Mason is also currently a Director of PPG Industries, Inc. and Cincinnati Bell.
Thomas J. Noonan, Jr. has served as a Director of Elder-Beerman since
December 1997. Mr. Noonan serves as Managing Director of The Coppergate Group, a
financial investment and management company, and has served in this capacity
since April 1993. Mr. Noonan also serves as Executive Vice President and Chief
Financial Officer of Herman's Sporting Goods, Inc., a sporting goods retailer
that filed for protection under Chapter 11 of the United States Bankruptcy code
and is currently being liquidated, and has served in this capacity since August
1994. Prior to this time, Mr. Noonan served as Managing Director and Chief
Executive Officer of TFGII, a financial investment and management company, from
January 1993 to October 1994, and as Executive Vice President of Intrenet Inc.,
a trucking holding company, from September 1990 to March 1993. Mr. Noonan is
also currently a Director of Intrenet Inc. and Richman Gordman 1/2 Price Stores
Inc.
Bernard Olsoff has served as a Director of Elder-Beerman since December
1997. Mr. Olsoff retired from Frederick Atkins, Inc., a retail marketing and
consulting company, in 1997. Prior to this time, Mr. Olsoff served as President,
Chief Executive Officer and Chief Operating Officer of Frederick Atkins, from
1994 to April 1997, and President and Chief Operating Officer from 1983 to 1994.
Laura H. Pomerantz has served as a Director of Elder-Beerman since
December 1997. Mrs. Pomerantz currently serves as President of LHP Consulting &
Management, a real estate consulting firm, and has served in this capacity since
1995. Through LHP Consulting & Management, Mrs. Pomerantz is also associated
with Newmark Real Estate Co., Inc., a commercial real estate company, as Senior
Managing Director and has served in this capacity since August 1996. Prior
thereto, Mrs. Pomerantz served as Senior Managing Director of S.L. Green Real
Estate Company, a commercial real estate company, from August 1995 to July 1996,
and was affiliated with Koeppel Tenor Real Estate Services, Inc., a commercial
real estate company, from March 1995 through July 1995. Prior to this time, Mrs.
Pomerantz served as Executive Vice President and a Director of The Leslie Fay
Companies, Inc. ("Leslie Fay"), an apparel design and manufacturing company,
from January 1993 to November 1994, and as Senior Vice President and Vice
President of Leslie Fay from 1986 through 1992.
Jack A. Staph has served as a Director of Elder-Beerman since December
1997. Currently, Mr. Staph is a consultant and a private investor. Mr. Staph has
also served in an unrestricted advisory capacity to CVS Corp. since June 1997.
Prior to this time, Mr. Staph served as Senior Vice President, Secretary, and
General Counsel of Revco D.S., Inc., a retail pharmacy company, from October
1972 to August 1997.
John J. Wiesner has served as a Director of Elder-Beerman since
December 1997. Mr. Wiesner retired from C.R. Anthony, a regional apparel
retailer, in June 1997. Prior to retirement, Mr. Wiesner served as Chairman of
the Board of Directors, President and Chief Executive Officer of C.R. Anthony,
from April 1987 to June 1997. Mr. Wiesner is also currently a Director of Stage
Stores, Inc. and Lamonts Apparel, Inc.
38
<PAGE> 42
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors and Executive Officers to file reports of ownership and
changes of ownership with the Securities and Exchange Commission and NASDAQ. The
Company assists its Directors and Executive Officers in completing and filing
those reports. The Company believes that during the last completed fiscal year
all filing requirements applicable to its Directors and Executive Officers were
complied with except that Mr. Schiller's Initial Statement of Beneficial
Ownership of Securities did not include the approximately 24 shares of Common
Stock allocated to Mr. Schiller under the Elder-Beerman Stores Corp. Profit
Sharing and Stock Ownership Plan.
ITEM 11. EXECUTIVE COMPENSATION
The compensation discussion that follows has been prepared based on the
actual plan and non-plan compensation awarded to, earned by or paid to the
Company's named executive officers during the periods presented. The Company's
compensation arrangements with its directors and employment contracts and
several arrangements with its named executive officers are also described below.
39
<PAGE> 43
CASH COMPENSATION TABLE
The following table sets forth the compensation paid or payable by the
Company during Fiscal 1995, Fiscal 1996 and Fiscal 1997, to those individuals
serving as the registrant's chief executive officer at any time during Fiscal
1997 and certain other highly compensated executive officers of the Company.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ---------------------------
Awards Payouts
------------------- -------
Securities
Other Restricted Underlying
Annual Stock Options/ LTIP All Other
Name and Principal Salary Bonus Compen- Award(s) SARs Payouts Compen-
Position Year ($) ($) sation ($) ($) (#) ($) sation ($)
-------- ---- --- --- ---------- --- --- --- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frederick J. Mershad 1997 503,344 500,000 (1) 51,251(2) 47,087 194,000 -- --
Chairman of the Board and 1996 19,231 633,632 (3) -- -- -- -- --
Chief Executive Officer 1995 -- -- -- -- -- -- --
John A. Muskovich 1997 267,335 598,750 (4) -- 34,802 (5) 126,000 -- --
President, Chief Operating 1996 183,974 67,908 -- -- -- -- --
Officer and 1995 -- -- -- -- -- -- --
Chief Financial Officer
James M. Zamberlan 1997 164,944 41,313 -- 1,404 (6) 61,000 -- --
Executive Vice President, 1996 -- -- -- -- -- -- --
Stores 1995 -- -- -- -- -- -- --
Steve D. Lipton 1997 132,897 19,763 -- 1,701 (7) 21,000 -- --
Senior Vice President, 1996 103,143 45,820 -- -- -- -- --
Controller 1995 -- -- -- -- -- -- --
Perry J. Schiller 1997 118,489 27,600 -- 594 (8) 15,000 -- --
Senior Vice President 1996 113,846 34,500 -- -- -- -- --
and Treasurer 1995 93,365 5,750 -- -- -- -- --
Max Gutmann (9) 1997 667,071(10) 800,000 (11) -- -- -- -- --
Chairman of the Board 1996 388,846 160,000 -- -- -- -- --
1995 107,308 -- -- -- -- -- --
Herbert O. Glaser (12) 1997 517,159(13) 670,000 (14) -- -- -- -- --
Vice Chairman 1996 309,030 134,000 -- -- -- -- --
1995 135,000 -- -- -- -- -- --
</TABLE>
- -------------------------
(1) Amount includes a $250,000 reorganization bonus granted to Mr.
Mershad by the Board of Directors on March 11, 1998, paid in
the same manner as the reorganization bonus previously paid to
Messrs. Muskovich, Gutmann and Glaser.
(2) Moving expense reimbursement.
(3) 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 options that he would have received from his prior
employer.
(4) Amount includes a $550,000 reorganization bonus awarded to Mr.
Muskovich pursuant to the Plan, paid 32.9% in cash and 62.1%
in stock (at $14.52 per share).
(5) Includes 3,357 deferred shares and 839 restricted shares
awarded Mr. Muskovich as the deferred portion of his 1997
bonus pursuant to the Equity and Performance Incentive Plan.
(6) Includes 1,123 deferred shares and 281 restricted shares
awarded Mr. Zamberlan as the deferred portion of his 1997
bonus pursuant to the Equity and Performance Incentive Plan.
(7) Includes 1,361 deferred shares and 340 restricted shares
awarded Mr. Lipton as the deferred portion of his 1997
bonus pursuant to the Equity and Performance Incentive Plan.
(8) Includes 475 deferred shares and 119 restricted shares awarded
to Mr. Schiller as the deferred portion of his 1997 bonus
pursuant to the Equity and Performance Incentive Plan.
(9) Effective December 30, 1997, Mr. Gutmann was replaced by Mr.
Mershad as Chairman of the Board of Directors.
(10) Includes severance payment of $400,000.
(11) Amount represents a reorganization bonus awarded to Mr.
Gutmann pursuant to the Plan, paid 32.9% in cash and 62.1% in
Stock (at $14.52 per share).
(12) Effective August 1997, Mr. Glaser is no longer employed by the
Company.
(13) Includes severance payment of $335,000.
(14) Amount represents a reorganization bonus awarded to Mr. Glaser
pursuant to the Plan, paid 32.9% in cash and 62.1% in stock
(at $14.52 per share).
40
<PAGE> 44
FISCAL 1997 OPTION GRANTS
The following table sets forth information concerning individual grants
of stock options to the Company's named executive officers during Fiscal 1997.
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value
----------------------------------------------------- At Assumed Annual Rate
Of Stock Price
Appreciation For Option Term
----------------------------
Percent Of
Number Of Total
Securities Options
Underlying Granted To Exercise
Options Employees In Of Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date 0% ($) 5% ($) 10% ($)
---- ----------- ----------- ------------ ---- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Frederick J. Mershad 194,000 24.6 $10.89 12/30/07 704,220 2,475,440 5,193,380
John A. Muskovich 126,000 16.0 $10.89 12/30/07 457,380 1,607,760 3,373,020
James M. Zamberlan 61,000 7.7 $10.89 12/30/07 221,430 778,360 1,632,970
Steve D. Lipton 21,000 2.7 $10.89 12/30/07 76,230 267,960 562,170
Perry J. Schiller 15,000 1.9 $10.89 12/30/07 54,450 191,400 401,550
Max Gutmann 0 0.0 -- -- 0 0 0
Herbert O. Glaser 0 0.0 -- -- 0 0 0
</TABLE>
- -------------------------
(1) One-fifth of the options vest on each of December 30, 1998,
1999, 2000, 2001, 2002.
(2) There was no established market price for the Company's stock
on the date of grant. The Company's stock did not begin
trading on NASDAQ until February 17, 1998, following
distribution shares of Common Stock to creditors under the
Plan.
FISCAL 1997 AGGREGATED OPTION EXERCISES FY-END OPTION VALUES
The following table sets forth information concerning the exercise of
stock options by each of the Company's named executive officers during Fiscal
1997 and fiscal year end value of unexercised options.
<TABLE>
<CAPTION>
Number Of Securities Value Of Unexercised
Underlying Unexercised In-The-Money
Shares Value Options At Fiscal Year-End (#) Options At Fiscal Year-End ($)
Acquired On Realized ------------------------------ ------------------------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frederick J. Mershad 0 0 194,000 0
John A. Muskovich 0 0 126,000 0
James M. Zamberlan 0 0 61,000 0
Steve D. Lipton 0 0 21,000 0
Perry J. Schiller 0 0 15,000 0
Max Gutmann 0 0 0 0
Herbert O. Glaser 0 0 0 0
</TABLE>
- -------------------------
(1) One-fifth of the options vest on each of December 30, 1998,
1999, 2000, 2001, 2002.
(2) There was no established market price for the Company's stock
on the date of grant. The Company's stock did not begin
trading on NASDAQ until February 17, 1998, following
distribution shares of Common Stock to creditors under the
Plan.
41
<PAGE> 45
EMPLOYMENT AND SEVERANCE AGREEMENTS WITH CERTAIN EXECUTIVES
The Company has entered into employment agreements with Frederick J.
Mershad, Chairman and Chief Executive Officer, and John A. Muskovich, President,
Chief Operating Officer, and Chief Financial Officer and several of its other
executive officers as described below (the "Employment Agreements"). The
Employment Agreements with Messrs. Mershad and Muskovich were 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 Mr. Mershad or Mr. Muskovich provides the Company or the Company provides
Mr. Mershad or Mr. Muskovich with 180 days prior notice terminating this yearly
renewal. These Employment Agreements set forth (a) the executive's compensation
and benefits, subject to review at the discretion of the Board of Directors, (b)
the Company's right to terminate the executive for cause or otherwise; (c) the
amounts to be paid by the Company in the event of the executive's termination,
death, or disability while rendering services; (d) the executive's duty of
strict confidence and to refrain from conflicts of interest; (e) the executive's
obligations not to compete for the term of the agreement plus one year unless
the executive terminated his employment for good reason or the employer
terminates the executive other than for cause; and (f) the executive's right to
receive severance payments. In general, these Employment Agreements provide that
if Mr. Mershad or Mr. Muskovich is terminated for any reason other than for
cause or following a change in control, he will receive payments equal to the
remaining base salary that would have been distributed to him by the Company
under the remaining term of his employment agreement and the incentive
compensation earned by the executive for the most recent fiscal year. If such
executive (a) is terminated within two years of a change in control without
cause, (b) voluntarily terminates within two years of a change in control, or
(c) is terminated in connection with but prior to a change in control and
termination occurs following the commencement of any discussions with any third
party that ultimately results in a change in control, he will receive a
severance payment equal to the greater of 2.99 times the Internal Revenue Code
"base amount" as described in Section 280G of the Internal Revenue Code or two
times his most recent base salary and bonus and the executive will continue to
be eligible for health benefits, perquisites, and fringe benefits generally made
available to senior executives following his termination, unless the executive
obtains new employment providing substantially similar benefits. A tax gross-up
on excise taxes also will be paid if the severance pay exceeds the limits
imposed by the Internal Revenue Code.
The Company has also entered into Employment Agreements that include
severance pay provisions with each of Messrs. Zamberlan, Davido, Lipton and
Schiller. These executives serve the Company under their respective agreements
for terms ending on the second anniversary, with respect to Mr. Schiller, or the
third anniversary, with respect to Messrs. Davido, Lipton and Zamberlan, of the
Effective Date with automatic yearly extensions thereafter, unless the Company
or the executive has given written notice of termination not less than 120 days
prior to the yearly renewal date. These Employment Agreements set forth (a) the
executive's compensation and benefits, subject to review at the discretion of
the Board of Directors, (b) the Company's right to terminate the executive for
cause or otherwise; (c) the amounts to be paid by the Company in the event of
the executive's termination, death, or disability while rendering services; (d)
the executive's duty of strict confidence and to refrain from conflicts of
interest; (e) the executive's obligations not to compete for the term of the
agreement plus one year unless the executive terminated his employment for good
reason or the employer terminates the executive other than for cause; and (f)
the executive's right to receive severance payments if he (i) is terminated
within two years of a change in control without cause, (ii) voluntarily
terminates for defined good reasons within two years of a change of control,
(iii) terminates his employment for any reason, or without reason, during the
thirty-day period immediately following the first anniversary of a change in
control, or (iv) is terminated in connection with but prior to a change in
control and termination occurs following the commencement of any discussions
with any third party that ultimately results in a change in control.
Specifically, under the employment agreements, the amount of any severance
payment by the Company will be the greater of 2.99 times the Internal Revenue
Code "base amount" as described in Section 280G of the Internal Revenue Code or
two times his most recent base salary and bonus. Severance payments made under
the employment agreements will reduce any amounts that would be payable under
any other severance plan or program, including the master severance plan for
certain key employees. A tax gross-up on excise taxes also will be paid if the
severance pay exceeds the limit imposed by the Internal Revenue Code. In
addition, the executive will continue to be eligible for health benefits,
perquisites, and fringe benefits generally made available to senior executives
for two years following his 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Olsoff, Staph and
Wiesner. Prior to the Effective Date, the Company never had a Compensation
Committee or other committee of the Board of Directors performing similar
functions.
42
<PAGE> 46
Previously, decisions concerning compensation of executive officers of the
Company were made by the Company's Chief Executive Officer.
DIRECTOR COMPENSATION
Commencing on December 30, 1997, 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, in the form of a discounted stock option or as a combination of the two.
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 also received an initial grant of (a) 1,300 shares
of restricted stock and (b) 7,000 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.
43
<PAGE> 47
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company's Common Stock is the only outstanding class of voting
securities. The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of March 27, 1998 by (a) each person
who owns beneficially more than 5% of Common Stock of the Company to the extent
known to management, (b) each executive officer and director of the Company, and
(c) all directors and executive officers, as a group. 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>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP (1) OF CLASS
- --------------------------------------- ------------- --------
<S> <C> <C>
Perry Corp. (2) 772,943 6.10%
599 Lexington Avenue
New York, New York 10022
Beerman-Peal Holdings, Inc. (3) 748,558 5.63%
11 West Monument Building
8th Floor
Dayton, Ohio 45402
Bank of Montreal (4) 707,211 5.58%
115 South LaSalle Street
Chicago, Illinois 60603
The Elder-Beerman Stores Corp. 644,680 5.09%
Profit Sharing and Stock Ownership Plan
3155 El-Bee Road
Dayton, Ohio 45401-1448
Stewart M. Kasen 1,300 *
Steven C. Mason 1,300 *
Frederick J. Mershad 105,075 *
John A. Muskovich 76,023 *
Thomas J. Noonan, Jr. 1,300 *
Bernard Olsoff 1,300 *
Laura H. Pomerantz 1,300 *
Jack A. Staph 1,300 *
John J. Wiesner 1,300 *
James M. Zamberlan 10,000 *
Max Gutmann 91,308 (5) *
Herbert O. Glaser 45,443 (6) *
All directors and executive officers as a group 200,198 1.57%
(13 persons)
</TABLE>
* less than 1%
- -------------------------
(1) Information with respect to beneficial ownership is based on
information furnished to the Company by each stockholder
included in this table. Each stockholder included in this
table has sole voting and investment power with respect to the
shares shown to be beneficially owned by him.
(2) According to Schedule 13G dated March 3, 1998 filed by Perry
Corp. and Richard C. Perry, President and sole stockholder of
Perry Corp.
(3) Includes a Series A Warrant and a Series B Warrant with
respect to 249,809 and 374,713 shares of Common Stock,
respectively, both of which were granted December 30, 1997.
Does not include approximately 34,161 shares owned by the
beneficial owners of Beerman-Peal Holdings, Inc. through other
entities.
(4) According to Schedule 13G dated February 27, 1998 filed by
Bank of Montreal.
(5) Includes 54,338 shares distributed to Mr. Gutmann pursuant to
the Plan in satisfaction of his claims in Class C-5, General
Unsecured Claims.
(6) Includes 14,381 shares distributed to Mr. Glaser pursuant to
the Plan in satisfaction of his claims in Class C-5, General
Unsecured Claims.
44
<PAGE> 48
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements of the Company
and its subsidiaries are included in Item 8:
- Consolidated Balance Sheets-- As of January 31, 1998
and February 1, 1997
- Consolidated Statements of Operations -- For the
Years Ended January 31, 1998, February 1, 1997 and
February 3, 1996
- Consolidated Statements of Changes in Shareholders'
Equity -- For the Years Ended January 31, 1998,
February 1, 1997 and February 3, 1996
- Consolidated Statements of Cash Flows -- For the
Years Ended January 31, 1998, February 1, 1997 and
February 3, 1996
- Notes to Consolidated Financial Statements
- Report of Independent Auditors
(a)(2) The following consolidated financial statement schedule of the
Company and its subsidiaries is submitted herewith:
- Financial Statement Schedule II, Valuation and
Qualifying Accounts, for the years ended January 31,
1998, February 1, 1997 and February 3, 1996.
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.
(a)(3) Exhibits
The following Exhibits are included in this Annual Report on Form 10-K:
<TABLE>
<S> <C>
2 Third Amended Joint Plan of Reorganization of The
Elder-Beerman Stores Corp. and its Subsidiaries dated November
17, 1997 (previously filed as Exhibit 2 to the Company's Form
10 filed on November 26, 1997 (the "Form 10"), and
incorporated herein by reference) 3(a) Amended Articles of
Incorporation
3(b) Amended Code of Regulations (previously filed as Exhibit 3(b)
to the Form 10 and incorporated herein by reference)
4(a) Stock Certificate for Common Stock (previously filed as
Exhibit 4(a) to the Company's Form 10/A-1 filed on January 23,
1998 (the "Form 10/A-1") and incorporated herein by reference)
4(b) Form of Registration Rights Agreement (previously filed as
Exhibit 4(b) to the Form 10 and incorporated herein by
reference)
</TABLE>
45
<PAGE> 49
<TABLE>
<S> <C>
4(c) Rights Agreement By and Between The Elder-Beerman Stores Corp. and
Norwest Bank Minnesota, N.A., dated as of December 30, 1997
4(d) Warrant Agreement by and Between Beerman-Peal Holdings, Inc. and the
Elder-Beerman Stores Corp. for 249,809 shares of Common Stock at a
strike price of $12.80 per share dated December 30, 1997
4(e) Warrant Agreement by and Between Beerman-Peal Holdings, Inc. and the
Elder-Beerman Stores Corp. for 374,713 shares of Common Stock at a
strike price of $14.80 per share dated December 30, 1997
10(a)(i) Pooling and Servicing Agreement Among The El-Bee Receivables
Corporation, The El-Bee Chargit Corp. and Bankers Trust Company,
dated December 30, 1997 (previously filed as Exhibit 10(a)(i) to the
Form 10/A-1 and incorporated herein by reference)
10(a)(ii) Series 1997-1 Supplement Among The El-Bee Receivables Corporation,
The El-Bee Chargit Corp. and Bankers Trust Company, dated December
30, 1997 (previously filed as Exhibit 10(a)(ii) to the Form 10/A-1
and incorporated herein by reference)
10(a)(iii) Certificate Purchase Agreement Among The El-Bee Receivables
Corporation, Corporate Receivables Corporation, The Liquidity
Providers Named Herein, CitiCorp North American, Inc. and Bankers
Trust Company, dated December 30, 1997 (previously filed as Exhibit
10(a)(iii) to the Form 10/A-1 and incorporated herein by reference)
10(a)(iv) Loan Agreement Among The El-Bee Receivables Corporation, The El-Bee
Chargit Corp., Bankers Trust Company, The Collateral Investors
Parties Hereto and CitiCorp North America, Inc., dated as of
December 30, 1997 (previously filed as Exhibit 10(a)(iv) to the Form
10/A-1 and incorporated herein by reference)
10(a)(v) Intercreditor Agreement By and Among The El-Bee Chargit Corp., The
Elder-Beerman Stores Corp., Bankers Trust Company, CitiCorp USA,
Inc., CitiCorp North America, Inc., Corporate Receivables
Corporation and the Liquidity Providers Named Herein, dated as of
December 30, 1997 (previously filed as Exhibit 10(a)(v) to the Form
10/A-1 and incorporated herein by reference)
10(a)(vi) Parent Undertaking Agreement Among The Elder-Beerman Stores Corp.
and Bankers Trust Company, dated as of December 30, 1997 (previously
filed as Exhibit 10(a)(vi) to the Form 10/A-1 and incorporated
herein by reference)
10(a)(vii) Purchase Agreement (Chargit) Among The El-Bee Chargit Corp. and The
El-Bee Receivables Corporation, dated as of December 30, 1997
(previously filed as Exhibit 10(a)(vii) to the Form 10/A-1 and
incorporated herein by reference)
10(a)(viii) Purchase Agreement (Elder-Beerman) Among The Elder-Beerman Stores
Corp. and The El-Bee Chargit Corp., dated as of December 30, 1997
(previously filed as Exhibit 10(a)(viii) to the Form 10/A-1 and
incorporated herein by reference)
10(a)(ix) Subordinated Note Between The El-Bee Receivables Corporation and The
El-Bee Chargit Corp, dated December 30, 1997 (previously filed as
Exhibit 10(a)(ix) to the Form 10/A-1 and incorporated herein by
reference)
10(b)(i) Credit Agreement Among The Elder-Beerman Stores Corp., The Lenders
Party Hereto, Citibank, N.A. and CitiCorp USA, Inc., dated as of
December 30, 1997 (previously filed as Exhibit 10(b)(i) to the Form
10/A-1 and incorporated herein by reference)
10(b)(ii) Borrower Pledge Agreement Made by The Elder-Beerman Stores Corp. to
Citibank, N.A., dated December 30, 1997 (previously filed as Exhibit
10(b)(ii) to the Form 10/A-1 and incorporated herein by reference)
</TABLE>
46
<PAGE> 50
<TABLE>
<S> <C>
10(b)(iii) Chargit Pledge Agreement Made By The El-Bee Chargit Corp. to
Citibank, N.A., dated December 30, 1997 (previously filed as Exhibit
10(b)(iii) to the Form 10/A-1 and incorporated herein by reference)
10(b)(iv) Security Agreement Made By The Elder-Beerman stores Corp., The
El-Bee Chargit Corp., The Bee-Gee Shoe Corp. in Favor of CitiCorp
USA, Inc., dated December 30, 1997 (previously filed as Exhibit
10(b)(iv) to the Form 10/A-1 and incorporated herein by reference)
10(b)(v) Subsidiary Guaranty Made by The El-Bee Chargit Corp., dated December
30, 1997 (previously filed as Exhibit 10(b)(v) to the Form 10/A-1
and incorporated herein by reference)
10(b)(vi) Subsidiary Guaranty Made by The Bee-Gee Shoe Corp., dated December
30, 1997 (previously filed as Exhibit 10(b)(vi) to the Form 10/A-1
and incorporated herein by reference)
10(b)(vii) Form of Revolving Note (previously filed as Exhibit 10(b)(vii) to
the Form 10/A-1 and incorporated herein by reference)
10(b)(viii) Letter Agreement Re: Assignment of Account By and Between The
Elder-Beerman Stores Corp., CitiCorp USA, Inc., and Bankers Trust
Company, dated December 30, 1997 (previously filed as Exhibit
10(b)(viii) to the Form 10/A-1 and incorporated herein by reference)
10(c) Form of Employment Agreement for Senior Vice Presidents (previously
filed as Exhibit 10(c) to the Form 10 and incorporated herein by
reference)*
10(d) Form of Employment Agreement for Executive Vice Presidents
(previously filed as Exhibit 10(d) to the Form 10 and incorporated
herein by reference)*
10(f) Form of Director Indemnification Agreement (previously filed as
Exhibit 10(f) to the Form 10 and incorporated herein by reference)*
10(g) Form of Officer Indemnification Agreement (previously filed as
Exhibit 10(g) to the Form 10 and incorporated herein by reference)*
10(h) Form of Director and Officer Indemnification Agreement (previously
filed as Exhibit 10(h) to the Form 10 and incorporated herein by
reference)*
10(i) The Elder-Beerman Stores Corp. Equity and Performance Incentive
Plan, Effective December 30, 1997*
10(j) Form of Restricted Stock Agreement for Non-Employee Director
(previously filed as Exhibit 10(j) to the Form 10 and incorporated
herein by reference)*
10(k) Form of Restricted Stock Agreement (previously filed as Exhibit
10(k) to the Form 10 and incorporated herein by reference)*
10(l) Form of Deferred Shares Agreement (previously filed as Exhibit 10(l)
to the Form 10 and incorporated herein by reference)*
10(m) Form of Nonqualified Stock Option Agreement for Non-Employee
Director (previously filed as Exhibit 10(m) to the Form 10 and
incorporated herein by reference)*
10(n) Form of Nonqualified Stock Option Agreement (previously filed as
Exhibit 10(n) to the Form 10 and incorporated herein by reference)*
10(o) Employee Stock Purchase Plan (previously filed as Exhibit 10(o) to
the Form 10 and incorporated herein by reference)*
10(p) Comprehensive Settlement Agreement By and Among The Debtors, The
ESOP and the ESOP Committee and the Shareholders of The
Elder-Beerman Stores Corp., dated as of December 30, 1997
</TABLE>
47
<PAGE> 51
<TABLE>
<S> <C>
10(q) Tax Indemnification Agreement By and Among The
Elder-Beerman Stores Corp., the Direct and Indirect
Subsidiaries of Elder-Beerman, Beerman-Peal Holdings,
Inc., The Beerman-Peal Corporation, Beerman Investments,
Inc., The Beerman Corporation and The Individuals,
Partnerships and Trusts named Herein dated as of
December 15, 1997 (previously filed as Exhibit 10(q) to
the Form 10 and incorporated herein by reference)
10(r) Tax Sharing Agreement By and Among The Elder-Beerman
Stores Corp., The Bee-Gee Shoe Corp. and The El-Bee
Chargit Corp., dated as of December 30, 1997 (previously
filed as Exhibit 10(r) to the Form 10 and incorporated
herein by reference)
10(s) Employment Agreement Between The Elder-Beerman Stores
Corp. and John A. Muskovich, dated December 30, 1997*
10(t) Amended and Restated Employment Agreement Between The
Elder-Beerman Stores Corp. and Frederick J. Mershad,
dated December 30, 1997*
21 Subsidiaries of the Company
23 Consent of Independent Auditors
24 Powers of Attorney
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed during the three months
ended January 31, 1998.
(c) The response to this portion of Item 14 is included as Exhibits to
this report.
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
</TABLE>
48
<PAGE> 52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 30th day of
April, 1998.
THE ELDER-BEERMAN STORES CORP.
By: /s/ Scott J. Davido, Esq.
---------------------------------------------
Scott J. Davido, Esq.
Senior Vice President, General Counsel
and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Company and in the capacities indicated and on April 30, 1998.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Chairman of the Board of Directors and Chief Executive
______________________________ Officer
Frederick J. Mershad (Principal Executive Officer)
* President, Chief Operating Officer and Chief Financial
______________________________ Officer; Director
John A. Muskovich (Principal Financial Officer)
* Senior Vice President, Controller
______________________________ (Principal Accounting Officer)
Steven D. Lipton
* Director
______________________________
Stewart M. Kasen
* Director
______________________________
Steven C. Mason
* Director
______________________________
Thomas J. Noonan, Jr.
* Director
______________________________
Bernard Olsoff
* Director
______________________________
Laura H. Pomerantz
* Director
______________________________
Jack A. Staph
* Director
______________________________
John J. Wiesner
</TABLE>
* The undersigned, pursuant to certain Powers of Attorney
executed by each of the directors and officers noted above and
previously filed or filed herewith contemporaneously with the
Securities and Exchange Commission, by signing his name
hereto, does hereby sign and execute this report on behalf of
each of the persons noted above, in the capacities indicated.
Dated: April 30, 1998 By: /s/ Scott J. Davido, Esq.
-------------------------------------
Scott J. Davido, Esq.
Attorney-in-Fact
49
<PAGE> 53
EXHIBIT INDEX
<TABLE>
<S> <C>
2 Third Amended Joint Plan of Reorganization of The Elder-Beerman
Stores Corp. and its Subsidiaries dated November 17, 1997
(previously filed as Exhibit 2 to the Company's Form 10 filed on
November 26, 1997 (the "Form 10"), and incorporated herein by
reference)
3(a) Amended Articles of Incorporation
3(b) Amended Code of Regulations (previously filed as Exhibit 3(b) to the
Form 10 and incorporated herein by reference)
4(a) Stock Certificate for Common Stock (previously filed as Exhibit 4(a)
to the Company's Form 10/A-1 filed on January 23, 1998 (the "Form
10/A-1") and incorporated herein by reference)
4(b) Form of Registration Rights Agreement (previously filed as Exhibit
4(b) to the Form 10 and incorporated herein by reference)
4(c) Rights Agreement By and Between The Elder-Beerman Stores Corp. and
Norwest Bank Minnesota, N.A., dated as of December 30, 1997
4(d) Warrant Agreement by and Between Beerman-Peal Holdings, Inc. and the
Elder-Beerman Stores Corp. for 249,809 shares of Common Stock at a
strike price of $12.80 per share dated December 30, 1997
4(e) Warrant Agreement by and Between Beerman-Peal Holdings, Inc. and the
Elder-Beerman Stores Corp. for 374,713 shares of Common Stock at a
strike price of $14.80 per share dated December 30, 1997
10(a)(i) Pooling and Servicing Agreement Among The El-Bee Receivables
Corporation, The El-Bee Chargit Corp. and Bankers Trust Company,
dated December 30, 1997 (previously filed as Exhibit 10(a)(i) to the
Form 10/A-1 and incorporated herein by reference)
10(a)(ii) Series 1997-1 Supplement Among The El-Bee Receivables Corporation,
The El-Bee Chargit Corp. and Bankers Trust Company, dated December
30, 1997 (previously filed as Exhibit 10(a)(ii) to the Form 10/A-1
and incorporated herein by reference)
10(a)(iii) Certificate Purchase Agreement Among The El-Bee Receivables
Corporation, Corporate Receivables Corporation, The Liquidity
Providers Named Herein, CitiCorp North American, Inc. and Bankers
Trust Company, dated December 30, 1997 (previously filed as Exhibit
10(a)(iii) to the Form 10/A-1 and incorporated herein by reference)
10(a)(iv) Loan Agreement Among The El-Bee Receivables Corporation, The El-Bee
Chargit Corp., Bankers Trust Company, The Collateral Investors
Parties Hereto and CitiCorp North America, Inc., dated as of
December 30, 1997 (previously filed as Exhibit 10(a)(iv) to the Form
10/A-1 and incorporated herein by reference)
10(a)(v) Intercreditor Agreement By and Among The El-Bee Chargit Corp., The
Elder-Beerman Stores Corp., Bankers Trust Company, CitiCorp USA,
Inc., CitiCorp North America, Inc., Corporate Receivables
Corporation and the Liquidity Providers Named Herein, dated as of
December 30, 1997 (previously filed as Exhibit 10(a)(v) to the Form
10/A-1 and incorporated herein by reference)
10(a)(vi) Parent Undertaking Agreement Among The Elder-Beerman Stores Corp.
and Bankers Trust Company, dated as of December 30, 1997 (previously
filed as Exhibit 10(a)(vi) to the Form 10/A-1 and incorporated
herein by reference)
10(a)(vii) Purchase Agreement (Chargit) Among The El-Bee Chargit Corp. and The
El-Bee Receivables Corporation, dated as of December 30, 1997
(previously filed as Exhibit 10(a)(vii) to the Form 10/A-1 and
incorporated herein by reference)
10(a)(viii) Purchase Agreement (Elder-Beerman) Among The Elder-Beerman Stores
Corp. and The El-Bee Chargit Corp., dated as of December 30, 1997
(previously filed as Exhibit 10(a)(viii) to the Form 10/A-1 and
incorporated herein by reference)
</TABLE>
50
<PAGE> 54
<TABLE>
<S> <C>
10(a)(ix) Subordinated Note Between The El-Bee Receivables Corporation and The
El-Bee Chargit Corp, dated December 30, 1997 (previously filed as
Exhibit 10(a)(ix) to the Form 10/A-1 and incorporated herein by
reference)
10(b)(i) Credit Agreement Among The Elder-Beerman Stores Corp., The Lenders
Party Hereto, Citibank, N.A. and CitiCorp USA, Inc., dated as of
December 30, 1997 (previously filed as Exhibit 10(b)(i) to the Form
10/A-1 and incorporated herein by reference)
10(b)(ii) Borrower Pledge Agreement Made by The Elder-Beerman Stores Corp. to
Citibank, N.A., dated December 30, 1997 (previously filed as Exhibit
10(b)(ii) to the Form 10/A-1 and incorporated herein by reference)
10(b)(iii) Chargit Pledge Agreement Made By The El-Bee Chargit Corp. to
Citibank, N.A., dated December 30, 1997 (previously filed as Exhibit
10(b)(iii) to the Form 10/A-1 and incorporated herein by reference)
10(b)(iv) Security Agreement Made By The Elder-Beerman stores Corp., The
El-Bee Chargit Corp., The Bee-Gee Shoe Corp. in Favor of CitiCorp
USA, Inc., dated December 30, 1997 (previously filed as Exhibit
10(b)(iv) to the Form 10/A-1 and incorporated herein by reference)
10(b)(v) Subsidiary Guaranty Made by The El-Bee Chargit Corp., dated December
30, 1997 (previously filed as Exhibit 10(b)(v) to the Form 10/A-1
and incorporated herein by reference)
10(b)(vi) Subsidiary Guaranty Made by The Bee-Gee Shoe Corp., dated December
30, 1997 (previously filed as Exhibit 10(b)(vi) to the Form 10/A-1
and incorporated herein by reference)
10(b)(vii) Form of Revolving Note (previously filed as Exhibit 10(b)(vii) to
the Form 10/A-1 and incorporated herein by reference)
10(b)(viii) Letter Agreement Re: Assignment of Account By and Between The
Elder-Beerman Stores Corp., CitiCorp USA, Inc., and Bankers Trust
Company, dated December 30, 1997 (previously filed as Exhibit
10(b)(viii) to the Form 10/A-1 and incorporated herein by reference)
10(c) Form of Employment Agreement for Senior Vice Presidents (previously
filed as Exhibit 10(c) to the Form 10 and incorporated herein by
reference)*
10(d) Form of Employment Agreement for Executive Vice Presidents
(previously filed as Exhibit 10(d) to the Form 10 and incorporated
herein by reference)*
10(f) Form of Director Indemnification Agreement (previously filed as
Exhibit 10(f) to the Form 10 and incorporated herein by reference)*
10(g) Form of Officer Indemnification Agreement (previously filed as
Exhibit 10(g) to the Form 10 and incorporated herein by reference)*
10(h) Form of Director and Officer Indemnification Agreement (previously
filed as Exhibit 10(h) to the Form 10 and incorporated herein by
reference)*
10(i) The Elder-Beerman Stores Corp. Equity and Performance Incentive
Plan, Effective December 30, 1997*
10(j) Form of Restricted Stock Agreement for Non-Employee Director
(previously filed as Exhibit 10(j) to the Form 10 and incorporated
herein by reference)*
10(k) Form of Restricted Stock Agreement (previously filed as Exhibit
10(k) to the Form 10 and incorporated herein by reference)*
10(l) Form of Deferred Shares Agreement (previously filed as Exhibit 10(l)
to the Form 10 and incorporated herein by reference)*
10(m) Form of Nonqualified Stock Option Agreement for Non-Employee
Director (previously filed as Exhibit 10(m) to the Form 10 and
incorporated herein by reference)*
10(n) Form of Nonqualified Stock Option Agreement (previously filed as
Exhibit 10(n) to the Form 10 and incorporated herein by reference)*
10(o) Employee Stock Purchase Plan (previously filed as Exhibit 10(o) to
the Form 10 and incorporated herein by reference)*
</TABLE>
51
<PAGE> 55
<TABLE>
<S> <C>
10(p) Comprehensive Settlement Agreement By and Among The Debtors, The
ESOP and the ESOP Committee and the Shareholders of The
Elder-Beerman Stores Corp., dated as of December 30, 1997
10(q) Tax Indemnification Agreement By and Among The Elder-Beerman Stores
Corp., the Direct and Indirect Subsidiaries of Elder-Beerman,
Beerman-Peal Holdings, Inc., The Beerman-Peal Corporation, Beerman
Investments, Inc., The Beerman Corporation and The Individuals,
Partnerships and Trusts named Herein dated as of December 15, 1997
(previously filed as Exhibit 10(q) to the Form 10 and incorporated
herein by reference)
10(r) Tax Sharing Agreement By and Among The Elder-Beerman Stores Corp.,
The Bee-Gee Shoe Corp. and The El-Bee Chargit Corp., dated as of
December 30, 1997 (previously filed as Exhibit 10(r) to the Form 10
and incorporated herein by reference)
10(s) Employment Agreement Between The Elder-Beerman Stores Corp. and John
A. Muskovich, dated December 30, 1997*
10(t) Amended and Restated Employment Agreement Between The Elder-Beerman
Stores Corp. and Frederick J. Mershad, dated December 30, 1997*
21 Subsidiaries of the Company
23 Consent of Independent Auditors
24 Powers of Attorney
27 Financial Data Schedule
</TABLE>
52
<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 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
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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 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 eight nor more than 11 directors, as
shall be fixed from time to time in the
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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; 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
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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.
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<PAGE> 1
Exhibit 4(c)
================================================================================
RIGHTS AGREEMENT
Dated as of December 30, 1997
By and Between
THE ELDER-BEERMAN STORES CORP.
and
NORWEST BANK MINNESOTA, N.A.,
as Rights Agent
================================================================================
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TABLE OF CONTENTS
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Page
----
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
(i)
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Page
----
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
(ii)
<PAGE> 4
RIGHTS AGREEMENT
----------------
This RIGHTS AGREEMENT, dated as of December 30, 1997 (this
"Agreement"), is made and entered into by and between The Elder-Beerman Stores
Corp., an Ohio corporation (the "Company"), and Norwest Bank Minnesota, N.A.
(the "Rights Agent").
RECITALS
--------
WHEREAS, pursuant to the final confirmation order entered by the
Bankruptcy Court in Jointly Administered Case No. 95-33643 on December 30, 1997,
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 the day that is ten days after the date on which the
Company's Registration Statement on Form 10 is declared effective by the
Securities and Exchange Commission (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 December 30, 1997 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 Beneficial Owner of Common
<PAGE> 5
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
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<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 $60.00 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 Norwest Bank Minnesota, N.A., 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 Norwest Bank Minnesota, N.A., dated as
of December 30, 1997 (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which is on
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<PAGE> 9
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 countersigned, either manually or by facsimile, 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 Certificates ceases to be
such officer of the Company before countersignature by the Rights Agent
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<PAGE> 10
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.
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
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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 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
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<PAGE> 12
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 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
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<PAGE> 13
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 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
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<PAGE> 14
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
(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
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<PAGE> 15
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 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
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<PAGE> 16
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 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
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<PAGE> 17
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 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
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<PAGE> 18
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 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
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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.
(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
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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. 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.
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<PAGE> 21
(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 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
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<PAGE> 22
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 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
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<PAGE> 23
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 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
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<PAGE> 24
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 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
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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 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.
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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.
(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;
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<PAGE> 27
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 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
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<PAGE> 28
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.
(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
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<PAGE> 29
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 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
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<PAGE> 30
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 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
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<PAGE> 31
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.
(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.
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<PAGE> 32
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 (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
29
<PAGE> 33
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
(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:
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<PAGE> 34
Norwest Bank Minnesota, N.A.
c/o Norwest Shareowner Services
161 North Concord Exchange
South St. Paul, Minnesota 55075
(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.
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
31
<PAGE> 35
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 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.
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<PAGE> 36
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.
/s/ Scott J. Davido By: /s/ John A. Muskovich
- --------------------------------------- ----------------------
Scott J. Davido John A. Muskovich
Senior Vice President, General Counsel President, Chief Operating Officer
and Secretary and Chief Financial Officer
[SEAL]
Attest: NORWEST BANK MINNESOTA, N.A.
/s/ Kelly A. Beenen By: /s/ William J. Kennedy
- --------------------------------------- ----------------------
Name: Kelly A. Beenen William J. Kennedy
----------------------------- Vice President
Title: Vice President
-----------------------------
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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 December 30, 1997, 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 of a Series A Preferred
Share. In the event the Company shall at any time declare or pay any dividend
A-1
<PAGE> 38
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.
(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
A-2
<PAGE> 39
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 shall be determined by the
Company's Board of Directors at its first meeting following December 30, 1997),
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.
Section 7. The Series A Preferred Shares shall not be
convertible into Common Stock.
A-3
<PAGE> 40
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 December,
1997.
--------------------------------------------
John A. Muskovich
President
--------------------------------------------
Scott J. Davido
Secretary
A-4
<PAGE> 41
FORM OF RIGHT CERTIFICATE
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER DECEMBER 30, 1998 (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 December 30, 1997 (the "Rights Agreement"),
between The Elder-Beerman Stores Corp., an Ohio corporation (the "Company"), and
Norwest Bank Minnesota, N.A. (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 per one one-hundredth
of a Preferred Share as determined by the Company's Board of Directors at its
first meeting following December 30, 1997 (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.
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
B-2
<PAGE> 43
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:
- ----------------------------------- -------------------------------
Secretary John A. Muskovich
President
Countersigned:
NORWEST BANK MINNESOTA, N.A.
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 December 30, 1997, 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 the day that is
ten days after the date on which the Company's Registration Statement on Form 10
is declared effective by the Securities and Exchange Commission (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")
per one one-hundredth of a Preferred Share as determined by the Company's Board
of Directors at its first meeting following December 30, 1997, subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement, dated as of December 30, 1997 (the "Rights Agreement"), between the
Company and Norwest Bank Minnesota, N.A. 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 December 30, 1997 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
BEERMAN-PEAL HOLDINGS, INC.
and
THE ELDER-BEERMAN STORES CORP.
Dated as of December 30, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
PAGE
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
-i-
<PAGE> 3
WARRANT AGREEMENT
This WARRANT AGREEMENT (the "Warrant") is being entered into
this 30th day of December, 1997, by and between The Elder-Beerman Stores Corp.,
an Ohio corporation (together with its successors and permitted assigns, the
"Company") and Beerman-Peal Holdings, Inc., an Ohio 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 for the New Series A Warrants is
contemplated by the Joint Plan of Reorganization of the Company and Its
Subsidiaries confirmed by an order entered by the Bankruptcy Court on December
16, 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 249,809 of the
outstanding shares of common stock (the "Warrant Shares"), at an exercise price
of $12.80 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 Share
<PAGE> 4
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
dividend or distribution, or the effective date of such recapitalization or
reclassification shall be adjusted so that
2
<PAGE> 5
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.
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.
4
<PAGE> 7
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: (937) 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:
Beerman-Peal Holdings, Inc.
11 W. Monument Building
8th Floor
Dayton, Ohio 45402
Attention: William S. Weprin
Telecopy: (937) 222-5472
5
<PAGE> 8
with a copy to:
McDonald, Hopkins, Burke & Haber Co., L.P.A.
2100 Bank One Center
600 Superior Avenue, East
Cleveland, Ohio 44114-2653
Attention: Shawn M. Riley
Telecopy: (216) 348-5474
(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: /s/ John A. Muskovich
---------------------------------------
John A. Muskovich
President, Chief Operating Officer
and Chief Financial Officer
BEERMAN-PEAL HOLDINGS, INC.
By: /s/ William S. Weprin
---------------------------------------
William S. Weprin
President
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,
without par value, 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 4(e)
================================================================================
WARRANT AGREEMENT
by and between
BEERMAN-PEAL HOLDINGS, INC.
and
THE ELDER-BEERMAN STORES CORP.
Dated as of December 30, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
PAGE
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
-i-
<PAGE> 3
WARRANT AGREEMENT
This WARRANT AGREEMENT (the "Warrant") is being entered into
this 30th day of December, 1997, by and between The Elder-Beerman Stores Corp.,
an Ohio corporation (together with its successors and permitted assigns, the
"Company") and Beerman-Peal Holdings, Inc., an Ohio 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 for the New Series B Warrants is
contemplated by the Joint Plan of Reorganization of the Company and Its
Subsidiaries confirmed by an order entered by the Bankruptcy Court on December
16, 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 374,713 of the
outstanding shares of common stock (the "Warrant Shares"), at an exercise price
of $14.80 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 Share
<PAGE> 4
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
dividend or distribution, or the effective date of such recapitalization or
reclassification shall be adjusted so that
2
<PAGE> 5
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.
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.
4
<PAGE> 7
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: (937) 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:
Beerman-Peal Holdings, Inc.
11 W. Monument Building
8th Floor
Dayton, Ohio 45402
Attention: William S. Weprin
Telecopy: (937) 222-5472
5
<PAGE> 8
with a copy to:
McDonald, Hopkins, Burke & Haber Co., L.P.A.
2100 Bank One Center
600 Superior Avenue, East
Cleveland, Ohio 44114-2653
Attention: Shawn M. Riley
Telecopy: (216) 348-5474
(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: /s/ John A. Muskovich
----------------------------------------------
John A. Muskovich
President, Chief Operating Officer and
Chief Financial Officer
BEERMAN-PEAL HOLDINGS, INC.
By: /s/ William S. Weprin
----------------------------------------------
William S. Weprin
President
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,
without par value, 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
8
<PAGE> 1
Exhibit 10(i)
THE ELDER-BEERMAN STORES CORP.
EQUITY AND PERFORMANCE INCENTIVE PLAN
(Effective December 30, 1997)
<PAGE> 2
THE ELDER-BEERMAN STORES CORP.
EQUITY AND PERFORMANCE INCENTIVE PLAN
(Effective December 30, 1997)
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <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>
i
<PAGE> 3
<TABLE>
<S> <C> <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>
ii
<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. ss.ss. 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.
2
<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 and 4.3, Market Value
per Share will be $10.89 per share.
"Non-Employee Director" means a Director of the Corporation who
is not an employee of the Corporation or any Subsidiary.
"Optionee" means the optionee named in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable on exercise of an
Option Right.
"Option Right" means the right to purchase Common Shares upon
exercise of an option granted pursuant to Section 3.2 or Section 4.2 of the
Plan.
"Participant" means a person who is selected by the Board to
receive benefits under the Plan and who is at the time an officer, or other key
employee of the Corporation or any one or more of its Subsidiaries, or who has
agreed to commence serving in any of such capacities within 90 days of the Date
of Grant, and also includes each Non-Employee Director who receives an award of
Option Rights pursuant to Section 4.2 of the Plan; provided, however, that for
purposes of Articles III and V of the Plan, Participant does not include such
Non-Employee Director.
"Performance Objectives" means the measurable performance
objective or objectives established pursuant to the Plan for Participants who
have received grants of Performance Shares or Performance Units or, when so
determined by the Board, Option Rights, Appreciation Rights, Restricted Shares
and dividend credits pursuant to the Plan. Performance Objectives may be
described in terms of Corporation-wide objectives and/or objectives that are
related to the performance of the individual Participant or of the Subsidiary,
division, department, region, store or function within the Corporation or
Subsidiary in which the Participant is employed. The Performance Objectives may
be made relative to the performance of other corporations. The Performance
3
<PAGE> 7
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.
(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
6
<PAGE> 10
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 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.
11
<PAGE> 15
(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.
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.
12
<PAGE> 16
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.
"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.
13
<PAGE> 17
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 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
14
<PAGE> 18
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, 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
15
<PAGE> 19
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.
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
16
<PAGE> 20
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
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
17
<PAGE> 21
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 Director............ 126,046 30,606 156,652
Executive Vice President - Stores.................. 60,599 -- 60,599
Senior Vice Presidents(12)......................... 215,975 -- 215,975
Vice Presidents(23)................................ 130,363 -- 130,363
Other Key Employees(3)............................. 12,120 -- 12,120
Outside Directors1(7).............................. 49,000 9,100 58,100
------- ------ -------
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>
<PAGE> 1
Exhibit 10(p)
COMPREHENSIVE SETTLEMENT AGREEMENT
----------------------------------
THIS COMPREHENSIVE SETTLEMENT AGREEMENT (this "Agreement") is entered
into as of December 30, 1997 by and among the Parties (as defined below). Any
capitalized terms not defined herein have the meanings assigned to them in the
Third Amended Joint Plan of Reorganization of The Elder-Beerman Stores Corp. and
Its Subsidiaries, dated November 17, 1997, as modified (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;
<PAGE> 2
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. ss.ss. 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
2
<PAGE> 3
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-
3
<PAGE> 4
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 actions,
4
<PAGE> 5
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 November 17, 1997 and are not affected by this Agreement.
5
<PAGE> 6
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 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.
6
<PAGE> 7
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 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
7
<PAGE> 8
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 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.
8
<PAGE> 9
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."
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
9
<PAGE> 10
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 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,
10
<PAGE> 11
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 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
11
<PAGE> 12
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.
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-
12
<PAGE> 13
Gee (as defined in Article I of the Plan), as successors in interest to the
Debtors, will perform all of 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 claim or the
14
<PAGE> 15
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:
<TABLE>
<S> <C>
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
Richard M. Cieri (Counsel to the ESOP Committee)
JONES, DAY, REAVIS & POGUE
North Point Shawn M. Riley
901 Lakeside Avenue McDONALD, HOPKINS, BURKE & HABER CO. LPA
Cleveland, Ohio 44114 2100 Bank One Center
(216) 586-3939 600 Superior Avenue, NE
Cleveland, Ohio 44114
(Counsel to the Debtors and Reorganized Debtors) (216) 348-5400
(Counsel to the Beerman Family Entities, including
Equity Directors and Zane Lessors)
</TABLE>
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.
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.
15
<PAGE> 16
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% owner of
Beerman and 11% owner of Abco Land Development
Corp. ("ALD"); as trustee for LPST and TWT; as
By: /s/ John A. Muskovich beneficiary of the Rhea Peal Trust; and on behalf of all
------------------------------------------ Beerman Family Entities wholly or partially owned and/or
John A. Muskovich controlled by LBP
Executive Vice President - Administration
THE ELDER-BEERMAN STORES CORP. /s/ Leonard B. Peal
Profit Sharing and Stock Ownership Plan ------------------------------------------
By: /s/ Patricia L. Gifford BEERMAN-PEAL HOLDINGS, INC.
------------------------------------------ On its behalf and that of its wholly-owned
subsidiary, The Beerman-Peal Corporation
THE ELDER-BEERMAN STORES CORP.
Profit Sharing and Stock Ownership Plan By: /s/ William S. Weprin
Administration Committee ------------------------------------------
William S. Weprin
President
By: /s/ Patricia L. Gifford
------------------------------------------ THE BEERMAN CORPORATION
BARBARA B. WEPRIN By: /s/ William S. Weprin
In her individual capacity ("BBW"); as 50% owner of The ------------------------------------------
Beerman Corporation ("Beerman"); trustee for The William S. Weprin
Leonard Peal Stock Trust ("LPST"), The Todd Weprin President
Trust ("TWT"), and Barbara B. Weprin, Trustee
("BWTr"); and on behalf of all Beerman Family Entities BEERMAN INVESTMENTS, INC.
wholly or partially owned and/or controlled by BBW
By: /s/ William S. Weprin
/s/ Barbara B. Weprin ------------------------------------------
- ------------------------------------------ William S. Weprin
President
WILLIAM S. WEPRIN THE LEONARD PEAL STOCK TRUST
In his individual capacity ("WSW"), and on behalf of all
Beerman Family Entities wholly or partially owned and/or
controlled by WSW By: /s/ Barbara B. Weprin
------------------------------------------
Barbara B. Weprin
/s/ William S. Weprin Trustee
- ------------------------------------------
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C>
BARBARA B. WEPRIN, TRUSTEE POINT WEST III LIMITED PARTNERSHIP
By: /s/ Barbara B. Weprin By: /s/ Barbara B. Weprin
------------------------------ ------------------------------
Barbara B. Weprin Barbara B. Weprin
General Partner
ABCO LAND DEVELOPMENT CORP.
UNIVERSITY MALL ASSOCIATES
PARTNERSHIP
By: /s/ William S. Weprin
------------------------------
William S. Weprin By: /s/ William S. Weprin
President ------------------------------
William S. Weprin
WILDCAT DEVELOPMENT LIMITED General Partner
PARTNERSHIP
FAIRBORN COMMERCE CENTER II
LIMITED PARTNERSHIP
By: /s/ Barbara B. Weprin
------------------------------
Barbara B. Weprin By: /s/ Barbara B. Weprin
General Partner ------------------------------
Barbara B. Weprin
CENTERVILLE ASSOCIATES LTD. General Partner
LIVE OAK ASSOCIATES LIMITED
By: /s/ Barbara B. Weprin PARTNERSHIP
------------------------------
Barbara B. Weprin
Trustee of BWTr, General Partner By: /s/ Barbara B. Weprin
------------------------------
CENTERVILLE ASSOCIATES III LIMITED Barbara B. Weprin
PARTNERSHIP General Partner
By: /s/ Barbara B. Weprin
------------------------------
Barbara B. Weprin
Trustee of BWTr, General Partner
</TABLE>
17
<PAGE> 18
EXHIBIT A -- BEERMAN FAMILY LEASE CLAIMS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AMOUNT RESOLVED
CLAIMANT DEBTOR BASIS CLAIMED AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BWTr Elder-Beerman Broadmoor Plaza
a. Prepetition Real Estate
("R/E") Taxes $ 24,000.71 $ 24,000.71
b. Lease Rejection Damages 147,333.10 147,333.10
c. Postpetition R/E Taxes 7,639.15 7,639.15
----------- --------
$ 179,026.96 $ 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 To be addressed
a. Prepetition R/E Taxes 32,528.17 by Toledo Stores
b. Postpetition R/E Taxes 4,273.07 Modification
3. North Towne Shopping Center Agreements
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 $ -0-
Limited b. Postpetition R/E Taxes 10,606.12 10,606.12
Partnership
TOTAL $ 86,994.03 $ 10,606.12
- ------------------------------------------------------------------------------------------------------------------------
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 $ 101,623.19
II Limited
Partnership
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE> 19
<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 $ 2,407.14
b. Lease Rejection Damages 339,376.08 339,376.08
c. Contingent Claim unliquidated -0-
d. Rent for 11/96-1/97 31,958.50 31,958.50
e. Prepetition R/E Taxes 22,523.23 22,523.23
f. Postpetition R/E Taxes 37,666.82 37,666.82
g. Damage to Premises 27,550.00 13,775.00
----------
TOTAL $ 461,481.77 $ 447,706.77
- ------------------------------------------------------------------------------------------------------------------------
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 $ 76,658.91
Limited b. Prepetition Insurance 4,464.54 4,464.54
Partnership c. Prepetition Disposal Charge 859.78 859.78
d. Postpetition R/E Taxes 18,472.41 18,472.41
e. Prepetition Water Charge 390.86 390.86
f. Prepetition Late Charges 1,633.67 1,633.67
---------- ----------
TOTAL $ 102,480.17 $ 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 $ 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 $ 8,252.75
Partnership b. Lease Rejection Damages 159,465.64 153,276.00
c. Repairs 17,566.53 8,783.27
d. Lost Access Card 5.00 5.00
e. 3/96, 4/96 Rent 16,505.50 16,505.50
f. Maintenance Billing 612.20 612.20
----------
TOTAL $ 202,407.62 $ 187,434.72
- ------------------------------------------------------------------------------------------------------------------------
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> 20
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AMOUNT RESOLVED
CLAIMANT DEBTOR BASIS CLAIMED AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Wildcat Bee-Gee North Park Center
Development a. Postpetition Disposal Charges $ 39.35 $ 39.35
Limited b. Prepetition Water 287.10 287.10
Partnership c. Postpetition Water 229.91 229.91
d. Claim unliquidated 0.00
---------- ----------
TOTAL $ 556.36 $ 556.36
- ------------------------------------------------------------------------------------------------------------------------
Live Oak Margo's Margo's Headquarters
Associates Limited a. Prepetition Rent $ 4,383.52 $ 4,383.52
Partnership b. Prepetition Taxes 10,340.42 10,340.42
---------- ----------
TOTAL $ 14,723.94 $ 14,723.94
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 21
EXHIBIT B -- MISCELLANEOUS BEERMAN FAMILY CLAIMS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AMOUNT RESOLVED
CLAIMANT BASIS CLAIMED AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LBP Indemnification unliquidated $ 0.00
Guaranty $ 1,800,000.00 0.00
Deferred Compensation unliquidated 0.00
Wages 0.00 0.00
----------
TOTAL $ 1,800,000.00 $ 0.00
- ------------------------------------------------------------------------------------------------------------------------
BBW Indemnification unliquidated $ 0.00
Guarantee $ 1,800,000.00 0.00
ESOP (as former employee) unliquidated 0.00
Van Buren Shopping Center Parking
Lot 965.80 965.80
a. Prepetition R/E Taxes 133.10 133.10
b. Postpetition R/E Taxes 0.00 0.00
Wages __________
$ 1,801,098.90 $ 1,098.90
TOTAL
- ------------------------------------------------------------------------------------------------------------------------
WSW Indemnification unliquidated $ 0.00
Guarantee $ 1,800,000.00 0.00
----------
TOTAL $ 1,800,000.00 $ 0.00
- ------------------------------------------------------------------------------------------------------------------------
The Beerman Realty 937 Patterson Boulevard
Co. a. Repairs $ 4,857.45 $ 4,857.45
b. Claim 8,636.90 8,636.90
c. Environmental Remediation 86,000.00 76,739.34
---------- ----------
TOTAL $ 99,494.35 $90,233.69
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 22
EXHIBIT C -- ELDER-BEERMAN CLAIMS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AMOUNT RESOLVED
AFFILIATE BASIS CLAIMED AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LBP Personal Use of Company Airplane $ 14,552.49 $ 14,552.49
Credit Card Balance 82,046.74 76,548.95
---------- ----------
TOTAL $ 96,599.23 $ 91,101.44
- ------------------------------------------------------------------------------------------------------------------------
BBW Personal Use of Company Airplane $ 39,954.11 $ 39,954.11
- ------------------------------------------------------------------------------------------------------------------------
The Beerman Realty Co. Personal Use of Company Airplane $ 1,947.91 $ 1,947.91
Credit Card Balance 192,379.27 192,379.27
---------- ----------
TOTAL $ 194,327.18 $ 194,327.18
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 23
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 during the term (or
any extension thereof) of the
lease for the Elder-Beerman
Fairborn Distribution Center,
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 made in binding
arbitration.
Right of First Refusal: 1. At any time during the term
(or any extension thereof)
of the lease for the
Elder-Beerman Fairborn
Distribution Center, if
Beerman Realty receives a
bona fide offer to purchase
all or a portion of the
Subject Real Property (the
"Triggering Offer"), Beerman
Realty shall provide notice
of the Triggering Offer to
Elder-Beerman within five
days of receipt of the
Triggering Offer and
Elder-Beerman shall have 30
days from receiving notice
of the Triggering Offer in
which to purchase the
Subject Real Property under
the terms and conditions of
such offer, subject to the
purchase price provision set
forth in 2 below.
2. The Elder-Beerman offer and
sale must be for all of the
Subject Real Estate,
provided that if the
Triggering Offer is for less
than all of the Subject Real
Estate, the purchase price
to be paid by Elder-Beerman
shall be at a per acre cost
calculated at fair market
value for all of the Subject
Real Estate. If the parties
cannot agree on a fair
market value, the
determination of fair market
value will be made in
binding arbitration.
<PAGE> 24
EXHIBIT E--ZANE LEASE TERMS
CHILLICOTHE, OHIO
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Size: 55,940 sq. ft. plus 3,000 sq. ft. Men's Store and 17,609 sq. ft. Furniture Store.
- --------------------------------------- --------------------------------------------------------------------------------------
Expansion: Tenant has the right to expand the existing 55,940 sq. ft. department store up to
100,000 sq. ft.
- --------------------------------------- --------------------------------------------------------------------------------------
Term: 40 years with a base term of 20 years and two 10 year options.
- --------------------------------------- --------------------------------------------------------------------------------------
Rent $4.50/sq. ft. First 10 years (on 55,940 sq. ft. only).
$5.00/sq. ft. Second 10 years (on 55,940 sq. ft. only).
- --------------------------------------- --------------------------------------------------------------------------------------
Percentage Rent: First 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. with an increase of $.05 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 if tenant exercises right to expand.
- --------------------------------------- --------------------------------------------------------------------------------------
Construction: Tenant to build expansion. Estimated cost: $70/sq. ft.
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.
- --------------------------------------- --------------------------------------------------------------------------------------
Timing: Tenant has the right to expand the existing department store from the current 55,940
sq. ft. to between 80,000 and 100,000 sq. ft. during the first 36 months of the
primary term of the lease. The tenant will pay any increase in land cost over the
current $25,000 price caused by the timing of the expansion.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 10(s)
EMPLOYMENT AGREEMENT FOR JOHN A. MUSKOVICH
THIS AGREEMENT, dated as of the 30th day of December, 1997,
between The Elder-Beerman Stores Corp., an Ohio corporation (the "Employer"),
and John A. Muskovich (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. ss.ss. 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"). On
December 16, 1997, the Bankruptcy Court entered an order (the "Confirmation
Order") confirming the Third Amended Joint Plan of Reorganization of The
Elder-Beerman Stores Corp. and Its Subsidiaries, dated November 17, 1997, as
subsequently modified (the "Plan").
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 President, Chief Operating Officer and Chief Financial
Officer and as a member of the Board of Directors of Employer effective upon the
Effective Date (as defined in the Plan).
3. Employer wants to enter into this Agreement with Executive
based on its belief that Executive is uniquely qualified to assume the role of
President, Chief Operating Officer and Chief Financial Officer and serve as a
member of the Board of Directors of Employer, effective 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. Employer is entering into
this Employment Agreement pursuant to authority provided under the Plan and the
Confirmation Order.
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 (a) 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; (b) intentional wrongful damage to material assets of Employer; or (c)
intentional wrongful engagement in any activity that would constitute a material
breach of Sections 3.1 through 3.4 hereof. 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
2
<PAGE> 3
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: (a)
the sale to any purchaser unaffiliated with Employer of all or substantially all
of the assets of Employer; (b) 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; (c) 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 (d) the
3
<PAGE> 4
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 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: (a)
Mercantile Stores Co., Inc.; Proffitt's, Inc.; or Carson Pirie Scott & Co.,
including each of their respective Affiliates; (b) Lazarus, Inc.; (c) Lazarus
PA, Inc.; or (d) Rich's Department Stores, Inc.
1.6 "EFFECTIVE DATE" means the first date on which (a) the Bankruptcy
Court has entered an order approving this Agreement and (b) such order is not
subject to any stay.
1.7 "ENTITY" shall have the meaning provided in section 101(16) of the
Bankruptcy Code.
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
4
<PAGE> 5
extend initially until the third anniversary of the Effective Date; provided,
however, that commencing on December 30, 1998 and each December 30 thereafter,
the term of this Agreement shall be automatically extended for a period of one
year unless Employer or Executive shall have given written notice of termination
to the other not less than 180 days prior to such December 30 (commencing
December 30, 1998). Upon termination of this Agreement pursuant to any such
notice, Executive's employment with Employer shall terminate, and Employer's
only obligation to Employer 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
President, Chief Operating Officer and Chief Financial Officer of Employer and
serve as a member of the Board of Directors 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 and Chief Executive Officer of Employer, with
responsibility for reporting to the Chairman and Chief Executive Officer of
Employer. Although it is understood that the right to elect directors of
Employer is by law vested in the shareholders and directors of Employer, it is
nevertheless mutually contemplated, subject to such rights, that Executive shall
be a member of the Board of Directors of Employer.
2.4 COMPENSATION. In consideration of Executive's services hereunder,
Employer shall pay Executive cash compensation consisting of an annual "Base
Salary" and "Incentive Compensation." Effective as of the Effective Date,
Executive's Base Salary shall be $325,000 per year. 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. In addition to his Base
Salary, the Executive shall be entitled, commencing with the fiscal year
5
<PAGE> 6
commencing February 2, 1997, to Incentive Compensation of up to 50% of
Executive's Base Salary to be earned as determined by the Board of Directors. In
each fiscal year thereafter, Executive shall participate in the Employer's
Equity and Performance Incentive Plan (the "Incentive Plan") and Executive's
Incentive Compensation thereunder shall consist of an incentive bonus of up to
50% of Executive's Base Salary, to be earned as determined by the Board of
Directors under the Incentive Plan.
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. Incentive Compensation
shall be paid annually in a lump sum not later than April 15 or, if such day is
not a business day on which 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 any reason, or without reason; or (iii) 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
6
<PAGE> 7
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 (A) 2.99 times his "base amount"
as such term is defined in Section 280G of the Code, or (B) 2 times his most
recent Base Salary and Bonus. 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 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 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 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, 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
7
<PAGE> 8
end of the then current term. If there is any dispute 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. If Executive's employment is terminated pursuant to
this Section 2.7(b), Employer shall pay to Executive or his personal
representative, in a lump sum, an amount equal to his Base Salary for the lesser
of one year or the then remaining term of this Agreement.
(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 under the circumstances described in paragraphs
(a), (b) or (c)(i) of this Section 2.7, Employer shall remain obligated to
Executive for (A) 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, (B) any Incentive Compensation (as described in Section 2.4) earned
on or before Executive's last day worked and (C) payment for any vacation
accrued but unused as of Executive's last day worked.
8
<PAGE> 9
(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 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
9
<PAGE> 10
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 charge Executive for all reasonable
10
<PAGE> 11
damages, costs, attorneys' fees and other expenses incurred in searching for,
taking, removing and/or recovering such property.
3.3 NONCOMPETITION. It is recognized by Executive and Employer 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 Employer terminates Executive other
than for Cause. For purposes of the preceding sentence, a de minimis investment
is ownership of less than 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.
11
<PAGE> 12
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 3 years
after the date of termination; PROVIDED, HOWEVER, that after such
3-year period, if Executive has not obtained new employment, Executive
will be offered the opportunity to continue health benefits similar to
those that would be provided to him under COBRA upon a termination of
employment without reference to the length of time such
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COBRA rights would be in force. During the period of continued coverage
pursuant to this Section 4.1(b)(i), 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. Executive will cease to be eligible for
continued health and life insurance benefits provided by Employer if he
(A) waives such coverage or (B) fails to pay any amount required for
such coverage.
(ii) Executive will be reimbursed by Employer for
reasonable expenses incurred for outplacement counseling (A) which are
pre-approved by Employer's Senior Vice President - Human Resources, (B)
which do not exceed 15% of Executive's Base Salary and (C) which are
incurred by Executive within 6 months following such termination.
4.2 RELOCATION. Executive shall relocate to a residence within 25
miles of downtown Dayton, Ohio. Employer shall retain a relocation service to
assist Executive in the disposition of Executive's former residence. Employer
shall, within 60 days of receipt of appropriate documentation, reimburse
Executive reasonable moving costs from Cincinnati, Ohio. Executive shall be
entitled to all payments and reimbursements to which executives are entitled
under Employer's applicable relocation policy for transferred employees. If the
reimbursement payable pursuant to this Section is taxable to Executive, then
the Executive shall be entitled to receive an additional payment (a "Gross-up
Payment"). The Gross-up Payment shall be in an amount such that, after payment
by the Executive of all taxes incurred as a result of the reimbursement
(including any interest or penalties imposed with respect to such taxes),
including any tax imposed on the Gross-up Payment, the Executive retains a
portion of the Gross-up Payment equal to the taxes, penalties and interest
imposed on the reimbursement amount.
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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.
ARTICLE V
---------
MISCELLANEOUS
-------------
5.1 LEGAL FEES AND EXPENSES.
(a) It is the intent of Employer that the Executive not be
required to incur legal fees and the related expenses associated with the
interpretation, enforcement or defense of Executive's rights under this
Agreement by litigation or otherwise because the cost and expense thereof would
substantially detract from the benefits intended to be extended to the Executive
hereunder. Accordingly, if it should appear to Executive that Employer has
failed to comply with any of its obligations under this Agreement or in the
event that Employer or any other person takes or threatens to take any action to
declare this Agreement void or unenforceable, or institutes any litigation or
other action or proceeding designed to deny, or to recover from, the Executive
the benefits provided or intended to be provided to the Executive hereunder,
Employer irrevocably authorizes the Executive from time to time to retain
counsel of Executive's choice, at the expense of Employer as hereafter provided,
to advise and represent the Executive in connection with any such
interpretation, enforcement or defense, including without limitation the
initiation or defense of any litigation or other legal action, whether by or
against Employer or any Director, officer, stockholder or other person
affiliated with Employer, in any jurisdiction. Notwithstanding any existing or
prior attorney-client relationship between Employer and such counsel, Employer
irrevocably consents to the Executive's entering into an attorney-client
relationship with such counsel, and in that connection Employer and the
Executive agree that a confidential relationship shall exist between the
Executive
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and such counsel. Without respect to whether the Executive prevails, in whole or
in part, in connection with any of the foregoing, Employer will pay and be
solely financially responsible for any and all attorneys' and related fees and
expenses incurred by the Executive in connection with any of the foregoing.
(b) Without limiting the generality or effect of Section 5.1,
in order to ensure the benefits intended to be provided to the Executive under
Section 5.1(a), Employer will promptly use its best efforts following written
notice to Employer by the Executive to secure an irrevocable standby letter of
credit (the "Letter of Credit"), issued by Citibank or another bank having
combined capital and surplus in excess of $500 million (the "Bank") for the
benefit of the Executive and providing that the fees and expenses of counsel
selected from time to time by the Executive pursuant to this Section 5.1 shall
be paid, or reimbursed to the Executive if paid by the Executive, on a regular,
periodic basis upon presentation by the Executive to the Bank of a statement or
statements prepared by such counsel in accordance with its customary practices.
Employer shall pay all amounts and take all action necessary to maintain the
Letter of Credit.
5.2 RELEASE. Payment of the amount described in Section 2.7(a) and the
benefits described in Section 4.1(b) to Executive is conditioned upon Executive
executing and delivering a release satisfactory to Employer releasing Employer
from any and all claims, demands, damages, actions and/or causes of action
whatsoever, which 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 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 Employer that are qualified under Section 401(a) of the Code or
under any "welfare benefit plan" of
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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 Employer arising under this Agreement, or rights of
indemnification Executive may have under Employer's policies or by contract or
by statute.
5.3 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 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 5.3(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
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attempts any assignment or transfer contrary to this Section 5.3, Employer will
have no liability to pay any amount Executive attempts to assign, transfer or
delegate.
5.4 GOVERNING LAW. 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 laws of the State of Ohio, without giving effect to
principles of conflict of laws. Employer and Executive each consent to the
jurisdiction of, and agree that any controversy between them arising out of this
Agreement shall be brought in, the United States District Court for the Southern
District of Ohio, Western Division; the Court of Common Pleas for Montgomery
County, Ohio; or such other court venued within Montgomery County, Ohio as may
have subject matter jurisdiction over the controversy; PROVIDED, HOWEVER, that
until consummation of a plan of reorganization for Employer, any such
controversy shall be brought in the Bankruptcy Court.
5.5 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.
5.6 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.
5.7 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) 5 business days after being sent by certified U.S.
mail, return receipt requested, to the Secretary of Employer at its principal
place
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of business in the City of Moraine or to Executive at his last known address as
shown on the records of Employer.
5.8 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: /s/ Frederick J. Mershad
----------------------------------------------
Frederick J. Mershad
Chairman and Chief Executive Officer
/s/ John A. Muskovich
----------------------------------------------
John A. Muskovich
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<PAGE> 1
Exhibit 10(t)
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT FOR FREDERICK J. MERSHAD
THIS AGREEMENT, dated as of the 30th day of December, 1997,
between The Elder-Beerman Stores Corp., an Ohio corporation (the "Employer"),
and Frederick J. Mershad (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. ss.ss. 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"). On
December 16, 1997, the Bankruptcy Court entered an order (the "Confirmation
Order") confirming the Third Amended Joint Plan of Reorganization of The
Elder-Beerman Stores Corp. and Its Subsidiaries, dated November 17, 1997, as
subsequently modified (the "Plan").
2. Employer and Executive have previously entered into an
Employment Agreement dated January 3, 1997.
3. Employer and Executive want to enter into this Amended and
Restated Employment Agreement, subject to the terms and conditions set forth
below. Employer is entering into this Amended and Restated Employment Agreement
pursuant to authority provided under the Plan and the Confirmation Order.
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:
<PAGE> 2
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 (a) 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; (b) intentional wrongful damage to material assets of Employer; or (c)
intentional wrongful engagement in any activity that would constitute a material
breach of Sections 3.1 through 3.4 hereof. 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 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
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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: (a)
the sale to any purchaser unaffiliated with Employer of all or substantially all
of the assets of Employer; (b) 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; (c) 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 (d) 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 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.
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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: (a)
Mercantile Stores Co., Inc.; Proffitt's, Inc.; or Carson Pirie Scott & Co.,
including each of their respective Affiliates; (b) Lazarus, Inc.; (c) Lazarus
PA, Inc.; or (d) Rich's Department Stores, Inc.
1.6 "EFFECTIVE DATE" means the first date on which (a) the Bankruptcy
Court has entered an order approving this Agreement and (b) such order is not
subject to any stay.
1.7 "ENTITY" shall have the meaning provided in section 101(16) of the
Bankruptcy Code.
ARTICLE II
----------
EMPLOYMENT
----------
2.1 EFFECTIVENESS. Notwithstanding any other provision of the
Agreement, the Agreement shall not be effective until the Effective Date (as
such term is defined in the Plan).
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; provided, however, that commencing on
December 30, 1998 and each December 30 thereafter, the term of this Agreement
shall be automatically extended for a period of one year unless Employer or
Executive shall have given written notice of termination to the other not less
than 180 days prior to such December 30 (commencing December 30, 1998). Upon
termination of this Agreement pursuant to any such notice, Executive's
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employment with Employer shall terminate, and Employer's only obligation to
Employer 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 Chairman
and Chief Executive Officer of Employer and serve as a member of the Board of
Directors 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 Board of Directors of
Employer, with responsibility for reporting to the Board of Directors and the
designated committees thereof. Although it is understood that the right to elect
directors of Employer is by law vested in the shareholders and directors of
Employer, it is nevertheless mutually contemplated, subject to such rights, that
Executive shall be a member of the Board of Directors of Employer.
2.4 COMPENSATION. In consideration of Executive's services hereunder,
Employer shall pay Executive cash compensation consisting of an annual "Base
Salary" and "Incentive Compensation." Effective as of the Effective Date,
Executive's Base Salary shall be $500,000 per year. 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. In addition to his Base
Salary, the Executive shall be entitled, commencing with the fiscal year
commencing February 2, 1997, to Incentive Compensation of up to 50% of
Executive's Base Salary, to be earned as determined by the Board of Directors;
PROVIDED, HOWEVER, that for the 1997 fiscal year Executive shall be guaranteed
Incentive Compensation of at least $175,000 and a nonguaranteed portion of up to
an additional $75,000. In each fiscal year thereafter, Executive shall
participate in the Employer's Equity and Performance Incentive Plan (the
"Incentive Plan") and Executive's
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<PAGE> 6
Incentive Compensation thereunder shall consist of an incentive bonus up to 50%
of Executive's Base Salary, to be earned as determined by the Board of Directors
under the Incentive Plan.
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 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 any reason, or without reason; or (iii) 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 (A) 2.99 times his "base
amount" as such term is defined in Section 280G of the Code, or (B) 2 times his
most recent
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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 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 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 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, 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 there is any dispute 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
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<PAGE> 8
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. If Executive's employment is
terminated pursuant to this Section 2.7(b), Employer shall pay to Executive or
his personal representative, in a lump sum, an amount equal to his Base Salary
for the lesser of one year or the then remaining term of this Agreement.
(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 (A)
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, (B) any Incentive Compensation (as described in Section 2.4)
earned on or before Executive's last day worked and (C) payment for any
vacation accrued but unused as of Executive's last day worked.
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<PAGE> 9
(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 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
9
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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 charge Executive for all reasonable
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damages, costs, attorneys' fees and other expenses incurred in searching for,
taking, removing and/or recovering such property.
3.3 NONCOMPETITION. It is recognized by Executive and Employer 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 Employer terminates Executive other
than for Cause. For purposes of the preceding sentence, a de minimis investment
is ownership of less than 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.
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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 3 years
after the date of termination; PROVIDED, HOWEVER, that after such
3-year period, if Executive has not obtained new employment, Executive
will be offered the opportunity to continue health benefits similar to
those that would be provided to him under COBRA upon a termination of
employment without reference to the length of time COBRA
12
<PAGE> 13
rights would be in force. During the period of continued coverage
pursuant to this Section 4.1(b)(i), 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. Executive will cease to be eligible for
continued health and life insurance benefits provided by Employer if he
(A) waives such coverage or (B) fails to pay any amount required for
such coverage.
(ii) Executive will be reimbursed by Employer for
reasonable expenses incurred for outplacement counseling (A) which are
pre-approved by Employer's Senior Vice President - Human Resources, (B)
which do not exceed 15% of Executive's Base Salary and (C) which are
incurred by Executive within 6 months following such termination.
4.2 RELOCATION. Executive shall relocate to a residence within 25
miles of downtown Dayton, Ohio. Employer shall, within 60 days of receipt of
appropriate documentation, reimburse Executive for reasonable costs for
temporary, furnished housing in the Dayton area for up to six months from the
Effective Date. Employer shall, within 60 days of receipt of appropriate
documentation, reimburse Executive reasonable moving costs from Executive's
temporary housing in Dayton, Ohio to Executive's permanent Dayton residence.
Executive shall be entitled to all payments and reimbursements to which
executives are entitled under Employer's applicable relocation policy for
transferred employees. If the reimbursement payable pursuant to this Section is
taxable to Executive, then the Executive shall be entitled to receive an
additional payment (a "Gross-up Payment"). The Gross-up Payment shall be in an
amount such that, after payment by the Executive of all taxes incurred as a
result of the reimbursement (including any interest or penalties imposed with
respect to such taxes), including any tax imposed on the Gross-up Payment, the
Executive retains a
13
<PAGE> 14
portion of the Gross-up Payment equal to the taxes, penalties and interest
imposed on the reimbursement amount.
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.
ARTICLE V
---------
MISCELLANEOUS
-------------
5.1 LEGAL FEES AND EXPENSES.
(a) It is the intent of Employer that the Executive not be
required to incur legal fees and the related expenses associated with the
interpretation, enforcement or defense of Executive's rights under this
Agreement by litigation or otherwise because the cost and expense thereof would
substantially detract from the benefits intended to be extended to the Executive
hereunder. Accordingly, if it should appear to Executive that Employer has
failed to comply with any of its obligations under this Agreement or in the
event that Employer or any other person takes or threatens to take any action to
declare this Agreement void or unenforceable, or institutes any litigation or
other action or proceeding designed to deny, or to recover from, the Executive
the benefits provided or intended to be provided to the Executive hereunder,
Employer irrevocably authorizes the Executive from time to time to retain
counsel of Executive's choice, at the expense of Employer as hereafter provided,
to advise and represent the Executive in connection with any such
interpretation, enforcement or defense, including without limitation the
initiation or defense of any litigation or other legal action, whether by or
against Employer or any Director, officer, stockholder or other person
affiliated with Employer, in any jurisdiction. Notwithstanding any existing or
prior attorney-client relationship between Employer and such counsel, Employer
irrevocably consents to
14
<PAGE> 15
the Executive's entering into an attorney-client relationship with such counsel,
and in that connection Employer and the Executive agree that a confidential
relationship shall exist between the Executive and such counsel. Without respect
to whether the Executive prevails, in whole or in part, in connection with any
of the foregoing, Employer will pay and be solely financially responsible for
any and all attorneys' and related fees and expenses incurred by the Executive
in connection with any of the foregoing.
(b) Without limiting the generality or effect of Section 5.1,
in order to ensure the benefits intended to be provided to the Executive under
Section 5.1(a), Employer will promptly use its best efforts following written
notice to Employer by the Executive to secure an irrevocable standby letter of
credit (the "Letter of Credit"), issued by Citibank or another bank having
combined capital and surplus in excess of $500 million (the "Bank") for the
benefit of the Executive and providing that the fees and expenses of counsel
selected from time to time by the Executive pursuant to this Section 5.1 shall
be paid, or reimbursed to the Executive if paid by the Executive, on a regular,
periodic basis upon presentation by the Executive to the Bank of a statement or
statements prepared by such counsel in accordance with its customary practices.
Employer shall pay all amounts and take all action necessary to maintain the
Letter of Credit.
5.2 RELEASE. Payment of the amount described in Section 2.7(a) and the
benefits described in Section 4.1(b) to Executive is conditioned upon Executive
executing and delivering a release satisfactory to Employer releasing Employer
from any and all claims, demands, damages, actions and/or causes of action
whatsoever, which 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 Executive may revoke the release or
any provision thereof having expired), and any and all claims,
15
<PAGE> 16
demands and causes of action for retirement (other than under the retirement
plans maintained by Employer that are qualified under Section 401(a) of the Code
or under any "welfare benefit plan" of 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 Employer arising under this
Agreement, or rights of indemnification Executive may have under Employer's
policies or by contract or by statute.
5.3 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 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 5.3(a) and (b). Without limiting the generality or effect
of the foregoing, Executive's right to receive payments hereof will not be
16
<PAGE> 17
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 5.3, Employer will have no liability to pay
any amount Executive attempts to assign, transfer or delegate.
5.4 GOVERNING LAW. 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 laws of the State of Ohio, without giving effect to
principles of conflict of laws. Employer and Executive each consent to the
jurisdiction of, and agree that any controversy between them arising out of this
Agreement shall be brought in, the United States District Court for the Southern
District of Ohio, Western Division; the Court of Common Pleas for Montgomery
County, Ohio; or such other court venued within Montgomery County, Ohio as may
have subject matter jurisdiction over the controversy; PROVIDED, HOWEVER, that
until consummation of a plan of reorganization for Employer, any such
controversy shall be brought in the Bankruptcy Court.
5.5 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.
5.6 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.
5.7 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) 5 business days after being
17
<PAGE> 18
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.
5.8 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: /s/ John A. Muskovich
------------------------------------------
John A. Muskovich
President and Chief Operating Officer
/s/ Frederick J. Mershad
----------------------------------------------
Frederick J. Mershad
18
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE ELDER-BEERMAN STORES CORP.
----------------------------------------------
The Bee-Gee Shoe Corp.
The El-Bee Chargit Corp.
The El-Bee Receivables Corporation
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
Nos. 333-48367 and 333-48369 of The Elder-Beerman Stores Corp. on Form S-8 of
our report dated April 10, 1998 (which expresses an unqualified opinion and
includes an explanatory paragraph concerning the company's plan of
reorganization), appearing in this Annual Report on Form 10-K of The
Elder-Beerman Stores Corp. for the year ended January 31, 1998.
DELOITTE & TOUCHE LLP
Dayton, Ohio
April 27, 1998
<PAGE> 1
EXHIBIT 24
THE ELDER-BEERMAN STORES CORP.
ANNUAL REPORT ON FORM 10-K
POWER OF ATTORNEY
- --------------------------------------------------------------------------------
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and/or officers of The Elder-Beerman Stores Corp., an Ohio corporation, hereby
constitutes and appoints each of Scott J. Davido and Steven D. Lipton as the
true and lawful attorney or attorney-in-fact, with full power of substitution
and revocation, for each of the undersigned and in the name, place and stead of
each of the undersigned, to sign on behalf of each of the undersigned an Annual
Report on Form 10-K for the fiscal year ended January 31, 1998 pursuant to the
Securities Exchange Act of 1934, as amended, and to sign any amendments to such
Annual Report, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting to each attorney or attorney-in-fact full power and authority to do so
and to perform any act requisite and necessary to be done as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that each attorney or attorney-in-fact or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney may be executed in multiple counterparts, each of which
shall be deemed an original with respect to the person executing it.
IN WITNESS WHEREOF, the undersigned have subscribed these presents as
of the 22nd day of April, 1998.
<TABLE>
<S> <C>
/s/ Frederick J. Mershad /s/ John A. Muskovich
- -------------------------------------------- --------------------------------------------
Frederick J. Mershad John A. Muskovich
Chairman of the Board of Directors and Chief President, Chief Operating Officer and Chief Financial
Executive Officer Officer; Director
(Principal Executive Officer) (Principal Financial and Officer)
/s/ Steven D. Lipton /s/ Thomas J. Noonan, Jr.
- -------------------------------------------- --------------------------------------------
Steven D. Lipton Thomas J. Noonan, Jr.
Senior Vice President, Controller Director
(Principal Accounting Officer)
/s/ Bernard Olsoff /s/ Laura H. Pomerantz
- -------------------------------------------- --------------------------------------------
Bernard Olsoff Laura H. Pomerantz
Director Director
/s/ Stewart M. Kasen /s/ John J. Wiesner
- -------------------------------------------- --------------------------------------------
Stewart M. Kasen John J. Wiesner
Director Director
/s/ Steven C. Mason /s/ Jack A. Staph
- -------------------------------------------- --------------------------------------------
Steven C. Mason Jack A. Staph
Director Director
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT ON FORM 10-K OF THE ELDER-BEERMAN STORES CORP. FOR THE YEAR ENDED JANUARY
31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
THIS SCHEDULE SHALL NOT BE DEEMED TO BE FILED FOR PURPOSES OF SECTION 11 OF THE
SECURITIES ACT OF 1933, SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934 AND
SECTION 323 OF THE TRUST INDENTURE ACT OF 1939, OR OTHERWISE SUBJECT TO THE
LIABILITIES OF SUCH SECTIONS, NOR SHALL IT BE DEEMED A PART OF ANY REGISTRATION
STATEMENT TO WHICH IT RELATES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 6,497
<SECURITIES> 0
<RECEIVABLES> 140,882
<ALLOWANCES> 4,177
<INVENTORY> 137,507
<CURRENT-ASSETS> 293,355
<PP&E> 150,236
<DEPRECIATION> 86,980
<TOTAL-ASSETS> 371,365
<CURRENT-LIABILITIES> 79,296
<BONDS> 142,024
0
0
<COMMON> 199,351
<OTHER-SE> (53,840)
<TOTAL-LIABILITY-AND-EQUITY> 371,365
<SALES> 581,372
<TOTAL-REVENUES> 607,946
<CGS> 423,542
<TOTAL-COSTS> 423,542
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,636
<INTEREST-EXPENSE> 7,084
<INCOME-PRETAX> 11,931
<INCOME-TAX> (7,412)
<INCOME-CONTINUING> (8,199)
<DISCONTINUED> 7,378
<EXTRAORDINARY> (28,131)
<CHANGES> 0
<NET-INCOME> (28,952)
<EPS-PRIMARY> (23.24)
<EPS-DILUTED> (23.24)
</TABLE>
