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Amendment Number 1
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SCHEDULE 14A
(Rule 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
THE ELDER-BEERMAN STORES CORP.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: ....
(2) Aggregate number of securities to which transaction applies: .......
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined): ....
(4) Proposed maximum aggregate value of transaction: ...................
(5) Total fee paid: ....................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ............................................
(2) Form, Schedule or Registration Statement No.: ......................
(3) Filing Party: ......................................................
(4) Date Filed: ........................................................
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THE ELDER-BEERMAN STORES CORP.
3155 El-Bee Road
Dayton, Ohio 45439
August __, 2000
Dear Fellow Shareholders:
On behalf of the Board of Directors and management of The Elder-Beerman
Stores Corp., I cordially invite you to attend the 2000 Annual Meeting of
Shareholders. The meeting will be held at 8:00 a.m., eastern daylight time, on
Thursday, August 24, 2000, at The Dayton Marriott Hotel, 1414 South Patterson
Boulevard, Dayton, Ohio 45409.
The matters expected to be acted upon at the meeting are described in
the enclosed Proxy Statement. In addition, there will be a report on current
developments in the Company.
You may be aware that PPM America, Inc., filed preliminary proxy
materials on June 7, 2000, whereby it indicated that it would solicit proxies
for the election of its three nominees to the Board of Directors and for several
shareholder proposals. On July 19, 2000, members of the Board of Directors and
management met with representatives from PPM and discussed the proposals that
PPM intended to bring before the annual meeting. The Board of Directors and PPM,
together with Snyder Capital Management, Inc., the Company's largest
shareholder, entered into a Settlement Agreement to end PPM's proposed proxy
contest with the Company. Pursuant to the terms of the Settlement Agreement, the
Company, PPM and Snyder have agreed on four nominees to be elected to the Board
and the Board of Directors has agreed to support several of PPM's proposals, all
as discussed in this proxy statement. You will not be receiving separate proxy
materials from PPM in connection with any matters to be acted upon at the annual
meeting.
The Company requests that all shareholders thoroughly read the
accompanying notice of annual meeting and proxy statement.
Thank you for your attention to this important matter.
Frederick J. Mershad
Chairman of the Board
and Chief Executive Officer
<PAGE> 3
THE ELDER-BEERMAN STORES CORP.
3155 El-Bee Road
Dayton, Ohio 45439
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NOTICE OF ANNUAL MEETING
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The Annual Meeting of Shareholders of The Elder-Beerman Stores Corp.
("Elder-Beerman" or the "Company") will be held on August 24, 2000, at 8:00
a.m., eastern daylight time, at The Dayton Marriott Hotel, 1414 South Patterson
Boulevard, Dayton, Ohio 45409. The principal business of the meeting will be:
(1) To elect four Directors for a three-year term expiring in
2003. The Board of Directors recommends a vote FOR the
election of its nominees, Mark F. C. Berner, Dennis S.
Bookshester, Eugene I. Davis and Charles H. Turner. If the
amendment to Article IX of the Company's Amended Articles of
Incorporation (the "Articles") is approved by the shareholders
at the Annual Meeting (see Item Number 4), the entire Board of
Directors must be re-elected at the Company's annual meeting
of shareholders in 2001.
(2) To act upon a proposal of the Board of Directors to increase
by 500,000 the number of shares of common stock covered by The
Elder-Beerman Stores Corp. Equity and Performance Incentive
Plan. The Board of Directors recommends a vote FOR the
amendment.
(3) To act upon a proposal of the Board of Directors to amend
Article X of the Company's Amended Articles of Incorporation
(the "Articles") to reduce from 72% to a majority of the
Company's outstanding shares of common stock the shareholder
approval required to amend or repeal any section of the
Articles including those dealing with cumulative voting
rights, preemptive rights to acquire shares, share repurchases
by the Company, the classification of and staggered election
system for the Board of Directors and the Amendment of Article
X of the Articles itself. The Board of Directors recommends a
vote FOR this proposal.
(4) To act upon a proposal of the Board of Directors to amend
Article IX of the Articles to eliminate the classification of
the Company's Board of Directors (which is currently divided
into three separate classes and elected on a staggered basis)
and to replace this structure with a single class board of
directors under which all directors of the Company are elected
by the shareholders on an annual basis. The Board of Directors
recommends a vote FOR this proposal.
(5) To act upon a proposal to adopt a new Article XIV to the
Articles pursuant to which Elder-Beerman would opt out of the
provisions of Chapter 1704 of the Ohio Revised Code, which
Chapter sets forth certain restrictions on the ability of an
Ohio corporation to engage in certain business combinations
and other transactions that involve shareholders that have the
ability to exercise 10% or more of the voting power of such
corporation. The Board of Directors recommends a vote FOR this
proposal.
(6) To act upon a proposal of the Board of Directors to amend
Regulation 34 of the Company's Amended Code of Regulations
(the "Regulations") to lower from 72% to a majority of the
Company's outstanding shares of common stock the shareholder
approval requirement needed to amend or repeal any Regulation
in the Regulations including those dealing with the time and
place of shareholder meetings, who may call special meetings
of the shareholders, the order of business (including advance
notice of business to be brought) at shareholder meetings, the
size of the Board of Directors, the filling of newly-created
directorships and Board of Directors vacancies, the removal of
directors, the nomination of directors (including advance
notice of the intent to nominate directors) and the amendment
of the Regulations. The Board of Directors recommends a vote
FOR this proposal.
(7) To act upon a proposal of the Board of Directors to amend
Regulation 9 of the Regulations to lower from 72% to a
majority of the Company's outstanding shares of common stock
the shareholder approval required to alter the size of the
Board. The Board of Directors recommends a vote FOR this
proposal.
<PAGE> 4
(8) To act upon a proposal of the Board of Directors to amend
Regulation 3(a) of the Regulations to permit a shareholder or
shareholders who own 10% rather than 50% of Elder-Beerman's
outstanding shares of common stock to call special meetings of
shareholders. The Board of Directors recommends a vote FOR
this proposal.
(9) To act upon a proposal of the Board of Directors to amend
Regulation 7(c) of the Regulations to provide that any
shareholder who desires to bring business before an annual
meeting of Elder- Beerman's shareholders must notify
Elder-Beerman not more than 90 days, but not less than 45 days
(rather than not less than 60 days), in advance of such
meeting of its intent to do so and of the nature of such
business. The Board of Directors recommends a vote FOR this
proposal.
(10) To act upon a proposal of the Board of Directors to amend
Regulation 12 of the Regulations to provide that any
shareholder who desires to propose any nominees for election
to Elder-Beerman's Board of Directors must notify
Elder-Beerman not more than 90 days, but not less than 45 days
(rather than not less than 60 days), in advance of such
meeting of its intent to do so. The Board of Directors
recommends a vote FOR this proposal.
(11) To act upon a proposal of the Board of Directors to adopt a
new Regulation 35 to the Regulations, pursuant to which the
Company would opt out of the provisions of the Ohio Control
Share Acquisition Act, which Act sets forth certain
restrictions on the ability of persons to acquire 20% or more
of the stock of an Ohio corporation. The Board of Directors
recommends a vote FOR this proposal.
(12) To transact any other business that may properly come before
the meeting.
Only shareholders of record on June 27, 2000, will be entitled to
notice of and to vote at the annual meeting and at any adjournments or
postponements of the meeting. If you own shares through a nominee, you must
instruct your nominee to vote if you wish to have your vote counted.
By Order of the Board of Directors
Frederick J. Mershad
Chairman of the Board
and Chief Executive Officer
August __, 2000
YOUR VOTE IS IMPORTANT
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PLEASE PROMPTLY FILL OUT, SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. A SELF-ADDRESSED ENVELOPE
IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES. RETURNING A SIGNED PROXY WILL NOT PREVENT YOU FROM ATTENDING THE MEETING
AND VOTING IN PERSON, IF YOU DESIRE.
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Also enclosed is a copy of our Annual Report for the year ended January
29, 2000. The Annual Report contains financial and other information about
Elder-Beerman, but is not incorporated into the proxy statement. The Annual
Report is not a part of the proxy soliciting material.
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THE ELDER-BEERMAN STORES CORP.
3155 El-Bee Road
Dayton, Ohio 45439
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 24, 2000
DATE OF THE PROXY STATEMENT - AUGUST __, 2000
INFORMATION ABOUT THE ANNUAL MEETING
INFORMATION ABOUT ATTENDING THE ANNUAL MEETING
The Annual Meeting of Shareholders (the "Annual Meeting") of The
Elder-Beerman Stores Corp. ("Elder- Beerman" or the "Company") will be held on
Thursday, August 24, 2000, at 8:00 a.m., eastern daylight time, at The Dayton
Marriott Hotel, 1414 South Patterson Boulevard, Dayton, Ohio 45409.
INFORMATION ABOUT THIS PROXY STATEMENT
We sent you this proxy statement (the "Proxy Statement") and the
enclosed proxy card because Elder- Beerman's Board of Directors is soliciting
your permission to vote your shares of common stock at the Annual Meeting. If
you own Elder-Beerman common stock in more than one account, such as
individually and also jointly with your spouse, you may receive more than one
set of these proxy materials. To assist us in saving money and to provide you
with better shareholder services, we encourage you to have all your accounts
registered in the same name and address. You may do this by contacting
Elder-Beerman's Investor Relations Department at (937) 296- 2700.
This Proxy Statement summarizes information that we are required to
provide to you under the rules of the Securities and Exchange Commission and is
designed to assist you in voting your shares. This Proxy Statement, together
with the Notice of Annual Meeting of Shareholders and proxy card, are first
being mailed on or about August __, 2000, to all shareholders of record at the
close of business on June 27, 2000.
You may be aware that PPM America, Inc. ("PPM"), filed a preliminary
proxy statement on June 7, 2000, which nominated three candidates for election
to the Board of Directors and made twelve additional proposals to be acted upon
at the Annual Meeting. The Company filed its preliminary proxy statement on June
27, 2000, whereby the Company set forth its nominees to be elected to the Board
of Directors and opposed the PPM nominees and PPM's other proposals. Since the
filing of the preliminary proxy statements by PPM and the Company, members of
the Board of Directors and the Company's management have met with
representatives of PPM to discuss the proposals that PPM intended to bring
before the Annual Meeting. On July 19, 2000, the Company and PPM, together with
Snyder Capital Management, Inc. ("Snyder"), the Company's largest shareholder,
entered into a Settlement Agreement (the "Settlement Agreement") to end PPM's
proposed proxy contest with the Company. Pursuant to the Settlement Agreement,
the Board of Directors has agreed to support the following proposals
(collectively, the "Charter Amendments"): (i) the amendment of Article X of the
Company's Amended Articles of Incorporation (the "Articles") to reduce from 72%
to a majority of the Company's outstanding shares of common stock the
shareholder approval required to amend or repeal any section of the Articles
including those dealing with cumulative voting rights, preemptive rights to
acquire shares, share repurchases by the Company, the classification of and
staggered election system for the Board of Directors and the Amendment of
Article X of the Articles itself, (ii) the amendment of Article IX of the
Articles to eliminate the classification of the Company's Board of Directors,
(iii) the adoption of Article XIV to the Articles, pursuant to which the Company
would opt out of the provisions of Section 1704 of the Ohio Revised Code, which
Chapter sets forth certain restrictions on the ability of an Ohio corporation to
engage in certain business combinations and other transactions that involve
shareholders that have the ability to exercise 10% or more of the voting power
of such corporation; (iv) the amendment of Regulation 34 of the Company's
Amended Code of Regulations (the "Regulations") to lower from 72% to a majority
of the Company's outstanding shares of common stock the shareholder approval
requirement needed to amend or repeal any Regulation in the Regulations
including those dealing with the time and place of shareholder meetings, who
<PAGE> 6
may call special meetings of the shareholders, the order of business (including
advance notice of business to be brought) at shareholder meetings, the size of
the Board of Directors, the filling of newly-created directorships and Board of
Directors vacancies, the removal of directors, the nomination of directors
(including advance notice of the intent to nominate directors) and the amendment
of the Regulations, (v) the amendment of Regulation 9 of the Regulations to
lower the shareholder approval requirement needed to alter the size of the Board
of Directors from 72% to a majority of the Company's outstanding shares of
common stock, (vi) the amendment of Regulation 3(a) of the Regulations to permit
a shareholder or shareholders who own 10% rather than 50% of Elder-Beerman's
outstanding shares of common stock to call special meetings of the shareholders,
(vii) the amendment of Regulation 7(c) of the Regulations to provide that any
shareholder who desires to bring business before an annual meeting of
Elder-Beerman's shareholders must notify Elder-Beerman not more than 90 days,
but not less than 45 days, in advance of such meeting of its intent to do so and
of the nature of such business, (viii) the amendment of Regulation 12 of the
Regulations to provide that any shareholder who desires to propose any nominees
for election to Elder- Beerman's Board of Directors must notify Elder-Beerman
not more than 90 days, but not less than 45 days, in advance of such meeting of
its intent to do so and (ix) the adoption a new Regulation 35 to the
Regulations, pursuant to which the Company would opt out of the provisions of
the Ohio Control Share Acquisition Act, which Act sets forth certain
restrictions on the ability of persons to acquire 20% or more of the stock of an
Ohio corporation. Each of these proposals is discussed in this Proxy Statement.
PPM and the Board of Directors have also agreed on the four nominees to
be elected to the Board of Directors. As a result, this proxy statement will be
the only proxy statement you will receive in connection with the Annual Meeting.
INFORMATION ABOUT VOTING
Shareholders can vote on matters presented at the Annual Meeting in two
ways:
- BY PROXY-- You can vote by signing, dating and returning the
enclosed proxy card. If you do this, the individuals named on
the card (your "proxies") will vote your shares in the manner
you indicate. You may specify on your proxy card whether your
shares should be voted for all, some or none of the Company's
nominees for director and whether your shares should be voted
for or against the amendment to the Company's Equity and
Performance Incentive Plan to be presented at the Annual
Meeting and whether your shares should be voted for or against
the Charter Amendments. If you do not indicate instructions on
the card, your shares will be voted FOR the election of the
Company's nominees for director, FOR the amendment to the
Company's Equity and Performance Incentive Plan and FOR the
Charter Amendments.
- IN PERSON -- You may come to the Annual Meeting and cast your
vote there.
The Board of Directors of the Company is soliciting votes FOR the
Company's four nominees for election to the Board of Directors, FOR the
amendment to the Company's Equity and Performance Incentive Plan and FOR the
Charter Amendments.
You may revoke your proxy at any time before the vote at the Annual
Meeting by sending a written notice of revocation to Elder-Beerman's Secretary
prior to the Annual Meeting or by attending the Annual Meeting and voting in
person.
Each share of Elder-Beerman common stock is entitled to one vote. As of
June 26, 2000, there were 14,923,846 shares of common stock outstanding.
INFORMATION REGARDING TABULATION OF THE VOTE
Elder-Beerman has a policy that all proxies, ballots and votes
tabulated at a meeting of the shareholders are confidential. Representatives of
Norwest Bank Minnesota, NA, will tabulate votes and act as Inspectors of
Election at the Annual Meeting.
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QUORUM REQUIREMENTS
A quorum of shareholders is necessary to hold a valid meeting. Under
Elder-Beerman's Regulations, if shareholders entitled to cast a majority of all
the votes entitled to be cast at the Annual Meeting are present in person or by
proxy, a quorum will exist to conduct all business at the Annual Meeting.
Abstentions are counted as present for establishing a quorum, but broker
nonvotes are not. A broker nonvote occurs when a broker votes on some matters on
the proxy card but not on others because the broker does not have the authority
to do so.
The holders of a majority of the votes represented at the Annual
Meeting, whether or not a quorum is present, may adjourn the meeting without
notice other than by announcement at the meeting of the date, time and location
at which the meeting will be reconvened.
INFORMATION ABOUT VOTES NECESSARY FOR ACTION TO BE TAKEN
ELECTION OF DIRECTORS
The four nominees for directors receiving the greatest number of votes
will be elected at the Annual Meeting.
AMENDMENT TO THE EQUITY AND PERFORMANCE INCENTIVE PLAN
A majority of all the votes cast at the Annual Meeting will be required
for the approval of the amendment to the Equity and Performance Incentive Plan.
Abstentions and broker nonvotes will have no effect on the result of
the vote on the election of directors and the amendment to the Equity and
Performance Incentive Plan.
CHARTER AMENDMENTS
The affirmative vote of the holders of at least 72% of the outstanding
common stock of the Company is required to approve Item 3. If Item 3 is
approved, the Company will adjourn the Annual Meeting to file the revised
Article X of the Articles with the Ohio Secretary of State. The meeting will be
re-convened after the amendment has been filed.
If Item 3 is approved, the affirmative vote of the holders of a
majority of the outstanding common stock of the Company is required to approve
Item 4. If the shareholders fail to approve Item 3, the affirmative vote of the
holders of at least 72% of the outstanding common stock of the Company is
required to approve Item 4.
If Item 3 is approved, the affirmative vote of the holders of a
majority of the outstanding common stock of the Company is required to approve
Item 5. If the shareholders fail to approve Item 3, then the affirmative vote of
the holders of at least 66 2/3% of the outstanding common stock of the Company
is required to approve Item 5.
The affirmative vote of the holders of at least 72% of the outstanding
common stock of the Company is required to approve Item 6.
If Item 6 is approved, the affirmative vote of the holders of a
majority of the outstanding common stock of the Company is required to approve
Item 7. If the shareholders fail to approve Item 6, the affirmative vote of the
holders of at least 72% of the outstanding common stock of the Company is
required to approve Item 7.
If Item 6 is approved, the affirmative vote of the holders of a
majority of the outstanding common stock of the Company is required to approve
Item 8. If the shareholders fail to approve Item 6, the affirmative vote of the
holders of at least 72% of the outstanding common stock of the Company is
required to approve Item 8.
If Item 6 is approved, the affirmative vote of the holders of a
majority of the outstanding common stock of the Company is required to approve
Item 9. If the shareholders fail to approve Item 6, the affirmative vote of the
holders of at least 72% of the outstanding common stock of the Company is
required to approve Item 9.
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<PAGE> 8
If Item 6 is approved, the affirmative vote of the holders of a
majority of the outstanding common stock of the Company is required to approve
Item 10. If the shareholders fail to approve Item 6, the affirmative vote of the
holders of at least 72% of the outstanding common stock of the Company is
required to approve Item 10.
The affirmative vote of the holders of a majority of the outstanding
common stock of the Company is required to approve Item 11.
REVOCATION OF PROXY
If you give a proxy, you may revoke it at any time before the vote at
the Annual Meeting by giving notice to Elder-Beerman's Secretary in writing
prior to the Annual Meeting or by voting in person at the Annual Meeting.
COSTS OF PROXY SOLICITATION
Elder-Beerman will pay all the costs of soliciting these proxies. In
addition to solicitation by mail, proxies may be solicited personally, by
telegram, telephone or personal interview by an officer or director of the
Company, as identified in this Proxy Statement under "Certain Information
Regarding Participants." Elder-Beerman will also ask banks, brokers and other
institutional nominees and fiduciaries to forward the proxy material to their
principals and to obtain authority to execute proxies, and reimburse them for
their expenses. In addition, Elder-Beerman has also retained Morrow & Co. to aid
in the distribution and solicitation of proxies, and has agreed to pay them a
fee of approximately $30,000, plus reasonable expenses. To date, the Company has
not paid any fees to Morrow & Co. The Company will pay up to $250,000 of PPM's
reasonable and documented costs and expenses (i) in connection with PPM's
activities prior to the date of the Settlement Agreement with respect to PPM's
solicitation of proxies with the Annual Meeting and (ii) after the date of the
Settlement Agreement, in connection with PPM's review of the Company's revised
proxy materials.
Background Information about the PPM Proxy and the Company
On June 7, 2000, PPM filed with the Securities and Exchange Commission
an Amendment to its Schedule 13D with Preliminary Proxy Materials (the "PPM
Proxy") attached. The PPM Proxy set forth PPM's intentions to solicit proxies
for the election of three nominees for directors to be elected at the Annual
Meeting and the adoption of a number of other proposals it intended to make at
the Annual Meeting.
PPM indicated in the PPM Proxy that it was planning to solicit proxies
in part because the Board of Directors and the Company's management failed to
respond to the concerns raised by some of the Company's largest shareholders. To
address these concerns, members of the Board of Directors and management met
with representatives of PPM and Snyder. Neither the Company, PPM nor Snyder
thought that the time and expense of a proxy contest was in the best interest of
the Company or its shareholders. Additionally, the Company wanted to address the
concerns of its largest shareholders. The Company, PPM and Snyder agreed on four
nominees to be elected to the Board of Directors and the nine Charter Amendments
outlined in Items 3, 4, 5, 6, 7, 8, 9, 10 and 11. The parties entered into the
Settlement Agreement, which is summarized below. The Board of Directors believes
that its support for the nominees for director and the Charter Amendments, as
well as the Company's recent actions and policies described below, collectively
reflect the commitment of the Board of Directors and the Company to maximize the
value of the Company for its shareholders.
Settlement Agreement
GENERAL
On July 19, 2000, the Company, all but one of its directors, Snyder,
PPM America Special Investments Fund, L.P. ("SIF I"), PPM America Special
Investments CBO II, L.P. ("CBO II"), and PPM ( SIF I, CBO II and PPM are
referred to collectively in this section as the "PPM Group"), entered into a
settlement agreement (the "Settlement Agreement") to end the Company's pending
proxy contest with the PPM Group. The following is a summary of the material
terms of the Settlement Agreement. This summary is qualified in its entirety by
references to the Settlement Agreement attached hereto as ANNEX C.
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<PAGE> 9
PROVISIONS REGARDING THE ELECTION OF DIRECTORS AT THE ANNUAL MEETING
The Company agreed, pursuant to the Settlement Agreement, to nominate
Messrs. Berner, Bookshester, Davis and Turner (the "New Nominees") for election
to the Board of Directors. Messrs. Bookshester and Turner were recommended by
Snyder. Messrs. Berner and Davis were recommended by the PPM Group. The Board of
Directors approved the nomination of the New Nominees and recommended such New
Nominees for approval by the shareholders.
AMENDMENTS TO THE COMPANY'S ARTICLES AND REGULATIONS
Pursuant to the Settlement Agreement, the Company agreed, subject to
the requisite approval of the shareholders at the Annual Meeting, (i) to amend
Article X of its Articles to reduce from 72% to a majority of the Company's
outstanding shares of common stock (the "Common Stock") the shareholder approval
required to amend or repeal any section of the Articles, (ii) to amend Article
IX of the Company's Articles to eliminate classification of the Board of
Directors, (iii) to adopt a new Article XIV to the Articles pursuant to which
the Company would opt out of Ohio state law provisions that restrict an Ohio
corporation's ability to engage in certain transactions with shareholders
holding 10% or more of the corporation's voting power, (iv) to amend Regulation
34 of the Regulations to reduce from 72% to a majority of the Company's
outstanding shares of Common Stock the shareholder approval required to amend or
repeal any regulation, (v) to amend Regulation 3(a) to permit special meetings
of shareholders to be called by a shareholder or shareholders owning 10% rather
than 50% of the Company's outstanding shares of Common Stock, (vi) to amend
Regulation 7(c) to relax the advance notice provisions in connection with
shareholder business to be brought before an annual meeting of the Company's
shareholders, (vii) to amend Regulation 12 to relax the advance notice
provisions in connection with shareholder nominations of candidates for election
to the Company's Board of Directors, (viii) to amend Regulation 9 to reduce from
72% to a majority of the Company's outstanding Common Stock the shareholder
approval required to alter the size of the Board of Directors, and (ix) to adopt
a new Regulation 35 to the Regulations pursuant to which the Company would opt
out of the provisions of the Ohio Control Share Acquisition Act.
At a meeting thereof held on July 21, 2000, the Company's Board of
Directors approved the amendments to the Company's Articles and Regulations and
recommended such amendments for approval by the shareholders.
AGREEMENT WITH RESPECT TO VOTING AT THE ANNUAL MEETING
Pursuant to the Settlement Agreement, each party thereto (other than
the Company) agreed to cause all shares of Common Stock beneficially owned by
such party to be voted at the Annual Meeting in favor of (i) the amendments to
the Articles, (ii) the amendments to the Regulations and (iii) the election of
the New Nominees to the Board of Directors, all as set forth therein.
Furthermore, each party to the Settlement Agreement (other than the Company)
agreed that, besides the proposed amendment to the Company's Equity and
Performance Plan to increase by 500,000 the number of Common Shares available
under such plan, it would not bring any business before the Annual Meeting
except as expressly contemplated by the Settlement Agreement.
TERMINATION OF THE PROXY CONTEST
Pursuant to the Settlement Agreement, the PPM Group agreed (i) to
immediately terminate all activities with respect to its solicitation of proxies
in connection with the Annual Meeting, (ii) to not solicit directly or
indirectly any proxies or participate in any solicitation of any proxy with
respect to matters to be presented at the Annual Meeting, other than
solicitations in favor of the amendments and director nominations set forth in
the Settlement Agreement, (iii) to not become a participant in any election
contest relating to the Annual Meeting, (iv) to promptly file an amendment to
the PPM Group's Schedule 13D to reflect the termination of the proxy contest and
the other provisions of the Settlement Agreement, and (v) to refrain from taking
any other actions inconsistent with the matters contemplated by the Settlement
Agreement. The Company agreed to pay up to $250,000 of the reasonable,
documented costs and expenses of the PPM Group and its representatives incurred
in connection with their activities prior to the date of the Settlement
Agreement with respect to their solicitation of proxies (i) in connection with
the Annual Meeting and (ii) in connection with the PPM Group's review of
Elder-Beerman's revised proxy materials following the date of the Settlement
Agreement.
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<PAGE> 10
VOTING AND STANDSTILL AGREEMENTS
Pursuant to the Settlement Agreement, each party thereto (other than
the Company) agreed that during the period commencing on the date of the
Settlement Agreement and ending on the date that is 75 days prior to the first
anniversary of the Annual Meeting, such party (a) shall cause all shares of
capital stock of the Company that have the right to vote generally in the
election of directors and that are beneficially owned by such party: (i) to be
present, in person or by proxy, at the Annual Meeting so that all such shares
may be counted for the purpose of determining if a quorum is present at the
Annual Meeting, (ii) to be voted in favor of all of the proposals set forth in
the Settlement Agreement and in favor of the election of the New Nominees to the
Board of Directors at the Annual Meeting; (b) shall not directly or indirectly
(except through the Company pursuant to due authorization) solicit any proxies
or consents or in any way participate in any solicitation of any proxy with
respect to shares of Common Stock in any election contest with respect to the
Company's Board of Directors or become a participant in any election contest
with respect to the Company's Board of Directors or request or induce or attempt
to induce any other person to take any such actions with respect to an election
contest related to the Company's Board of Directors; (c) shall not (i) form,
join or otherwise participate in any "group" (within the meaning of Section
13(d)(3) of the Exchange Act or Rule 13d-5 thereunder) or (ii) otherwise act in
concert with any other person for the purpose of holding or voting Common Stock
in order to circumvent the Settlement Agreement; (d) shall not call, request the
call of, or seek to call, any special meeting of shareholders for the purpose of
an election contest with respect to the Company's Board of Directors; (e) shall
not enter into any discussions, negotiations, arrangements or understandings
with any other person with respect to any of the foregoing matters; and (f)
shall not make any public announcement critical of the composition of the Board
of Directors. In addition, the parties to the Agreement (other than the Company)
agreed to refrain from calling a special meeting of shareholders during the 75
days leading up to the 2001 Annual Meeting.
OTHER PROVISIONS
The Board of Directors has agreed that the transactions contemplated by
the Settlement Agreement will not trigger the provisions of the Rights
Agreement, dated as of December 30, 1997, as amended, by and between the Company
and Norwest Bank Minnesota, N.A., as Rights Agent.
The Settlement Agreement provides that the parties thereto will seek to
cause the 2001 Annual Meeting to be held between twelve and thirteen months from
the date of the 2000 Annual Meeting. Additionally, the Settlement Agreement may
be amended or modified only by the written agreement of each party thereto.
Finally, the Settlement Agreement shall automatically terminate in the event
that the shareholders fail to elect each of the New Nominees to the Board of
Directors at the Annual Meeting or in the event that the Company or any of the
directors party to the Settlement Agreement fails to exercise good faith in
fulfilling its obligations to actively seek shareholder approval of the
amendments to the Articles and to the Regulations and election of the New
Nominees. In the event that the Settlement Agreement is terminated,
substantially all obligations of the parties thereto shall terminate.
The Company's Actions to Maximize Shareholder Value
The Company has executed a number of initiatives that the Company
believes will help to generate the best overall result for its shareholders,
including:
- The addition of two independent directors to the Board of
Directors in December, 1999, at the request of the Company's
shareholders.
- The development of a new store prototype and the opening of
the first two of these stores in the Fall of 1999, and the
announcement of three new concept stores in Howell, Michigan,
West Bend, Wisconsin and Jasper, Indiana to be opened during
the fall of this year.
- The expansion of two stores in Sandusky, Ohio and Winfield,
West Virginia.
- The implementation of a planner/distributor merchandising
structure. A planner/distributor organization separates the
merchandising functions into (i) buyers, who select
merchandise and
6
<PAGE> 11
manage vendor relationships and (ii) planner/distributor
specialists, who focus on merchandise flow and store inventory
management. The Company believes that by implementing a
planner/distributor structure, it can optimize is inventory
investment.
- The implementation of an innovative proprietary point of sale
system to bring better and more efficient service to the
Company's customers. This new point of sale system functions
as much more than a traditional cash register. In addition to
processing sales up to three times faster than the Company's
previous system, it will provide a number of non-cash register
functions, including (i) advertising and couponing of the
Company's own products, (ii) a store locator function that
allows customers to select merchandise available only at other
Elder-Beerman locations, (iii) reporting of real-time sales
performance goals to each sales associate and (iv) Internet
access at the terminal to third-party websites and goods.
- The $300 million renewal of the Company's credit facilities in
May, 1999.
- The sale of the Bee-Gee Shoe division during the fourth
quarter of 1999 so that the Company can focus on its core
department store business.
- The closure of two underperforming stores in Wheeling and
Charleston, West Virginia earlier this year.
- The purchase of 1.1 million shares ($7 million) of the
Company's Common Stock pursuant to the two-year, $24 million
stock repurchase program implemented during fiscal year 1999.
On February 28, 2000, the Company announced that it engaged Wasserstein
Perella & Co. to explore strategic alternatives in order to maximize shareholder
value. This process is ongoing and the Company and its advisors are exploring a
variety of potential transactions.
Concurrently with its evaluation of potential transactions, the Company
has revised its strategic business plan to improve operating performance and
strengthen shareholder value in both the short and long term. The revised plan
includes plans for shifting the Company's merchandising strategy to emphasize
opening and moderate priced, value driven assortments in all families of
business, with an intense focus on certain key businesses, streamlining the
Company's organizational structure and accelerating new store growth in the
concept store format.
Management of the Company and the Board of Directors have devoted
significant time and effort to developing and implementing the Company's plans
and initiatives to improve the operating performance of the Company and to best
maximize the value of the Company for its shareholders. The Company believes its
plans and initiatives, combined with the election of the nominees for director
of the Company and the adoption of the Charter Amendments, will best maximize
shareholder value and provide the best growth opportunities for the Company.
OTHER MATTERS
The Board of Directors does not know of any other matter that will be
presented at the Annual Meeting other than the proposals discussed in this Proxy
Statement. Under our Regulations, generally no business besides the items
discussed in this Proxy Statement may be conducted or considered at the Annual
Meeting. However, if any other matter properly comes before the Annual Meeting,
the persons you have designated as your proxies will act on such proposal in
their discretion. For business to be conducted or considered at the Annual
Meeting, proposals must have been received at our executive offices not less
than 60 nor more than 90 calendar days prior to the date of the Annual Meeting.
7
<PAGE> 12
ITEM NUMBER 1
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
Currently, the Board of Directors has eleven members and is divided
into three classes. Classes II and III each consist of four members and Class I
consists of three members. A single class of directors is elected annually for a
three-year term. Each director elected serves until the term of office of the
class to which he is elected expires and until the election and qualification of
his successor. The terms of the following Class II directors expire at the
Annual Meeting: Dennis S. Bookshester, Stewart M. Kasen, John A. Muskovich and
John J. Wiesner. For election as Class II directors at the Annual Meeting, the
Nominating and Corporate Governance Committee has recommended, and the Board of
Directors has approved, the re-nomination of Mr. Bookshester and the nominations
of Mark F. C. Berner, Eugene I. Davis and Charles H. Turner to serve as
directors for a three-year term of office that will expire at the Annual Meeting
of Shareholders in the year 2003. However, if the amendment to Article IX of the
Articles is approved by the shareholders at the Annual Meeting, the classified
Board will be eliminated and the entire Board of Directors will stand for
re-election at the Company's annual meeting of shareholders in 2001.
The directors to be elected will be elected by a plurality of the votes
cast for directors. Except to the extent that shareholders indicate otherwise on
their proxies solicited by Elder-Beerman's Board of Directors, the holders of
such proxies intend to vote these proxies for the election as directors of the
persons named in the following table as nominees for election. The Board has no
reason to believe that the persons nominated will not be available to serve. If
a vacancy among such nominees occurs prior to the Annual Meeting, pursuant to
the terms of the Settlement Agreement, Snyder shall have the right to designate
a replacement for Mr. Bookshester and/or for Mr. Turner, and PPM shall have the
right to designate a replacement for Mr. Berner and/or Mr. Davis. The shares of
Common Stock represented by your proxies will be voted for any such replacement
nominees.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE FOUR NOMINEES
FOR DIRECTOR NOMINATED BY THE COMPANY.
Listed below are the names of the Company's four nominees for election
to the Board of Directors in Class II, those continuing directors in Classes III
and I who have previously been elected to terms that will expire in the year
2001 and the year 2002, respectively and those directors in Class II whose terms
will expire at the Annual Meeting. Also listed is the year in which each
individual first became a director of the Company and the individual's principal
occupation and other directorships.
8
<PAGE> 13
NOMINEES FOR DIRECTOR AT THE ANNUAL MEETING:
<TABLE>
<CAPTION>
NAME DIRECTOR AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
SINCE
<S> <C> <C> <C>
Mark F. C. Berner 46 Mr. Berner is Managing Partner of SDG Resources, L.P., an
oil and gas investment fund. From 1996 to 1998, he was a
private investment consultant in New York. In 1995, Mr.
Berner served as Senior Vice President and Counsel for
Turnberry Capital Management, L.P., a private equity fund.
His prior position was as a Director of the First Boston
Special Situations Fund, a private investment partnership.
Mr. Berner also currently serves a Director of ThinkSheet,
Inc., and served as a Director of Renaissance Technologies
from 1997 through March, 2000. Mr. Berner is also a
member of the bar of the State of New York.
Dennis S. Bookshester 1999 61 Mr. Bookshester serves as the Chief Executive Officer of
Fruit of the Loom, Inc., a garment manufacturer that filed for
protection under Chapter 11 of the United States Bankruptcy
Code in December, 1999. Mr. Bookshester also currently
serves as a Director of Fruit of the Loom and Playboy
Enterprises and as Chairman of Cutanix Corp.
Eugene I. Davis 45 Mr. Davis is Chairman and Chief Executive Officer of
Pirinate Consulting Group, L.L.C., a corporate strategy
consulting firm, and of Murdock Communications Corp., a
telecommunications enterprise. He also serves as Chief
Executive Officer of Smartalk Teleservices Corp., an
independent provider of prepaid calling cards, that filed for
protection under Chapter 11 of the United States Bankruptcy
Code in January, 1999, and is currently being liquidated.
During 1998 and 1999, Mr. Davis was Chief Operating
Officer of Total-tel Communications, Inc., a long distance
telecommunications provider. From 1996 to 1997, Mr. Davis
was the Chief Executive Officer of Sport Supply Group, Inc.,
a sporting goods and athletic equipment distributor. From
1992 to 1997, he served as President of Emerson Radio
Corp., a consumer electronics distributor. Mr. Davis also
currently serves as a Director of Coho Energy, Inc., Murdock
Communications Corp., Tipperary Corporation and Eagle
Geophysical Corp.
Charles H. Turner 43 Mr. Turner is Senior Vice President of Finance, Chief
Financial Officer and Treasurer of Pier I Imports, Inc. ("Pier
I"), and has served in this capacity since August, 1999. Mr.
Turner served as Pier I's Senior Vice President of Stores from
July 1994 through August 1999 and served as Controller and
Principal Accounting Officer of Pier I from January 1992
through August 1994. Mr. Turner also currently serves as a
Director of the Boys & Girls Clubs of Greater Fort Worth.
</TABLE>
9
<PAGE> 14
DIRECTORS IN CLASS III WITH TERMS CURRENTLY SCHEDULE TO EXPIRE IN 2001:
<TABLE>
<CAPTION>
NAME DIRECTOR AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
SINCE
<S> <C> <C> <C>
Charles Macaluso 1999 56 Mr. Macaluso is a Principal in East Ridge Consulting, Inc., a
management advisory and investment firm he founded in
1999. Prior to this, Mr. Macaluso served as a Principal from
1996 through 1999 in Miller Associates, Inc., a management
consulting firm. Prior to this, Mr. Macaluso was a partner
with the Airlie Group, L.P. and an analyst for Investment
Limited Partners, L.P., both private investment partnerships,
from 1986 through 1996.
Steven C. Mason 1997 64 Mr. Mason retired from Mead Corp., a forest products
company, in November 1997. Prior to retirement, Mr. Mason
served as Chairman of the Board and Chief Executive Officer
of Mead Corp. from April 1992 to November 1997. Mr.
Mason also currently serves as a Director of PPG Industries,
Inc. and Convergys.
Frederick J. Mershad 1997 57 Mr. 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 and a Director 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 Saks, Inc. ("Proffitt's"), from February
1995 to December 1996; Executive Vice President,
Merchandising Stores for Proffitt's from May 1994 to
January 1995; Senior Vice President, General Merchandise
Manager, Home Store for the Rich's Department Stores
division of Federated Department Stores, Inc. ("Federated")
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.
Jack A. Staph 1997 54 Mr. Staph is currently a consultant, lawyer and 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.
</TABLE>
10
<PAGE> 15
DIRECTORS IN CLASS I WITH TERMS CURRENTLY SCHEDULED TO EXPIRE IN 2002:
<TABLE>
<CAPTION>
NAME DIRECTOR AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
SINCE
<S> <C> <C> <C>
Thomas J. Noonan, Jr. 1997 60 Mr. Noonan serves as Executive Vice President of WSR, Inc.
("WSR"), an automotive aftermarket retailer, and has served
in this capacity since January 2000. Mr. Noonan served as
WSR's Chief Restructuring Officer from August 1998
through December 1999. He also serves as the Chief
Executive Officer of the Coppergate Group ("Coppergate"), a
financial investment and management company, and has
served in this capacity since May 1996. Prior to that, he
served as a Managing Director of Coppergate from April
1993 through May 1996. From August 1994 through 1999, Mr. Noonan
served 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. Mr. Noonan also currently
serves as a Director of Intrenet Inc.
Bernard Olsoff 1997 71 Mr. Olsoff retired from Frederick Atkins, a retail marketing
and consulting company, in 1997. Prior to this time, Mr.
Olsoff served as President, Chief Executive Officer and Chief
Operating Officer of Frederick Atkins, from 1994 to April
1997, and President and Chief Operating Officer from 1983
to 1994. Mr. Olsoff also currently serves as a Director of The
Leslie Fay Companies, Inc., an apparel design and
manufacturing company ("Leslie Fay").
1997 52
Laura H. Pomerantz 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 Leslie Fay, from January 1993 to
November 1994, and as Senior Vice President and Vice
President of Leslie Fay from 1986 through 1992.
</TABLE>
11
<PAGE> 16
DIRECTORS IN CLASS II WITH TERMS EXPIRING AT THE ANNUAL MEETING AND WHO WERE NOT
NOMINATED FOR RE-ELECTION TO THE BOARD:
<TABLE>
<CAPTION>
NAME DIRECTOR SINCE AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
<S> <C> <C> <C>
Stewart M. Kasen 1997 60 Mr. Kasen is currently a private investor. Mr. Kasen
previously served as the President and Chief Executive
Officer of Factory Card Outlet Corp. ("Factory Cards") from
May 1998 through October 1999 and as Chairman from April
1997 through 1999. Factory Cards filed for protection under
chapter 11 of the United States Bankruptcy Code in March
1999 and is developing a reorganization plan. 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 a
Director of Markel Corp.
John A. Muskovich 1997 53 Mr. Muskovich served as President and Chief Operating
Officer of Elder-Beerman from December 1997 through June
29, 2000, and served as Executive Vice President of
Administration of Elder-Beerman from February 1996 to
December 1997. In addition, Mr. Muskovich served as Chief
Financial Officer from December 1997 through March 1999.
Prior to this time, Mr. Muskovich served as Director of
Business Process for Kmart Corp. from September 1995 to
February 1996; President of the Claims Services Group with
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.
John J. Wiesner 1997 61 Mr. Wiesner has served as interim Chief Executive Officer of
Stage Stores, Inc., a regional apparel retailer, since February
2000. 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 also currently serves
as a Director of Stage Stores, Inc., Lamonts Apparel, Inc. and
The Loewen Group, Inc. and as a member of the Advisory
Committee of the Board of Directors of Fiesta Stores, Inc.
</TABLE>
12
<PAGE> 17
ITEM NUMBER 2
PROPOSED AMENDMENT TO THE COMPANY'S EQUITY AND PERFORMANCE INCENTIVE PLAN
GENERAL
The Elder-Beerman Stores Corp. Equity and Performance Incentive Plan
(the "Original Plan") was approved in December, 1997 pursuant the Company's plan
of reorganization, which was confirmed by the United States Bankruptcy Court. On
April 13, 2000, the Board of Directors (the "Board") approved an amendment to
the Plan, subject to shareholder approval at the Annual Meeting. The proposed
amendment would increase the number of shares of Common Stock to be issued under
the Plan from 2,250,000 to 2,750,000, thereby making 500,000 additional shares
available for grant under the Plan. The additional shares represent
approximately 3.34% of the issued and outstanding stock of the Company. To date,
options to acquire approximately [1,835,318] shares of Common Stock have been
granted under the Plan and approximately [445,607] shares of Common Stock in the
form of restricted shares and deferred shares have been granted under the
Original Plan. The Board of Directors intends to continue granting these awards
in order to assist the Company in developing and maintaining strong management
and an increase in the maximum number of shares under the Plan would allow these
future grants.
A summary description of the Original Plan, as amended by the Amendment
(the "Plan') is set forth below. The full text of the Plan, as amended by this
proposal, is annexed to this Proxy Statement as ANNEX A, and the following
summary is qualified in its entirety by reference to ANNEX A.
SUMMARY OF THE PLAN
General. Under the Plan, the Board is authorized to make awards of
options to purchase shares of Common Stock ("Option Rights"), awards of Tandem
Appreciation Rights and/or Free-Standing Appreciation Rights ("Appreciation
Rights"), awards of restricted shares ("Restricted Shares"), awards of deferred
Shares ("Deferred Shares"), and awards of performance shares ("Performance
Shares") and performance units ("Performance Units"). The terms applicable to
awards of the various types, including those terms that may be established by
the Board when making or administering particular awards, are set forth in
detail in the Plan.
Shares Available Under the Plan. Subject to adjustments as provided in
the Plan, the number of shares of Common Stock that may be issued or transferred
(i) upon the exercise of the Option Rights or Appreciation Rights, (ii) as
Restricted Shares and released from substantial risks and 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
payments of dividend equivalents paid with respect to awards made under the Plan
may not exceed, in the aggregate, 2,750,000 shares (2,250,000 of which were
approved in 1997 and 500,000 of which are being added by the proposed amendment)
plus any shares relating to awards that expire or are forfeited or canceled.
Such shares of Common Stock may be shares of original issuance or treasury
shares or a combination of both.
Limitations on Specific Kinds of Awards. In addition to the general
limitation on the number of shares of Common Stock available under the Plan, the
Plan specifically prevents grants to any participant in excess of 300,000 shares
of Common Stock during any calendar year. Additionally, no participant may be
granted, during any calendar year, more than 300,000 Appreciation Rights, 75,000
Restricted Shares, 5,000 Deferred Shares and Performance Shares. No participant
may receive in any calendar year an award of Performance Units having an
aggregate maximum value as of their respective dates of grant in excess of
$1,000,000. The aggregate number of Common Shares actually issued or transferred
by the Company upon the exercise of Incentive Stock Options (as defined below)
may not exceed 200,000 shares, subject to adjustment as provided in the Plan.
Eligibility. Officers, including officers who are members of the Board,
Non-Employee Directors, and other key employees of the Company and its
subsidiaries may be selected by the Board to receive Long-Term Inactive Awards
under Article III of the Plan. The Board may also make awards under the Plan to
any person who has agreed to commence serving in any such capacity within 90
days of the date of the grant of the award. Non- employee Directors are eligible
to receive Option Rights (other than Incentive Options) and Restricted Shares
under Article IV of the Plan, as the Board determines.
13
<PAGE> 18
Option Rights. The Board may grant Option Rights, which entitle the
participant to purchase a specified number of shares of Common Stock at an
option price, which may be equal to or more or less than (but not less than 75%
of) the fair market value of the shares of Common Stock, as determined by the
Board, on the date of the grant. However, if the Board grants Option Rights that
are intended to qualify as incentive stock options ("Incentive Stock Options")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code"), the option price per share may not be
less than 100% of the fair market value of the shares of Common Stock, as
determined by the Board, on the date of the grant. The grant will specify
whether the option price will be payable (1) in cash or by check acceptable to
the Company, (2) by the actual or constructive transfer to the Company of
nonforfeitable, unrestricted shares of Common Stock owned by the participant
having a value at the time of exercise equal to the total option price, or (3)
by a combination of such methods of payment. 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 Company of some or all of the shares to which such
exercise relates.
No Option Right may be exercised more than ten years from the date of
the grant. Each grant must specify the period of continuous employment with the
Company or any subsidiary that is necessary before the Option Rights become
exercisable and may provide for the earlier exercise of such Option Rights in
the event of a Change of Ownership (as defined in the Plan) of the Company. Any
grant of Option Rights may specify Performance Objectives (as defined below)
that must be achieved as a condition to the exercise of the Option Rights.
Successive grants may be made to the same participant whether or not Option
Rights previously granted remain unexercised. The exercise of an Option Right
cancels, on a share-for-share basis, any Tandem Appreciation Right (described
below). On or after the date of the grant of any Option Right other than
Incentive Stock Options, the Board may provide for the payment to the optionee
of dividend equivalents on such Option Right in cash or shares of Common Stock
on a current, deferred or contingent basis or may provide that such equivalents
will be credited against the option price.
Appreciation Rights. The Board may authorize the granting of Tandem
Appreciation Rights. A Tandem Appreciation Right is a right to receive from the
Company up to 100% of the spread between the option price and the current value
of the shares of Common Stock underlying the option. Additionally, the Board may
authorize the granting of Free-Standing Appreciation Rights, which are rights to
receive from the Company an amount determined by the Board as a percentage of
the spread (not exceeding 100%) at the time of exercise.
Any grant of Appreciation Rights may specify that the amount payable on
exercise of an Appreciation Right may be paid by the Company in cash, in shares
of Common Stock or in any combination and may either grant to the participant or
retain in the Board the right to elect among the alternatives. The grant may
specify a maximum amount payable on exercise. Any grant may also specify waiting
periods before exercise. Each grant will provide that no Appreciation Right may
be exercised except at a time when the related Option Right (if applicable) is
also exercisable. The grant may specify Performance Objectives (described below)
that must be achieved as a condition to exercise such rights.
Restricted Shares. The Board may also authorize the grant or sale of
Restricted Shares, which constitutes an immediate transfer of ownership of
shares of Common Stock to the participant in consideration of the performance of
services, entitling such participant to voting, dividend and other ownership
rights, but may be subject to substantial risk of forfeiture and restrictions on
transfer. Each grant or sale of Restricted Shares may provide that the transfer
may be made without additional consideration or in consideration of a payment by
the participant that is less than current fair market value of the shares of
Common Stock, as determined by the Board. Each grant or sale will provide that
the Restricted Shares 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 of the Company (as defined in the Plan), for a period
of not less than three years as determined by the Board. The grant may provide
that during the period for which "substantial risk of forfeiture" continues, the
transferability of Restricted Shares will be prohibited or restricted in the
manner and to the extent prescribed by the Board at the date of the grant. Any
grant may specify Performance Objectives (described below) which, if achieved,
will result in termination or early termination of the restrictions applicable
to such shares. Each grant or sale may require that any or all dividends or
other distributions paid thereon during the period of restriction be
automatically deferred and reinvested in additional Restricted Shares.
14
<PAGE> 19
Deferred Shares. The Board may also authorize the granting or sale of
Deferred Shares, which constitutes an agreement by the Company to deliver shares
of Common Stock to the participant in the future in consideration of the
performance of services and subject to the fulfillment of any conditions during
the deferral period, which the Board may specify. Each grant or sale may be made
without additional consideration or in consideration of a payment to the
participant that is equal to or less than the fair market value of the shares of
Common Stock, as determined by the Board, on the date of the grant. Deferral
periods must constitute not less than one year as determined by the Board at the
date of the grant, except (if the Board so determines) in the event of
retirement, disability or death of the participant or a Change of Ownership of
the Company or similar event or transaction. During the deferral period, the
participant will have no right to transfer any rights under the award and will
have no rights of ownership in the Deferred Shares and will have no right to
vote them.
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
(described below). Each grant will specify the number of Performance Shares or
Performance Units to which it pertains and the Performance Objectives which, if
achieved, will result in payment or early payment of the award. Each grant will
specify a minimum acceptable level of achievement below which no payment may 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. Each grant will specify the performance period during
which the Performance Objectives should be achieved. The performance period 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 of
the Company or similar event or transaction) commencing with the date of the
grant as is determined by the Board at the date of the grant.
Each grant will specify the time and manner of payment of Performance
Shares or Performance Units that have been earned. The amount may be paid by the
Company in cash, in shares of Common Stock or in any combination thereof and may
either grant to the participant or retain in the Board the right to elect among
the alternatives. The Board may provide for the payment of dividend equivalents
on Performance Shares on a current, deferred or contingent basis. Any grant of
Performance Shares may specify a maximum amount payable and any grant of
Performance Units may specify a maximum amount payable or the maximum number of
shares of Common Stock issued upon achievement of Performance Objectives.
Performance Objectives. Performance Objectives are established by the
Board for participants who receive awards of Performance Shares or Performance
Units, or, if so determined by the Board, Option Rights, Appreciation Rights or
Restricted Shares and dividend credits pursuant to the Plan. Such performance
measures or "Performance Objectives" may be described either in terms of
Company-wide objectives or objectives that are related to performance of the
individual participant or in the division, subsidiary, department or function
within the Company or a subsidiary in which the participant is employed. Section
162(m) of the Code requires that the Plan and the performance measures which
must be attained to earn compensation under performance-based awards be
disclosed to and approved by shareholders. The Performance Objectives applicable
to any award to a participant who is or is likely to become a "covered employee"
within the meaning of Section 162(m) of the Code 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;
4. share price;
5. total shareholder return;
6. return on invested capital, equity or assets;
7. operating earnings; and
8. sales growth.
If the Board determines that a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which
it conducts its business, or other events or circumstances render the
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 or equitable,
15
<PAGE> 20
except in the case of a "covered employee" where such action would result in the
loss of the otherwise available exemption of the award under Section 162(m) of
the Code.
Annual Incentive Awards. The purpose of annual incentive awards
("Annual Incentive Awards") provided under the Plan is to provide for the grant
of short-term performance awards to certain key employees of the Company based
on their attainment of predetermined goals which will further the interests of
the Company and its shareholders. Following the end of the Company's fiscal
year, the Board will determine whether and to what extent the goals, 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,
have been met and what Annual Incentive Awards have been earned, and will notify
each participant of his or her entitlement. Annual Incentive Awards will be paid
in cash as soon as practicable following the determination by the Board of such
award, subject to any deferral election made by the participant. A participant
may elect to defer up to 50% of an Annual Incentive Awards, which portion will
be converted and granted as Deferred Shares using the fair market value of the
shares of Common Stock, as determined by the Board, on the last day of the
Company's fiscal year for which such award is earned. Upon the lapse of the
deferral period, each participant will be granted Restricted Shares, the number
of which will be calculated using the fair market value of the shares of Common
Stock, as determined by the Board, on the last day of the Company's fiscal year
to which the award relates, to 25% of the deferred portion of such award
deferred.
Transferability. Except as 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 a participant 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 Company) to a fully revocable trust of which
the participant is treated as the owner for federal income tax purposes. Option
Rights and Appreciation Rights will be excersiable only during the participant's
lifetime by him or her or by the participant's guardian or legal representative.
The Board may specify on the date of the grant that part or all of the
shares of Common Stock that are (1) to be issued or transferred by the Company
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 (2) no longer subject to the
substantial risk of forfeiture and restrictions on transfer, will be subject to
further restrictions on transfer.
Adjustments. The Board may make or provide for such adjustments in the
number of shares of Common Stock 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 kinds 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 that otherwise would result from
(1) any stock dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, or (2) 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 (3) any other corporate transaction or event
having an effect similar to any of the foregoing. Notwithstanding any other
provision of the Plan, following any adjustment, the total percent of share
equivalents to be made available under the Plan will be 15% of shares
outstanding after such adjustment.
Administration and Amendments. The Plan is administered by the Board,
which may from time to time delegate all or any of part of its authority under
the Plan to a committee of the Board. 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.
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 Company in order to comply with applicable law or the rules
of any national securities exchange upon which the shares of Common Stock are
traded or quoted will not be effective unless and until such approval has been
obtained.
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<PAGE> 21
The Board will not, without further approval of the shareholders of the
Company, authorize the amendment of any outstanding Option Rights to reduce the
option price. Furthermore, no Option Right may be canceled and replaced to the
same individual with awards having a lower option price without further approval
of the shareholders.
If a participant holding (1) an Option Right or Appreciation Right that
is not immediately exercisable in full, (2) any Restricted Shares as to which
the substantial risk of forfeiture or the prohibition or restriction on transfer
has not lapsed, (3) any Deferred Shares as to which the deferral period has not
been completed, (4) any Performance Shares or Performance Units which have not
been fully earned, or (5) shares of Common Stock subject to any transfer
restrictions, terminates employment by reasons of death, disability, normal or
early retirement, or in the event of hardship or other special circumstances,
the Board may, in its sole discretion, take any action it deems equitable or in
the Company's best interest.
The Board may permit participants to elect to defer the issuance of
shares of Common Stock or the settlement of awards in cash under the Plan
pursuant to such rules, procedures or programs as it may establish for purposes
of the Plan. The Board may also provide that deferred issuances and settlements
include the payment or crediting of dividend equivalents or interest on the
deferral amounts.
Termination. No grant may be made under the Plan more than 10 years
after the date on which the Plan is first approved, but all grants made on or
prior to such date will continue in effect thereafter subject to the terms
thereof and of the Plan.
General. The closing price on NASDAQ of the shares of Common Stock of
the Company on June 1, 2000 was $4.50 per share.
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<PAGE> 22
PLAN BENEFITS
It is not possible to determine the future awards that will be received
by participants in the Plan. Set forth in the table below are the number of
Non-Qualified Stock Options and Restricted Shares that were granted under the
Plan during the Company's fiscal year 1999 and through April 13, 2000, to each
of (i) the chief executive officer and the four most highly compensated
executive officers of the Company, (ii) all present executive officers as a
group and (iii) all employees, including all present officers who are not
executive officers, as a group.
<TABLE>
<CAPTION>
PLAN BENEFITS
EQUITY AND PERFORMANCE INCENTIVE PLAN
GRANT/AWARD STOCK OPTIONS EXERCISE RESTRICTED SHARES GRANTED
NAME AND POSITION DATE GRANTED PRICE($) NUMBER VALUE ($)(1)
----------------- ----------------- ---------------- -------- ----------------------------
<S> <C> <C> <C> <C> <C>
Frederick J. Mershad................. 2000
Chairman and Chief 1999 90,000 8.00 75,000 581,250(2
Executive Officer 100,000 9.60
110,000 11.20
John A. Muskovich.................... 2000
President, Chief Operating Officer 1999 48,000 8.00 40,000 310,000(2)
until June 29, 2000 53,500 9.60
58,500 11.20
Scott J. Davido...................... 2000 5,000 29,690
Executive Vice President - Chief 1999 15,000 9.125 5,000 45,625
Financial Officer, Treasurer and 10,000 9.125
Secretary
Charles P. Shaffer................... 2000
Executive Vice President - 1999 15,000 9.125 1,108 5,540(4)
Merchandising and Marketing 25,000 6.750 10,000 67,500
James M. Zamberlan................... 2000 5,000 29,690
Executive Vice President, Stores 1999 20,000 9.125
Executive Officer Group (3).......... 2000 10,000 59,380
1999 545,000 131,108 1,009,915
Non-Executive Director Group......... 2000 34,668 18,000 90,000
1999 44,554 10,875 88,135
Non-Executive Officer Employee Group. 2000 25,000 4,000 23,752
1999 244,000 2,785 13,925(4)
</TABLE>
-------------------------------------
(1) Reflects value on date of award.
(2) Vests three years from date of grant only if certain performance objectives
are met.
(3) Includes five executives listed above.
(4) Restricted Share Company match for 1999 bonus deferral.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the Federal income tax consequences
of certain transactions under the Plan based on Federal income tax laws in
effect on January 1, 2000. This summary is not intended to be complete and does
not describe state or local tax consequences.
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<PAGE> 23
TAX CONSEQUENCES TO PARTICIPANTS
Non-qualified Stock Options. In general, (i) no income will be
recognized by an optionee at the time a non-qualified Option Right is granted;
(ii) at the time of exercise of a non-qualified Option Right, ordinary income
will be recognized by the optionee in an amount equal to the difference between
the option price paid for the shares and the fair market value of the shares, if
unrestricted, on the date of exercise; and (iii) at the time of sale of shares
acquired pursuant to the exercise of a non-qualified Option Right, appreciation
(or depreciation) in value of the shares after the date of exercise will be
treated as a capital gain (or loss).
Incentive Stock Options. No income generally will be recognized by an
optionee upon the grant or exercise of an Incentive Stock Option. If shares of
Common Stock are issued to the optionee pursuant to the exercise of an Incentive
Stock Option, and if no disqualifying disposition of such shares is made by such
optionee within two years after the date of the grant or within one year after
the transfer of such shares to the optionee, then upon sale of such shares, any
amount realized in excess of the option price will be taxed to the optionee as a
capital gain and any loss sustained will be a capital loss.
If shares of Common Stock acquired upon the exercise of an Incentive
Stock Option are disposed of prior to the expiration of either holding period
described above, the optionee generally will recognize ordinary income in the
year of disposition in an amount equal to the excess (if any) of the fair market
value of such shares at the time of exercise (or, if less, the amount realized
on the disposition of such shares if a sale or exchange) over the option price
paid for such shares. Any further gain (or loss) realized by the participant
generally will be taxed as a capital gain (or loss).
Appreciation Rights. No income will be recognized by a participant in
connection with the grant of a Tandem Appreciation Right or a Free-Standing
Appreciation Right. When the Appreciation Right is exercised, the participant
normally will be required to include as taxable ordinary income in the year of
exercise an amount equal to the amount of cash received and the fair market
value of any unrestricted shares of Common Stock received upon the exercise.
Restricted Shares. The receipt of Restricted Shares generally will be
subject to tax at ordinary income rates on the fair market value of the
Restricted Shares (reduced by any amount paid by the participant for such
Restricted Shares) at such time as the shares are no longer subject to
forfeiture or restrictions on transfer for purposes of Section 83 of the Code
("Restrictions"). However, a recipient who so elects under Section 83(b) of the
Code within 30 days of the date of transfer of the shares will have taxable
ordinary income on the date of transfer of the shares equal to the excess of the
fair market value of such shares (determined without regard to the Restrictions)
over the purchase price, if any, of such Restricted Shares. If a Section 83(b)
election has not been made, any dividends received with respect to Restricted
Shares that are subject to the Restrictions generally will be treated as
compensation that is taxable as ordinary income to the participant.
Deferred Shares. No income generally will be recognized upon the award
of Deferred Shares. The recipient of a Deferred Share award generally will be
subject to tax at ordinary income rates on the fair market value of
nonrestricted shares of Common Stock on the date that such shares are
transferred to the participant under the award (reduced by any amount paid by
the participant for such Deferred Shares).
Performance Shares and Performance Units. No income generally will be
recognized upon the grant of Performance Shares or Performance Units. Upon
payment of the earn-out of Performance Shares or Performance Units, the
recipient generally will be required to include as taxable ordinary income in
the year of receipt an amount equal to the amount of cash received and the fair
market value of any nonrestricted shares of Common Stock received.
TAX CONSEQUENCES TO THE COMPANY OR SUBSIDIARY
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company or subsidiary for which the
participant performs services will be entitled to a corresponding deduction
provided that, among other things, the income meets the test of reasonableness,
is an ordinary and necessary
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<PAGE> 24
business expense, is not an "excess parachute payment" within the meaning of
Section 280G of the Code and is not disallowed by the $1 million limitation on
certain executive compensation under Section 162(m) of the Code.
REQUIRED VOTE
The approval of the Amendment to the Plan requires a majority of all
the votes cast at the Annual Meeting, whether present in person or by proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THIS PROPOSAL.
ITEM NUMBERS 3-11
THE CHARTER AMENDMENTS
ITEM NUMBER 3
ADOPTION OF AMENDMENT TO ARTICLE X OF THE ARTICLES
PROPOSED AMENDMENT
Article X of the Articles currently states that at least 72% of the
voting power of the Company is required to amend or repeal, or adopt any
provision inconsistent with, the following articles in the Articles: (i) Article
VI (regarding cumulative voting rights); (ii) Article VII (regarding preemptive
purchase rights); (iii) Article VIII (regarding re-acquisition of shares by the
Company); (iv) Article IX (regarding classification of the Board of Directors as
discussed in Item 3 above); and (v) Article X (which also protects any voting
entitlement of holders of preferred stock). The Board of Directors proposes that
Article X of the Articles be amended to reduce from 72% to a majority of the
Company's outstanding Common Stock the shareholder approval required to amend or
repeal any section of the Articles including those dealing with cumulative
voting rights, preemptive rights to acquire shares, share repurchases by
Elder-Beerman, the classification of and staggered election system for the Board
of Directors and the amendment of Article X of the Articles itself. The full
text of the amendment to Article X is set forth on ANNEX B to this Proxy
Statement.
CONSIDERATIONS IN SUPPORT OF THE PROPOSAL
The Board of Directors supports the proposal to amend Article X to
permit the amendment of any provision of the Articles upon the approval of the
holders of a majority of the outstanding Common Stock of the Company. If Article
X of the Articles is amended as proposed, a majority of the outstanding Common
Stock of the Company will be sufficient to amend or repeal, or adopt any
provision inconsistent with, the articles noted in the preceding paragraph or
any other articles set forth in the Articles. The Board of Directors believes
that if the holders of more than a majority of the Company's Common Stock desire
to amend any provision of the Articles, they should be able to do so because
they represent a majority of the outstanding Common Stock of the Company. This
proposed amendment to Article X would make it easier for the Company's
shareholders to pursue future corporate governance changes and to approve
corporate governance changes proposed by the Board and by other shareholders.
OTHER CONSIDERATIONS
In considering this proposal, shareholders should be aware that the
provisions in Article X that require a 72% shareholder vote to eliminate or
change are certain corporate governance provisions that the Company initially
implemented to protect against abusive or unfair tactics in unsolicited attempts
to buy the Company. These provisions may be changed by the holders of a majority
of the Company's Common Stock if the amendment to Article X is approved.
VOTE REQUIRED
On July 21, 2000, the Board of Directors approved the amendment to
Article X of the Articles, subject to shareholder approval at the Annual
Meeting. The affirmative vote of the holders of at least 72% of the outstanding
Common Stock of the Company is required to approve the amendment to Article X of
the Articles.
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<PAGE> 25
THE BOARD OF DIRECTORS SUPPORTS THIS PROPOSAL
AND RECOMMENDS A VOTE FOR ITEM NUMBER 3
ITEM NUMBER 4
ADOPTION OF AMENDMENT TO ARTICLE IX OF THE ARTICLES
PROPOSED AMENDMENT
Article IX of the Articles currently provides that the Company's Board
of Directors be divided into three classes designated Class I, Class II and
Class III. Each class of directors is elected for a term of three years, to
expire on a staggered basis. The directors first appointed to Class II hold
office for a term expiring at the Annual Meeting and the directors first
appointed to Class III hold office for a term expiring at the annual meeting of
shareholders to be held in 2001. The directors in Class I hold office for a term
that expires at the annual meeting of shareholders to be held in 2002, with the
members of each class to hold office until their successors are elected. The
Board of Directors proposes that Article IX of the Articles be amended to
eliminate the classification of the Company's Board of Directors. The full text
of the amendment to Article IX is set forth on ANNEX B to this Proxy Statement.
CONSIDERATIONS IN SUPPORT OF THE PROPOSAL
The Board of Directors supports the proposal to eliminate the
classification of the board so that all members of the Board of Directors would
stand for election at each annual meeting of the Company's shareholders. The
election of directors is a primary means for shareholders to influence corporate
governance policies and to hold management accountable for implementation of
those policies. Requiring each director to stand for election annually allows
shareholders an opportunity to express their views on the performance of the
Board of Directors collectively and each director individually. The Amendment to
Article IX would eliminate the three classes of directors and the staggered
terms. Instead, all of the members of the Board of Directors would be part of a
single, unified class. Each director would be elected annually for a one-year
term.
OTHER CONSIDERATIONS
In considering this proposal, shareholders should be aware that the
election of directors by classes may promote continuity and stability in the
management of the affairs of the Company, because, at any given time, a majority
of the Board of Directors generally will have had prior experience as directors
of the Company and will be familiar with its business and operations.
VOTE REQUIRED
On July 21, 2000, the Board of Directors approved the amendment to
Article IX of the Articles, subject to shareholder approval at the Annual
Meeting. If the Amendment to Article X (Item Number 3) is adopted by at least
72% of the outstanding Common Stock of the Company, the affirmative vote of the
holders of a majority of the outstanding Common Stock of the Company will be
required to approve the amendment to Article IX of the Articles. If the
shareholders fail to approve the amendment to Article X (Item Number 3), then
the affirmative vote of the holders of at least 72% of the outstanding Common
Stock of the Company will be required to approve the amendment to Article IX of
the Articles.
THE BOARD OF DIRECTORS SUPPORTS THIS PROPOSAL
AND RECOMMENDS A VOTE FOR ITEM NUMBER 4
ITEM NUMBER 5
ADOPTION OF NEW ARTICLE XIV TO THE ARTICLES
PROPOSAL
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<PAGE> 26
Chapter 1704 of the Ohio Revised Code sets forth certain restrictions
on the ability of an Ohio corporation to enter into certain business
combinations and other transactions, including, for example, mergers,
consolidations, asset sales, share acquisitions, leases, loans and mortgages
with an "interested shareholder." Chapter 1704 of the Ohio Revised Code defines
an "interested shareholder" as a shareholder who exercises or has the ability to
exercise control of 10% or more of the voting power of an Ohio corporation. This
statute precludes an Ohio corporation from engaging in any of the
above-mentioned transactions for a period of three years after the interested
shareholder acquired its shares in the corporation, unless the directors of the
corporation approved in advance either the transaction in question or the
interested shareholder's acquisition of its shares. The statute does, however,
permit an Ohio corporation to opt out of the provisions of Chapter 1704 by
adopting an amendment to its articles of incorporation to that effect. The full
text of the new Article XIV is set forth on ANNEX B to this Proxy Statement.
CONSIDERATIONS IN SUPPORT OF THE PROPOSAL
The Board of Directors supports the proposal to adopt this new Article
XIV to the Articles which would render Chapter 1704 of the Ohio Revised Code
inapplicable to the Company. The Board believes that the application of Chapter
1704 to the Company has the effect of limiting or deterring types of
transactions, including purchases of large blocks of the Company's Common Stock,
that could be beneficial to all of the shareholders of the Company.
OTHER CONSIDERATIONS
In considering this proposal, shareholders should be aware that this
provision is intended to encourage those persons proposing to acquire control of
the Company to negotiate with the Board of Directors so that all of the
Company's shareholders receive fair consideration for their shares if the
Company should be sold.
VOTE REQUIRED
On July 21, 2000, the Board of Directors approved the new Article XIV
of the Articles, subject to shareholder approval at the Annual Meeting. If the
amendment to Article X (Item Number 3) is adopted by at least 72% of the
outstanding Common Stock of the Company, the affirmative vote of the holders of
a majority of the outstanding Common Stock of the Company will be required to
approve the adoption of new Article XIV. If the shareholders fail to approve the
amendment to Article X (Item Number 3), the affirmative vote of the holders of
at least 66 2/3% of the outstanding Common Stock of the Company will be required
to approve the new Article XIV of the Articles.
THE BOARD OF DIRECTORS SUPPORTS THIS PROPOSAL
AND RECOMMENDS A VOTE FOR ITEM NUMBER 5
ITEM NUMBER 6
ADOPTION OF AMENDMENT TO REGULATION 34 OF THE REGULATIONS
PROPOSAL
Regulation 34 of the Regulations currently states that at least 72% of
the voting power of the Company is required to amend or repeal, or adopt any
provision inconsistent with, the following regulations: (i) Regulation 1
(regarding the time and place of shareholder meetings); (ii) Regulation 3(a)
(regarding who may call special meetings of shareholders); (iii) Regulation 7
(regarding the order of business at shareholder meetings); (iv) Regulation 9
(regarding the number, election and terms of directors); (v) Regulation 10
(regarding newly-created directorships and vacancies on the Board of Directors);
(vi) Regulation 11 (regarding removal of directors); (vii) Regulation 12
(regarding the nomination and election of directors as discussed above); and
(viii) Regulation 34 (regarding amendments to the Code of Regulations). The
Board of Directors proposes that Regulation 34 of the Regulations be amended to
permit the amendment of any regulation contained in the Regulations upon the
approval of the holders of a majority of the outstanding Common Stock of the
Company. The full text of the amendment to Regulation 34 is set forth on ANNEX B
to this Proxy Statement.
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<PAGE> 27
CONSIDERATIONS IN SUPPORT OF THE PROPOSAL
The Board of Directors supports the proposal to amend Regulation 34 to
permit the amendment of certain provisions of the Regulations upon the approval
of a majority of the outstanding Common Stock of the Company. If Regulation 34
is amended as proposed, the affirmative vote of a majority of the voting power
of the Company will be sufficient to amend or repeal, or adopt any provision
inconsistent with, the regulations noted in the preceding paragraph or any other
regulations set forth in the Regulations. The proposed amendment to Regulation
34 would make it easier for the Company's shareholders to pursue future
corporate governance changes and to approve corporate governance changes
proposed by the Board or by other shareholders. The Board of Directors believes
that if a majority of the Company's shareholders want to amend any Regulation,
they should be able to do so since they represent a majority of the outstanding
Common Stock of the Company.
OTHER CONSIDERATIONS
In considering this proposal, shareholders should be aware that the
provisions in the Regulations that require a 72% shareholder vote to eliminate
or change are certain fundamental corporate governance provisions that may be
changed by a smaller majority of the holders of the Company's outstanding Common
Stock if the amendment to Regulation 34 is approved.
VOTE REQUIRED
On July 21, 2000, the Board of Directors approved the amendment to
Regulation 34 of the Regulations, subject to shareholder approval at the Annual
Meeting. The affirmative vote of the holders of at least 72% of the outstanding
Common Stock of the Company is required to approve the amendment to Regulation
34 of the Regulations.
THE BOARD OF DIRECTORS SUPPORTS THIS PROPOSAL
AND RECOMMENDS A VOTE FOR ITEM NUMBER 6
ITEM NUMBER 7
ADOPTION OF AN AMENDMENT TO REGULATION 9 OF THE REGULATIONS
PROPOSAL
Regulation 9 of the Regulations permits the size of the Board of
Directors to be established only (i) by a vote of the entire Board of Directors
or (ii) by the affirmative vote of the holders of at least 72% of the voting
power of the Company. The Board of Directors proposes that Regulation 9 be
amended to permit a majority of the outstanding Common Stock of the Company to
change the size of the Board of Directors. The full text of the amendment to
Regulation 9 is set forth on ANNEX B to this Proxy Statement.
CONSIDERATIONS IN SUPPORT OF THE PROPOSAL
The Board of Directors supports the proposal that the affirmative vote
of the holders of a majority of the outstanding Common Stock of the Company be
sufficient to alter the size of the Board of Directors. This proposal would
permit a smaller majority of shareholders to impact the size of the Board. The
Board believes that if a majority of the outstanding Common Stock of the Company
are not satisfied with the size of the Board of Directors, such shareholders
should be able to change it because such shareholders represent a majority of
the outstanding voting power of the Company.
OTHER CONSIDERATIONS
In considering this proposal, shareholders should be aware that the
provisions in the Regulations that require a 72% shareholder vote to alter the
size of the Board of Directors may be changed by a lower percentage of the
holders of the Company's Common Stock if the amendment to Regulation 34 is
approved. It could, however, be argued that requiring a higher percentage of
holders of the Company's Common Stock to change the number of
23
<PAGE> 28
directors on the Board of Directors could have the effect of enhancing the
stability of the Board of Directors and the Company.
VOTE REQUIRED
On July 21, 2000, the Board of Directors approved the amendment to the
Regulation 9 of the Regulations, subject to shareholder approval at the Annual
Meeting. If the amendment to Regulation 34 (Item Number 6) is adopted by at
least 72% of the outstanding Common Stock of the Company, the affirmative vote
of the holders of a majority of the outstanding Common Stock of the Company will
be required to approve the amendment to Regulation 9 of the Regulations. If the
shareholders fail to approve the amendment to Regulation 34 (Item Number 6), the
affirmative vote of the holders of at least 72% of the outstanding Common Stock
of the Company will be required to approve the amendment to Regulation 9 of the
Regulations.
THE BOARD OF DIRECTORS SUPPORTS THIS PROPOSAL
AND RECOMMENDS A VOTE FOR ITEM NUMBER 7
ITEM NUMBER 8
ADOPTION OF AN AMENDMENT TO REGULATION 3(a) OF THE REGULATIONS
PROPOSAL
Regulation 3(a) of the Regulations permits a shareholder or
shareholders who own 50% of the Company's Common Stock to call special meetings
of the shareholders. The Board of Directors proposes that Regulation 3(a) be
amended to permit a shareholder or shareholders who own 10% of the Company's
Common Stock to call special meetings of the shareholders. The full text of the
amendment to Regulation 3(a) is set forth on ANNEX B to this Proxy Statement.
CONSIDERATIONS IN SUPPORT OF THE PROPOSAL
The Board of Directors supports the proposal that the affirmative vote
of 10% of the outstanding Common Shares be permitted to call a special meeting
of the shareholders. The Board of Directors believes that lowering the holdings
required to call a special meeting from 50% to 10% would facilitate and promote
shareholder participation in governing the conduct and affairs of the Company.
OTHER CONSIDERATIONS
In considering this proposal, shareholders should be aware that by
allowing a lower percentage of shareholders to call special meetings potentially
could disrupt the Company's operations because the Board of Directors and the
Company's senior officers would be required to focus their time and efforts on
preparation for each special meeting called.
VOTE REQUIRED
On July 21, 2000, the Board of Directors approved the amendment to the
Regulation 3(a) of the Regulations, subject to shareholder approval at the
Annual Meeting. If the amendment to Regulation 34 (Item Number 6) is adopted by
at least 72% of the outstanding Common Stock of the Company, the affirmative
vote of the holders of a majority of the outstanding Common Stock of the Company
will be required to approve the amendment to Regulation 3(a) of the Regulations.
If the shareholders fail to approve the amendment to Regulation 34 (Item Number
6), the affirmative vote of the holders of at least 72% of the outstanding
Common Stock of the Company will be required to approve the amendment to
Regulation 3(a) of the Regulations.
THE BOARD OF DIRECTORS SUPPORTS THIS PROPOSAL
AND RECOMMENDS A VOTE FOR ITEM NUMBER 8
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<PAGE> 29
ITEM NUMBER 9
ADOPTION OF AN AMENDMENT TO REGULATION 7(c) OF THE REGULATIONS
PROPOSAL
Regulation 7(c) of the Regulations provides that any shareholder who
desires to bring business before an annual meeting of Elder-Beerman's
shareholders must notify Elder-Beerman not more than 90 days, but not less than
60 days, in advance of such meeting of its intent to do so and the nature of
such business. The Board of Directors proposes that Regulation 7(c) be amended
to relax the advance notice provisions contained in Regulation 7(c). Regulation
7(c), as amended, would provide that any shareholder who desires to bring
business before an annual meeting of Elder-Beerman's shareholders must notify
Elder-Beerman not more than 90 days, but not less than 45 days, in advance of
such meeting of its intent to do so and the nature of such business. The full
text of the amendment to Regulation 7(c) is set forth on ANNEX B to this Proxy
Statement.
CONSIDERATIONS IN SUPPORT OF THE PROPOSAL
The Board of Directors supports the proposal that any shareholder who
desires to bring business before an annual meeting of Elder-Beerman's
shareholders must notify Elder-Beerman not more than 90 days, but not less than
45 days, in advance of such meeting. This change would allow a shareholder who
intends to bring business before an annual meeting more time to notify
Elder-Beerman of its intent to do so. This additional time would make it easier
for shareholders to participate in corporate governance and could, therefore,
result in more shareholder participation in the governance of the conduct and
affairs of the Company.
OTHER CONSIDERATIONS
In considering this proposal, shareholders should be aware that a
longer advance notice period provides the Board of Directors with sufficient
time and information to evaluate shareholder proposals and other relevant
information, such as existing shareholder support for the proposal and to
formulate an appropriate response.
VOTE REQUIRED
On July 21, 2000, the Board of Directors approved the amendment to the
Regulation 7(c) of the Regulations, subject to shareholder approval at the
Annual Meeting. If the amendment to Regulation 34 (Item Number 6) is adopted by
at least 72% of the outstanding Common Stock of the Company, the affirmative
vote of the holders of a majority of the outstanding Common Stock of the Company
will be required to approve the amendment to Regulation 7(c) of the Regulations.
If the shareholders fail to approve the amendment to Regulation 34 (Item Number
6), the affirmative vote of the holders of at least 72% of the outstanding
Common Stock of the Company will be required to approve the amendment to
Regulation 7(c) of the Regulations.
THE BOARD OF DIRECTORS SUPPORTS THIS PROPOSAL
AND RECOMMENDS A VOTE FOR ITEM NUMBER 9
ITEM NUMBER 10
ADOPTION OF AN AMENDMENT TO REGULATION 12 OF THE REGULATIONS
PROPOSAL
Regulation 12 of the Regulations provides that any shareholder who
desires to propose any nominees for election to Elder-Beerman's Board of
Directors must notify Elder-Beerman not more than 90 days, but not less than 60
days, in advance of such meeting of its intent to do. The Board of Directors
proposes that Regulation 12 be amended to relax the advance notice provision
contained therein. Regulation 12, as amended, would provide that any shareholder
who desires to propose any nominees for election to Elder-Beerman's Board of
Directors must notify Elder-Beerman not more than 90 days, but not less than 45
days, in advance of such meeting of its intent to do so. The full text of the
amendment to Regulation 12 is set forth on ANNEX B to this Proxy Statement.
25
<PAGE> 30
CONSIDERATIONS IN SUPPORT OF THE PROPOSAL
The Board of Directors supports the proposal that any shareholder who
desires to propose any nominees for election to Elder-Beerman's Board of
Directors must notify Elder-Beerman not more than 90 days, but not less than 45
days, in advance of such meeting. This change would allow a shareholder who
intends to propose any nominees for election to Elder-Beerman's Board of
Directors more time to notify Elder-Beerman of its intent to do so. This
additional time would make it easier for shareholders to participate in the
nomination of directors and could, therefore, result in more shareholder
participation in the director selection process.
OTHER CONSIDERATIONS
In considering this proposal, shareholders should be aware that a
longer advance notice period provides the Board of Directors with sufficient
time and information to evaluate the shareholder's proposed nominees, such as
existing shareholder support for the nominees and to formulate an appropriate
response.
VOTE REQUIRED
On July 21, 2000, the Board of Directors approved the amendment to the
Regulation 12 of the Regulations, subject to shareholder approval at the Annual
Meeting. If the Amendment to Regulation 34 (Item Number 6) is adopted by at
least 72% of the outstanding Common Stock of the Company, the affirmative vote
of the holders of a majority of the outstanding Common Stock of the Company will
be required to approve the amendment to Regulation 12 of the Regulations. If the
shareholders fail to approve the amendment to Regulation 34 (Item Number 6), the
affirmative vote of the holders of at least 72% of the outstanding Common Stock
of the Company will be required to approve the amendment to Regulation 12 of the
Regulations.
THE BOARD OF DIRECTORS SUPPORTS THIS PROPOSAL
AND RECOMMENDS A VOTE FOR ITEM NUMBER 10
ITEM NUMBER 11
ADOPTION OF A NEW REGULATION 35 TO THE REGULATIONS
PROPOSAL
The Ohio Control Share Acquisition Act (Sections 1701.831 and 1701.832
of the Ohio Revised Code) (the "Control Share Act") requires that (i) any person
who proposes to acquire shares of an Ohio corporation so as to give such person
control of 20% or more of the voting power of the corporation must notify the
corporation of such acquisition and (ii) such acquisition must be approved by a
majority of the corporation's shareholders. The Board of Directors proposes that
the Company amend its Regulations to adopt a new Regulation 35 that would
expressly opt out of the application of the Control Share Act to the Company.
The full text of the new Regulation 35 is set forth on ANNEX B to this Proxy
Statement.
CONSIDERATIONS IN SUPPORT OF THE PROPOSAL
The Ohio Revised Code provides that the Control Share Act will apply to
all Ohio corporations unless the corporation specifically opts out by amendment
to its articles of incorporation or code of regulations. The Board of Directors
supports the proposal to eliminate the applicability of the Control Share Act to
the Company because the Board believes that by opting out of the Control Share
Act, the Company would remove a deterrent to potential acquirors of significant
blocks of the Company's Common Stock. The Board of Directors believes that the
applicability of the Control Share Act to the Company may serve as a deterrent
to potential investors in the Company.
OTHER CONSIDERATIONS
In considering this proposal, shareholders should be aware that in
enacting the Control Share Act, the Ohio General Assembly determined that
shareholders should have the right to vote on certain control acquisitions. If
the
26
<PAGE> 31
Company opts out of the Control Share Act, the shareholders may not have the
opportunity to vote on acquisitions by one person or group of 20% or more of the
Common Stock of the Company.
VOTE REQUIRED
On July 21, 2000, the Board of Directors approved the new Regulation 35
of the Regulations, subject to shareholder approval at the Annual Meeting. The
affirmative vote of the holders of a majority of the outstanding Common Stock of
the Company is required to approve the new Regulation 35 of the Regulations.
THE BOARD OF DIRECTORS SUPPORTS THIS PROPOSAL
AND RECOMMENDS A VOTE FOR ITEM NUMBER 11
27
<PAGE> 32
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors oversees the business and affairs of
Elder-Beerman and monitors the performance of management. The Board met nine
times during 1999.
BOARD COMMITTEES
The Board of Directors has an Executive Committee, an Audit and Finance
Committee, a Compensation Committee and a Nominating and Corporate Governance
Committee. Each Committee reports to the Board of Directors at its first meeting
after the Committee meeting.
Executive Committee
During fiscal year 1999, the members of the Executive Committee were
Messrs. Mershad (Chairman), Mason and Staph and Mr. Muskovich until he departed
from the Company in June 2000. The Executive Committee held no meetings in 1999.
Except to the extent that its powers are limited by law, by Elder-Beerman's
Articles or Regulations or by the Board of Directors, during the intervals
between meetings of the Board of Directors, the Executive Committee may
exercise, subject to the control of the Board of Directors, all of the powers of
the Board of Directors in the management and control of the Company's business.
All action taken by the Executive Committee is to be reported to the Board of
Directors at its first meeting thereafter.
Audit and Finance Committee
During fiscal year 1999, the members of the Audit and Finance Committee
were Messrs. Noonan (Chairman), Kasen and Olsoff. Mr. Macaluso joined this
Committee in December 1999. The Audit and Finance Committee held seven formal
meetings in 1999. The Audit and Finance Committee is responsible for: (i)
monitoring the Company's corporate compliance program; (ii) recommending the
Company's outside auditors; (iii) reviewing the independence of the Company's
outside auditors; (iv) reviewing the audit results and recommendations of the
Company's outside auditors; (v) reviewing the Company's financial statements,
including meeting each quarter with management and the Company's outside
auditors to review quarterly earnings results and the quality of those earnings
prior to their public release; (vi) reviewing and evaluating the Company's
systems of internal accounting controls; (vii) reviewing and evaluating the
Company's internal audit functions and meeting from time to time with the
internal auditors outside the presence of other employees; and (viii) reviewing
such other matters in relation to the accounting, auditing and financial
reporting practices and procedures of the Company as the Audit and Finance
Committee may, in its own discretion, deem desirable in connection with the
review functions described above.
Compensation Committee
During fiscal year 1999, the members of the Compensation Committee were
Messrs. Olsoff (Chairman), Staph and Wiesner. The Compensation Committee held
five formal meetings in 1999. The Compensation Committee is responsible for: (i)
reviewing executive salaries; (ii) approving the salaries and other benefits of
the executive officers of the Company; (iii) administering the bonus, stock
option and other incentive compensation plans of the Company, as well as the
employee stock purchase plan; and (iv) advising and consulting with the
Company's management regarding pension and other benefit plans and compensation
policies and practices of the Company.
Nominating and Corporate Governance Committee
During fiscal year 1999, the members of the Nominating and Corporate
Governance Committee were Messrs. Mason (Chairman), Mershad and Staph and Mrs.
Pomerantz. Mr. Bookshester joined this Committee in December 1999. The
Nominating and Corporate Governance Committee held four formal meetings in 1999.
The Nominating and Corporate Governance Committee is responsible for the
selection, evaluation and nomination of candidates for election to the Board of
Directors. The Nominating and Corporate Governance Committee is also responsible
for recommending to the Board the members and chair of each Board Committee. In
addition, the Nominating and Corporate Governance Committee is responsible for
the process of evaluating the overall
28
<PAGE> 33
performance of the Board of Directors and its individual members to ensure
effective operations of the Board of Directors and overall corporate governance.
The Nominating and Corporate Governance Committee does not consider nominees
recommended by shareholders. Instead, these nominees would be considered by the
entire Board of Directors.
COMPENSATION OF ELDER-BEERMAN'S DIRECTORS
Compensation
Directors who are employees of Elder-Beerman do not receive any
separate fees or other remuneration for serving as a director or a member of any
Committee of the Board. For fiscal year 1999, nonemployee directors were paid a
retainer of $20,000 for their service on the Board of Directors and Committee
chairmen were paid an additional $5,000. Nonemployee directors were also each
paid a meeting fee of $1,500 for each board meeting attended, plus $500 for each
committee meeting attended. Nonemployee directors may elect to take their annual
retainer as cash or in the form of discounted stock options.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
None of the members of the Compensation Committee was or ever has been
an officer or employee of Elder-Beerman or engaged in transactions with
Elder-Beerman (other than in his capacity as a director). None of
Elder-Beerman's executive officers serves as a director or member of the
compensation committee of another entity, one of whose executive officers serves
as a member of the Compensation Committee or a director of Elder- Beerman.
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company's Common Stock is the only outstanding class of voting
securities. The following table sets forth information regarding ownership of
the Company's Common Stock as of June 26, 2000 (except as otherwise noted) by:
(a) each person who owns beneficially more than 5% of Common Stock of the
Company to the extent known to management, (b) each executive officer and
director of the Company, (c) all directors and executive officers as a group,
and (d) each new nominee for election to the Board of Directors at the Annual
Meeting. Except as noted, all information with respect to beneficial ownership
has been furnished by each director or officer or is based on filings with the
Securities and Exchange Commission.
29
<PAGE> 34
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP (1) OF CLASS
----------------------------------------- -------------------------- ---------
Snyder Capital Management, Inc. 3,118,150(2) 20.80
350 California Street, Suite 1460
San Francisco, CA 94104
PPM America, Inc. 1,966,868(3) 13.15
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
James D. Bennett 1,126,323(4) 7.55
Bennett Management Corporation
2 Stamford Plaza, Suite 1501
281 Tresser Boulevard
Stamford, CT 06901
The D3 Family Fund 900,000(5) 6.02
19605 N.E. Eighth Street
Camas, WA 98607
Dennis S. Bookshester 3,577 *
Stewart M. Kasen 12,070(6) *
Charles Macaluso 5,794(6) *
Steven C. Mason 23,717(6) *
Frederick J. Mershad 300,928(6) 2.02
John A. Muskovich 184,028(6) 1.23
Thomas J. Noonan, Jr. 10,909(6) *
Bernard Olsoff 16,393(6) *
Laura H. Pomerantz 21,489(6)(7) *
Jack A. Staph 16,793(6) *
John J. Wiesner 13,952(6) *
Scott J. Davido 22,613(6) *
Charles P. Shaffer 29,100(6) *
James M. Zamberlan 48,238(6) *
--------------------------------------------------------------------------------
All directors and executive
officers as a group (15 persons): 721,728 4.82%
* less than 1%
_____________________
30
<PAGE> 35
(1) Information with respect to beneficial ownership is based on
information furnished to the Company by each shareholder included in
this table. "Beneficial ownership" is a technical term broadly defined
by the Securities and Exchange Commission to mean more than ownership
in the usual sense. So, for example, you not only "beneficially" own
the Elder-Beerman Common Stock that you hold directly, but also the
Elder-Beerman Common Stock that you indirectly (through a relationship,
a position as a director or trustee, or a contract or understanding),
have (or share) the power to vote or sell or that you have the right to
acquire within 60 days.
(2) Snyder Capital Management, Inc. ("SCMI") is the general partner of
Snyder Capital Management, L.P. ("SCMLP"), a registered investment
advisor. SCMI and SCMLP reported the beneficial ownership (as of March
31, 2000) of such shares in a Schedule 13D/A filed on July 26, 2000.
(3) PPM, a registered investment advisor, reported the beneficial ownership
(as of March 21, 2000) of such shares in Amendment No. 4 to Schedule
13D dated June 7, 2000. All such shares are held in portfolios of PPM
America Special Investments Fund, L.P. ("SIF I") and PPM America
Special Investments CBO II, L.P. ("CBO II"). PPM serves as investment
advisor to both SIF I and CBO II. PPM, PPM America CBO II Management
Company (general partner of CBO II) and PPM American Fund Management
GP, Inc. (general partner of SIF I) disclaim beneficial ownership of
all such shares.
(4) Mr. Bennett reported the beneficial ownership (as of June 21, 2000) of
such shares in a Schedule 13D filed on July 26, 2000. Mr. Bennett
shares beneficial ownership of as well as voting and dispositive power
with respect to such shares with Bennett Restructuring Fund, L.P. and
Bennett Offshore Restructuring Fund, Inc.
(5) The D3 Family Fund ("D3") reported the beneficial ownership (as of June
21, 2000) of such shares in a Schedule 13D filed June 22, 2000. D3 has
sole voting and dispositive power over such shares. Such shares include
shares held by Haredale Ltd. (20,000), James Henry Hildebrandt (6,500),
Toxford Corporation (3,000) and The Nierenberg Family Trust (50,000).
(6) These amounts include shares of Common Stock that the following persons
had a right to acquire within 60 days after June 26, 2000.
Stock Options Exercisable
Name by August 25, 2000
---- -----------------------
Mr. Mershad 107,600
Mr. Muskovich 62,400
Mr. Davido 11,400
Mr. Shaffer 10,000
Mr. Zamberlan 30,400
Mr. Kasen 4,667
Mr. Macaluso 2,217
Mr. Mason 19,314
Mr. Noonan 6,506
Mr. Olsoff 11,990
Ms. Pomerantz 11,086
Mr. Staph 11,990
Mr. Wiesner 9,549
(7) Includes 1,000 shares of Common Stock with shared voting or investment
power.
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<PAGE> 36
The following table sets forth the ownership of the Common Stock as of
June 27, 2000, by each of the new nominees for election to the Board of
Directors. Unless otherwise indicated, such persons have sole voting and
investment power with respect to such shares, and all such shares were owned
beneficially by the person indicated.
AMOUNT OF BENEFICIAL
NAME OWNERSHIP PERCENT OF CLASS
---- -------------------- ----------------
Mark F.C. Berner 0 0
Eugene I. Davis 0 0
Charles H. Turner 0 0
SUMMARY COMPENSATION TABLE
The table below shows the before-tax compensation for the years shown
for Elder-Beerman's Chief Executive Officer and the four next highest paid
executive officers (the "Named Executive Officers") at the end of fiscal year
1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------- ----------------------------------------------------
Awards Payouts
----------------------- ----------------------
Securities All
Other Restricted Underlying Other
Annual Stock Options/ LTIP Compen-
Name and Salary Bonus Compen- Award(s) SARs Payouts sation
Principal Position Year ($) ($) sation ($)(2) ($) (#) ($) ($)(4)(5)
------------------ ---- ----- ------- ------------- ---------- ---------- ------- ---------
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Frederick J. Mershad --
Chairman and Chief 1999 600,000 581,250 300,000 7,665
Executive Officer 1998 559,263 120,000 29,403 1,050,000 75,000 9,970
1997 503,344 500,000 51,251 683,703 194,000
John A. Muskovich--
President, Chief 1999 425,000 310,000 160,000 6,000
Operating Officer 1998 412,207 85,000 473,127 30,000 9,950
through June 29, 2000 1997 267,335 598,750 505,325 126,000
Scott J. Davido --
Executive Vice 1999 217,596 36,000 60,550 45,625 25,000 382
President--Chief 1998 174,076 21,280 26,626 26,599 4,585
Financial Officer, 1997 15,935 27,500(1) 3,124 21,000
Treasurer and Secretary
Charles P. Shaffer
Executive Vice President 1999 243,654 44,303(3) 95,190 40,000 7,159
-- Merchandising and 1998 220,769 60,000 37,495 5,483
Marketing 1997 190,385 60,000 37,505 25,000 1,349
James M. Zamberlan --
Executive Vice 1999 309,808 53,156 20,000 2,712
President-- Stores 1998 278,803 79,650 234,892 15,000 8,050
1997 139,944 41,313 20,386 61,000
</TABLE>
______________________
(1) Includes a $25,000 signing bonus paid in fiscal year 1997.
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<PAGE> 37
(2) Moving expense reimbursement.
(3) Includes 4,430 deferred shares and 1,108 restricted shares awarded to
Mr. Shaffer as the deferred portion of his 1999 bonus pursuant to the
Equity and Performance Incentive Plan.
(4) Includes life insurance premium payments paid by the Company in 1999 in
the following amounts: Mr. Mershad $4,425, Mr. Muskovich $2,760, Mr.
Zamberlan $2,712, Mr. Davido $382 and Mr. Shaffer $2,299.
(5) Includes matching contributions paid by the Company in 1999 under the
Company's Retirement Savings Plan in the following amounts: Mr. Mershad
$3,240, Mr. Muskovich $3,240 and Mr. Shaffer $4,860.
STOCK OPTIONS
The following table sets forth information concerning stock option
grants made to the Named Executive Officers during fiscal year 1999 pursuant to
the Plan.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
------------------------------------------------------------------
Potential Realizable Value
At Assumed Annual Rate
Of Stock Price Appreciation
For Option Term
-----------------------------
Percent Of
Number Of Total
Securities Options/SARs
Underlying Granted To Exercise
Options/SARs Employees In Of Base Expiration
Name Granted(#)(1)(2) Fiscal Year Price($/Sh) Date 5% ($) 10% ($)
---- ---------------- ----------- ----------- ---- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Frederick J. Mershad 90,000 (1) 11.41 8.00 2/25/06 261,453 639,230
100,000 (1) 12.67 9.60 2/25/06 130,503 550,256
110,000 (1) 13.94 11.20 2/25/06 (32,447) 429,281
John A. Muskovich 48,000 (1) 6.08 8.00 2/25/06 139,441 340,923
53,500 (1) 6.78 9.60 2/25/06 69,819 294,387
58,500 (1) 7.41 11.20 2/25/06 (17,256) 228,300
Scott J. Davido 15,000 (2) 1.90 9.125 3/15/09 86,080 218,143
10,000 (2) 1.27 9.125 4/22/09 57,387 145,429
Charles P. Shaffer 15,000 (2) 1.90 9.125 4/22/09 86,080 218,143
25,000 (2) 3.17 6.750 8/19/09 106,126 268,944
James M. Zamberlan 20,000 (1) 2.53 9.125 4/22/09 114,773 290,858
</TABLE>
(1) Options vest three years from date of grant.
(2) Options vest one-fifth annually, beginning one year from date of grant.
33
<PAGE> 38
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information about stock options
exercised during fiscal year 1999 by the Named Executive Officers and the fiscal
year-end value of unexercised options held by the Named Executive Officers. All
of such options were granted under the Plan.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number Of Securities Value Of Unexercised
Underlying Unexercised In-The-Money
Options/SARs Held At Options/SARs Held At
Shares Value January 29, 2000 (#) January 29, 2000($)(1)
Acquired On Realized ---------------------- -----------------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
----------------------- --------------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frederick J. Mershad 0 $0.00 92,600 476,400 $0.00 $0.00
John A. Muskovich 0 $0.00 56,400 259,600 $0.00 $0.00
Scott J. Davido 0 $0.00 8,400 37,600 $0.00 $0.00
Charles P. Shaffer 0 $0.00 10,000 55,000 $0.00 $0.00
James M. Zamberlan 0 $0.00 27,400 68,600 $0.00 $0.00
</TABLE>
______________
(1) Based on the closing price on NASDAQ of the Company's Common Stock on
January 28, 2000 (the last trading day in fiscal year 1999) of $5.00.
34
<PAGE> 39
EMPLOYMENT AND SEVERANCE AGREEMENTS WITH CERTAIN OFFICERS
The Company has entered into employment agreements with Frederick J.
Mershad, Chairman and Chief Executive Officer and John A. Muskovich who departed
as President and Chief Operating Officer, and several of its other executive
officers as described below (the "Employment Agreements"). These Employment
Agreements set forth (a) the executive's compensation and benefits, subject to
increases 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," (as defined in the Employment Agreements), 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.
As announced by the Company on June 30, 2000, Mr. Muskovich is no
longer employed by the Company and has not been re-nominated for election to the
Board of Directors. Pursuant to the terms of his Employment Agreement, Mr.
Muskovich 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, which expires on December 30, 2001.
The Company has also entered into Employment Agreements that include
severance pay provisions with each of Messrs. Zamberlan, Davido and Shaffer.
These Employment Agreements set forth (a) the executive's compensation and
benefits, subject to review at the discretion of the Board of Directors, (b) the
Company's right to terminate the executive for cause or otherwise; (c) the
amounts to be paid by the Company in the event of the executive's termination,
death or disability while rendering services; (d) the executive's duty of strict
confidence and to refrain from conflicts of interest; (e) the executive's
obligations not to compete for the term of the agreement plus one year unless
the executive terminated his employment for good reason or the employer
terminates the executive other than for cause; and (f) the executive's right to
receive severance payments if he (i) is terminated within two years of a change
in control without cause, (ii) voluntarily terminates for defined good reasons
within two years of a change of control, (iii) terminates his employment for any
reason, or without reason, during the thirty-day period immediately following
the first anniversary of a change in control, or (iv) is terminated in
connection with but prior to a change in control and termination occurs
following the commencement of any discussions with any third party that
ultimately results in a change in control. Specifically, under the Employment
Agreements, the amount of any severance payment by the Company will be the
greater of 2.99 times the Internal Revenue Code "base amount" as described in
Section 280G of the Internal Revenue Code or two times his most recent base
salary and bonus. Severance payments made under the Employment Agreements will
reduce any amounts that would be payable under any other severance plan or
program, including the Company's severance pay plan. A tax gross-up on excise
taxes also will be paid if the severance pay exceeds the limit imposed by the
Internal Revenue Code. In addition, the executive will continue to be eligible
for health benefits, perquisites, and fringe benefits generally made available
to senior executives for two years following his termination, unless the
executive waives such coverage, fails to pay any amount required to maintain
such coverage, or obtains new employment providing substantially similar
benefits.
The Company has also entered into Indemnification Agreements with each
current member of the Board of Directors as well as each of the Company's
executive officers. These agreements provide that, to the extent
35
<PAGE> 40
permitted by Ohio law, the Company will indemnify the director or officer
against all expenses, costs, liabilities and losses (including attorneys' fees,
judgments, fines or settlements) incurred or suffered by the director or officer
in connection with any suit in which the director or officer is a party or is
otherwise involved as a result of the individual's service as a member of the
Board of Directors or as an officer so long as the individual's conduct that
gave rise to such liability meets certain prescribed standards.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Compensation Committee of the Board of Directors (the "Committee")
has responsibility for setting and administering the policies that govern
executive compensation. The Committee has authority, among other things, to
review, analyze and recommend compensation programs to the Board and to
administer and grant awards under the Company's Equity and Performance Incentive
Plan (the "Plan"). The Committee is composed entirely of outside directors.
Reports of the Committee's actions and decisions are recommended to the full
Board. The purpose of this report is to summarize the philosophical principles,
specific program objectives and other factors considered by the Committee in
reaching its determination regarding the executive compensation of the Chief
Executive Officer and the Company's executive officers.
The Committee's goal is to ensure the establishment and administration
of executive compensation policies and practices that will enable Elder-Beerman
to attract, retain and motivate the management talent necessary to achieve the
Company's goals and objectives. The Committee's philosophy is that executive
compensation should include the following:
- A competitive mix of short-term (base salary and annual
incentive bonus) and long-term (stock options and restricted
and deferred shares) compensation that helps the Company
attract and retain executive talent.
- Cash compensation that generally reflects competitive industry
levels, with annual incentive bonus opportunities that may
produce total compensation at or above competitive levels if
performance against predetermined objectives exceeds
expectations.
- Opportunities for ownership of Elder-Beerman's Common Stock
that align the interests of Company executives with the
long-term interests of shareholders.
The Company's executive compensation is comprised primarily of (i)
salaries, (ii) annual cash incentive bonuses and (iii) long-term incentive
compensation in the form of stock options, deferred shares and restricted shares
granted under the Plan. Each year the Committee reviews market data and assesses
the Company's competitive position for each of these three components. To assist
in benchmarking the competitiveness of its compensation programs, the Committee
retains a third-party consultant to compile an executive compensation survey for
comparably sized retail companies. Because the Committee believes that
compensation in the retail industry is more directly tied to the size of
enterprise than the type of retail business, these surveys also include
comparably sized retailers outside of the department store business. Each of the
components of executive compensation is discussed below.
COMPONENTS OF COMPENSATION
Base Salary
-----------
Base salaries for Company executives were initially established in each
of the executive's employment agreements, which were approved pursuant to the
Plan of Reorganization. The Committee reviews base salaries annually and makes
adjustments on the basis of the performance of both the individual executive and
the Company, the executive's level of responsibility in the Company, the
executive's importance to the Company and the general level of executive
compensation in the retail industry. The base salaries and increases in the base
salaries of the
36
<PAGE> 41
Company's executive officers (other than the Chief Executive Officer) are
reviewed and approved by the Committee after considering recommendations made by
the Chief Executive Officer in light of the criteria discussed above.
Annual Bonus
------------
- General Parameters
------------------
Annual bonus awards are designed to promote the achievement of the
Company's business objectives. In setting the bonus award targets each year that
the Company must meet before it can make any bonus payments, the Committee
considers the Company's prior year's performance and objectives, as well as its
expectations for the upcoming year. Additionally, individual performance goals
are established for each participant. Bonus program participants receive no
payments unless minimum thresholds are achieved.
Bonus targets are fixed as a percentage of annual base salary based on
comparable incentives paid by other retail companies. Target bonus percentages
for the executive officers ranged from 35% to 50%. The target percentage
increases with the level of responsibility of the executive. Bonus payments may
range from 0% to 150% of the target annual bonus, with payments increasing as
performance improves.
- Deferred Shares and Restricted Shares
-------------------------------------
An executive may elect to defer up to 50% of his annual bonus in the
form of deferred shares. Deferred shares are subject to a deferral period of at
least three years, which is accelerated in the event of death, permanent
disability, termination of employment or change in control of Elder-Beerman.
Holders of deferred shares do not have voting rights for their deferred shares,
but the terms of the deferred shares may provide for dividend equivalents. The
Company matches 25% of the deferred shares in restricted shares.
Restricted shares vest in three years from the date of grant, which is
accelerated in the event of death, permanent disability or a change in control
of Elder-Beerman. Prior to vesting, restricted shares are forfeitable upon
termination of employment. The restricted shares provide for dividend
equivalents and voting rights.
The deferred shares and restricted shares are granted to executives in
accordance with the Plan.
- 1999 Bonus Objectives
---------------------
Annual bonuses for 1999 were based on meeting weighted objectives for
the following measurements:
- Corporate operating profit;
- Financial goals in the applicable executive's area of
responsibility; and
- Individual performance goals for the applicable executive
For 1999, the Company did not achieve the target award level
established for operating profit and therefore, the Company did not pay any
amounts for this component of bonuses. Many executives were able to achieve some
or all of their respective area of responsibility and individual performance
goals, which resulted in each executive earning in total between 30% and 55% of
the executive's respective target bonus amounts.
Long-Term Incentive Awards
--------------------------
- Stock Options, Deferred Shares and Restricted Shares
----------------------------------------------------
The Committee administers the Plan, which provides for long-term
incentives to executive officers in the form of stock options, deferred shares
and restricted shares. The awards of stock options, deferred shares and
restricted shares provide compensation to executives only if shareholder value
increases. To determine the number of stock options, deferred shares and
restricted shares awarded, the Committee reviews a survey prepared by a third-
party consultant of awards made to individuals in comparable positions at other
retail companies and the executive's
37
<PAGE> 42
past performance, as well as the number of long-term incentive awards previously
granted to the executive. The deferred shares and restricted shares are subject
to the terms and conditions described above.
Executive Plan
--------------
At the beginning of Fiscal 1999, the Committee adopted a long-term
incentive award plan (the "Executive Plan") for Mr. Mershad, its Chief Executive
Officer, and Mr. Muskovich, its President and Chief Operating Officer. This
Executive Plan consists of performance-based restricted shares and premium
priced stock options. This Executive Plan was developed to achieve two key
objectives:
- Create strong incentives that will drive shareholder value; and
- Create a retention mechanism for the top two officers of the
Company.
To establish benchmarks for a competitive long-term incentive plan for
Messrs. Mershad and Muskovich, the Committee engaged a third party consultant to
conduct an analysis of executive compensation at 12 peer retail companies. The
Committee reviewed the current compensation packages of Messrs. Mershad and
Muskovich and evaluated the Company's performance and future performance
objectives. Bearing in mind these factors and the two key objectives for the
Executive Plan, the Committee formulated the amounts of restricted shares and
stock options to be granted under the Executive Plan to Messrs. Mershad and
Muskovich and the earnings per share and stock price targets that must be met
for Messrs. Mershad and Muskovich to earn their respective awards. Pursuant to
the terms of the Executive Plan, any restricted shares granted to Messrs.
Mershad and Muskovich will vest at the end of three years only if the Company
meets target earnings per share levels. The premium price stock options will
vest over a period of three years and the vesting is not contingent on
performance goals.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The base salary and increases in the base salary of the Chief Executive
Officer are reviewed annually and approved by the Committee and the nonemployee
members of the Board of Directors after review of the Chief Executive Officer's
performance against predetermined performance criteria set by the nonemployee
Directors.
1999 Base Salary and Annual Bonus
---------------------------------
Mr. Mershad's annual base salary was $600,000, the same level since
March 22, 1998. Mr. Mershad is also eligible for an annual bonus of up to 50% of
his base salary. Mr. Mershad's bonus is determined in the same manner described
above for the executive officers. For fiscal year 1999, Mr. Mershad received no
bonus.
Executive Plan
On February 25, 1999 pursuant to the Executive Plan, the Committee
granted Mr. Mershad 75,000 restricted shares and options to purchase 300,000
shares of Elder-Beerman stock. The restricted shares granted to Mr. Mershad will
vest at the end of three years only if the Company meets target earnings per
share levels. The premium price stock options will vest at the end of three
years and the vesting is not contingent on performance goals. At the date of the
grant approximately one-third of the options had an exercise price equal to the
then-current stock price. The remaining two-thirds of the options were set with
exercise prices of 20% to 40% above current market price.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Under Section 162(m) of the Internal Revenue Code, the Company is
precluded from deducting compensation in excess of $1 million per year paid to
each of the Named Executive Officers. Qualified performance-based compensation
is excluded from this deduction limitation if certain requirements are met. The
Plan is designed to permit (but not require) the Committee to grant awards that
will qualify as performance-based compensation that is excluded from the
limitation in Section 162(m). The Committee believes that Section 162(m) should
not cause the Company to be denied a deduction for Fiscal 1999 compensation paid
to the Named Executive Officers. The Committee will work to structure components
of its executive compensation package to achieve
38
<PAGE> 43
maximum deductibility under Section 162(m) while at the same time considering
the goals of its executive compensation policies.
The foregoing is the report of the Compensation Committee of the Board
of Directors.
Bernard Olsoff
Jack A. Staph
John J. Wiesner
STOCK PRICE PERFORMANCE
The following graph depicts the value of $100 invested in Elder-Beerman
Common Stock (trading symbol "EBSC") beginning February 17, 1998 (the first
trading day of the Common Stock) through January 29, 2000 (the last day of the
Company's fiscal year). Comparisons are made to:
1. The Standard & Poor's SmallCap 600 Index, a market-value
weighted index of 600 domestic companies with an average
equity market value of approximately $500 million.
2. A Regional Department Store Peer Group, consisting of The
Bon-Ton Stores, Inc., Stage Stores, Inc., Gottschalks Inc.,
and Jacobson Stores Inc. The return for this group was
calculated assuming an equal dollar amount was invested in
each retailer's stock based on closing prices as of February
17, 1998.
<TABLE>
<CAPTION>
Base
Period
Company/Index Name Feb 98 May 98 Aug 98 Oct 98 Jan 99 May 99 Jul 99 Oct 99 Jan 00
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
S&P Small Cap 600 Index $100 $107 $93 $84 $93 $91 $97 $93 $103
Regional Dept Store Peer Group Index 100 116 91 57 59 53 58 53 40
EBSC 100 165 140 71 54 51 37 41 30
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 8, 2000, the Compensation Committee of the Board of
Directors of the Company recommended that the Board approve a loan to John A.
Muskovich for the purpose of financing the purchase of his new home in Dayton,
Ohio. Following approval by the Board of this recommendation, on February 8,
2000, the Company made an unsecured loan to Mr. Muskovich in the amount of
$230,000. The Company's loan to Mr. Muskovich bears interest at the same rate
charged to the Company under the Company's Revolving Credit Facility and
Receivable Securitization Facility. The principal and interest are due on the
earlier of (i) three days after the closing of the purchase of Mr. Muskovich's
old residence or (ii) August 8, 2000.
See "Costs of Proxy Solicitation" and "Settlement Agreement" in the
"Information About the Annual Meeting" section of this Proxy Statement for a
description of the arrangements pursuant to which the Company will reimburse PPM
for reasonable and documented costs and expenses with respect to the
solicitation of proxies, the review of the Company's proxy materials and other
matters set forth in the Settlement Agreement.
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 and persons who own more than 10
percent of a registered class of our equity securities to file reports of
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission. The
Securities and Exchange Commission requires this group to furnish us with copies
of all such filings. The Company periodically reminds this group of its
reporting obligation and assists in making the required disclosure once the
Company is notified that a reportable event has occurred. The Company is
required to disclose any failure by any of the above mentioned persons to make
timely Section 16 reports.
39
<PAGE> 44
Based upon its review of such forms received by Elder-Beerman and
written representations from the directors and executive officers that no other
reports were required, Elder-Beerman is unaware of any instances of
noncompliance, or late compliance, with such filings during fiscal year 1999 by
its directors, executive officers or ten percent shareholders.
INDEPENDENT AUDITORS
In February, 1999, Deloitte & Touche LLP was appointed by the Board of
Directors of the Company, on the recommendation of the Audit and Finance
Committee, as the Company's independent auditors for the fiscal year ended
January 29, 2000. In February, 2000, the Board of Directors reappointed Deloitte
& Touche as the Company's independent auditors for the fiscal year ending
January 27, 2001. Representatives of Deloitte & Touche are expected to be
present at the Annual Meeting and will have the opportunity to make a statement
if they so desire. They are expected to be available to respond to proper
questions regarding the independent auditors' responsibilities.
SUBMISSION OF SHAREHOLDER PROPOSALS
Pursuant to our Regulations, for any shareholder proposal to be
eligible for inclusion in our proxy statement and form of proxy for our next
annual meeting, your proposals must be received at our executive offices not
less than 60 nor more than 90 calendar days prior to the date of next year's
annual meeting. If public notice of the date of the annual meeting is not given
at least 105 days prior to the annual meeting, submissions must be delivered to
Elder-Beerman no later than 10 days following the public announcement of the
meeting date. Such proposals should be submitted by certified mail, return
receipt requested, addressed to us at 3155 El-Bee Road, Dayton, Ohio 45439,
Attention: Secretary. In the event that Proposal Number 9 (adoption of an
amendment to Regulation 7(c) of the Regulations) is approved at the Annual
Meeting, your proposals must be received at our executive offices not less than
45 nor more than 90 calendar days prior to the date of next year's annual
meeting.
OTHER MATTERS
The Board of Directors knows of no other matters that are likely to be
brought before the Annual Meeting, but if other matters do properly come before
the meeting, the persons named in the enclosed proxy, or their substitutes, will
vote the proxy in accordance with their best judgment.
The Company's 1999 Annual Report, including financial statements, has
been mailed along with this Proxy Statement.
**********
It is important that your proxy cards be returned promptly. If you do
not plan to attend the Annual Meeting, we urge you to fill out, date and mail
the enclosed proxy card in the enclosed envelope, which requires no postage if
mailed in the United States.
40
<PAGE> 45
Annex A
THE ELDER-BEERMAN STORES CORP.
EQUITY AND PERFORMANCE INCENTIVE PLAN
(AS AMENDED AND RESTATED AS OF AUGUST 24, 2000)
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. Section Section 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> 46
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.
"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
2
<PAGE> 47
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
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
<PAGE> 48
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.
"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,
4
<PAGE> 49
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 2,750,000 (2,250,000 of
which were approved in 1997 and 500,000 of which are being added as of August
24, 2000) 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 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.
5
<PAGE> 50
(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 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
6
<PAGE> 51
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.
(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.
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(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.
(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.
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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).
(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.
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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.
(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
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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.
(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.
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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.
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
-----------------------
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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.
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
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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 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.
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(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 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
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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 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.
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(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 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.
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Annex B
ITEM NUMBER 3
ARTICLE X. Notwithstanding anything to the contrary contained in these
Amended Articles of Incorporation, the affirmative vote of the holders of a
majority 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 any article contained herein; 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.
ITEM NUMBER 4
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 manner
provided in the Amended Code of Regulations of the Corporation. 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, any qualifications,
limitations or restrictions on, such shares and (ii) voting rights entitling
such shares to vote generally in the election of directors.
ITEM NUMBER 5
ARTICLE XIV. Pursuant to Section 1704.06(A) of the Revised Code of
Ohio, the provisions of Chapter 1704 of the Ohio Revised Code (regarding
regulation of transactions involving interested shareholders) shall not be
applicable to the Corporation.
ITEM NUMBER 6
34. AMENDMENTS. Except as otherwise provided by law, this Amended Code
of Regulations or any Regulations may be amended in any respect or repealed at
any time at any meeting of shareholders by the affirmative vote of a majority of
the voting power of the Corporation, voting together as a single class. Except
as otherwise provided by law or by the
<PAGE> 63
Amended Articles of Incorporation or this Amended Code of Regulations, the
shareholders shall not take any action without a meeting to alter or amend this
Amended Code of Regulations. Notwithstanding the foregoing provisions of this
Regulation 34, no amendment to Regulations 29, 30 or 31 will be effective to
eliminate or diminish the rights of persons specified in those Regulations
existing at the time immediately preceding such amendment.
ITEM NUMBER 7
9. NUMBER, ELECTION, AND TERMS OF DIRECTORS. Except as may be provided
in any Preferred Stock Designation and subject to the minimum and maximum number
of authorized directors provided in the Amended Articles of Incorporation, the
size of the Board of Directors shall be established from time to time only (i)
by a vote of a majority of the Whole Board or (ii) by the affirmative vote of
the holders of not less than a majority of the voting power of the Corporation,
voting together as a single class.
ITEM NUMBER 8
3. SPECIAL MEETINGS. (a) Special meetings of shareholders may be called
by (i) the Chairman, (ii) the President, (iii) a majority of the Board of
Directors acting with or without a meeting, or (iv) any person or persons who
hold not less than 10% of all the shares outstanding and entitled to be voted at
such meeting. Holders of shares that are entitled to call a special meeting of
shareholders by virtue of any Preferred Stock Designation may call such meetings
in the manner and for the purposes provided in the applicable terms of such
Preferred Stock Designation. For purposes of this Amended Code of Regulations,
"Preferred Stock Designation" shall have the meaning specified in the Amended
Articles of Incorporation.
ITEM NUMBER 9
(c) For business to be properly requested by a shareholder to be
brought before an annual meeting, the shareholder must (i) be a shareholder of
the Corporation of record at the time of the giving of the notice for such
annual meeting provided for in this Amended Code of Regulations, (ii) be
entitled to vote at such meeting, and (iii) have given timely notice thereof in
writing to the Secretary. To be timely, a shareholder's notice must be delivered
to or mailed and received at the principal executive offices of the Corporation
not less than 45 nor more than 90 calendar days prior to the annual meeting;
PROVIDED, HOWEVER, that in the event public announcement of the date of the
annual meeting is not made at least 105 calendar days prior to the date of the
annual meeting, notice by the shareholder to be timely must be so received not
later than the close of business on the tenth calendar day following the day on
which public announcement is first made of the date of the annual meeting. A
shareholder's notice to the Secretary must set forth as to each matter the
shareholder proposes to bring before the annual meeting (A) a description in
reasonable detail of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (B)
the name and address, as they appear on the Corporation's books, of the
shareholder proposing such business and of the beneficial owner, if any, on
whose behalf the proposal is made, (C) the class and number of shares of the
Corporation that are owned beneficially and of record by the shareholder
proposing such business and by the beneficial owner, if any, on whose behalf the
proposal is made, and (D) any material interest of such shareholder proposing
such business and the beneficial owner, if any, on whose behalf the proposal is
made in such business.
<PAGE> 64
Notwithstanding the foregoing provisions of this Amended Code of Regulations, a
shareholder must also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in this Regulation 7(c). For purposes of this
Regulation 7(c) and Regulation 12, "public announcement" means disclosure in a
press release reported by the Dow Jones News Service, Associated Press, or
comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14, or 15(d) of the Securities Exchange Act of 1934, as amended, or publicly
filed by the Corporation with any national securities exchange or quotation
service through which the Corporation's stock is listed or traded, or furnished
by the Corporation to its shareholders. Nothing in this Regulation 7(c) will be
deemed to affect any rights of shareholders to request inclusion of proposals in
the Corporation's proxy statement pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended.
ITEM NUMBER 10
12. NOMINATIONS OF DIRECTORS; ELECTION. (a) Except as may be otherwise
provided in any Preferred Stock Designation, only persons who are nominated in
accordance with this Regulation 12 will be eligible for election at a meeting of
shareholders to be members of the Board of Directors.
(b) Nominations of persons for election as directors of the Corporation
may be made only at an annual meeting of shareholders (i) by or at the direction
of the Board of Directors or a committee thereof or (ii) by any shareholder who
is a shareholder of record at the time of giving of notice provided for in this
Regulation 12, who is entitled to vote for the election of directors at such
meeting, and who complies with the procedures set forth in this Regulation 12.
All nominations by shareholders must be made pursuant to timely notice in proper
form to the Secretary.
(c) To be timely, a shareholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
45 nor more than 90 calendar days prior to the annual meeting of shareholders;
PROVIDED, HOWEVER, that in the event that public announcement of the date of the
annual meeting is not made at least 105 calendar days prior to the date of the
annual meeting, notice by the shareholder to be timely must be so received not
later than the close of business on the tenth calendar day following the day on
which public announcement is first made of the date of the annual meeting. To be
in proper written form, such shareholder's notice must set forth or include: (i)
the name and address, as they appear on the Corporation's books, of the
shareholder giving the notice and of the beneficial owner, if any, on whose
behalf the nomination is made; (ii) a representation that the shareholder giving
the notice is a holder of record of stock of the Corporation entitled to vote at
such annual meeting and intends to appear in person or by proxy at the annual
meeting to nominate the person or persons specified in the notice; (iii) the
class and number of shares of stock of the Corporation owned beneficially and of
record by the shareholder giving the notice and by the beneficial owner, if any,
on whose behalf the nomination is made; (iv) a description of all arrangements
or understandings between or among any of (A) the shareholder giving the notice,
(B) the beneficial owner on whose behalf the notice is given, (C) each nominee,
and (D) any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the shareholder giving the
notice; (v) such other information regarding each nominee
<PAGE> 65
proposed by the shareholder giving the notice as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or proposed
to be nominated, by the Board of Directors; and (vi) the signed consent of each
nominee to serve as a director of the Corporation if so elected. The presiding
officer of any annual meeting may, if the facts warrant, determine that a
nomination was not made in accordance with this Regulation 12, and if he or she
should so determine, he or she will so declare to the meeting, and the defective
nomination will be disregarded. Notwithstanding the foregoing provisions of this
Regulation 12, a shareholder must also comply with all applicable requirements
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder with respect to the matters set forth in this Regulation
12.
ITEM NUMBER 11
35. EXCEPTION TO OHIO GENERAL CORPORATION LAW. Pursuant to Section
1701.831 of the Ohio General Corporation Law (regarding control share
acquisitions), the provisions of such section shall not be applicable to the
Corporation.
<PAGE> 66
Annex C
AGREEMENT
---------
THIS AGREEMENT, dated as of July 19, 2000 (this "Agreement"), is made
by and among The Elder-Beerman Stores Corp., an Ohio corporation
("Elder-Beerman"); PPM America Special Investments Fund, L.P., a Delaware
limited partnership ("SIF I"); PPM America Special Investments CBO II, L.P., a
Delaware limited partnership ("CBO II"); PPM America, Inc., a Delaware
corporation ("PPM America" and, collectively, with SIF I and CBO II, "PPM");
Snyder Capital Management, Inc., a Delaware corporation ("Snyder"); Dennis S.
Bookshester; Stewart M. Kasen; Charles Macaluso; Steven C. Mason; Frederick J.
Mershad; Thomas J. Noonan, Jr.; Bernard Olsoff; Laura H. Pomerantz; Jack A.
Staph and John J. Wiesner (Bookshester, Kasen, Macaluso, Mason, Mershad, Noonan,
Olsoff, Pomerantz, Staph and Wiesner are collectively referred to herein as the
"Directors").
WHEREAS, PPM currently beneficially owns, in the aggregate,
approximately 13.15% of Elder-Beerman's outstanding common shares, without par
value (the "Common Shares"), Snyder currently beneficially owns, in the
aggregate, approximately 20.87% of the outstanding Common Shares, and the
Directors currently beneficially own, in the aggregate, approximately 2.85% of
the outstanding Common Shares;
WHEREAS, Elder-Beerman and PPM have been engaged in a proxy contest,
which they desire to end; and
WHEREAS, Elder-Beerman and the Directors have agreed to support four
nominees selected by PPM and Snyder for election to Elder-Beerman's Board of
Directors (the "Board of Directors") and to support certain proposals of PPM to
be acted upon by Elder-Beerman's shareholders at Elder-Beerman's 2000 Annual
Meeting (as defined below); and
WHEREAS, Elder-Beerman, PPM, Snyder and the Directors desire to provide
for certain agreements with respect to the voting by PPM, Snyder and the
Directors of the Common Shares they own and regarding other matters.
NOW, THEREFORE, in consideration of the covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
Section 1. SPECIAL MEETING OF THE BOARD OF DIRECTORS. Elder-Beerman and
the Directors represent and warrant that the Board of Directors of Elder-Beerman
has heretofore duly and validly approved the following items:
(a) the nomination at the 2000 Annual Meeting of the
Shareholders of Elder-Beerman to be held on August 24, 2000, or such
later date as shall be determined by Elder-Beerman solely in order to
facilitate effectuation of the provisions of this Agreement (the "2000
Annual Meeting") of new candidates for election to the Board of
Directors (the "New Nominees"), which New Nominees will consist of Mark
F.C. Berner, Dennis S. Bookshester, Eugene I. Davis and Charles H.
Turner, each of whom
<PAGE> 67
will serve for an initial term of three years and until such time as
his successor has been duly elected and qualified (unless the amendment
to Article IX of Elder-Beerman's Amended Articles of Incorporation (the
"Articles") is approved by the shareholders at the 2000 Annual Meeting,
in which case the entire Board of Directors must be re-elected at the
annual meeting of shareholders in 2001 (the "2001 Annual Meeting")),
and the submission of the New Nominees at the 2000 Annual Meeting with
the recommendation of the Board of Directors for election as directors
by the shareholders; provided, however, that in the event that any of
the New Nominees is unable at the 2000 Annual Meeting to stand for
election for any reason, his replacement shall be designated as
follows: (i) Snyder shall have the right to designate a replacement for
Mr. Bookshester and/or for Mr. Turner, and (ii) PPM shall have the
right to designate a replacement for Mr. Berner and/or for Mr. Davis;
(b) the amendment of Article X of Elder-Beerman's Articles to
reduce from 72% to a simple majority the shareholder approval required
to amend or repeal any section of the Articles including those dealing
with cumulative voting rights, preemptive rights to acquire shares,
share repurchases by Elder-Beerman, the classification of and staggered
election system for the Board of Directors and the amendment of Article
X of the Articles itself, and submission of the proposed amendment for
approval to Elder-Beerman's shareholders at the 2000 Annual Meeting;
(c) the amendment of Article IX of Elder-Beerman's Articles to
eliminate classification of the Board of Directors, which currently is
divided into three separate classes and elected on a staggered basis
and to replace this structure with a single class board of directors
under which all directors of Elder-Beerman are elected by the
shareholders on an annual basis, and submission of the proposed
amendment for approval to Elder-Beerman's shareholders at the 2000
Annual Meeting;
(d) the adoption of a new Article XIV to Elder-Beerman's
Articles pursuant to which Elder-Beerman would opt out of the
provisions of Chapter 1704 of the Ohio Revised Code, which Chapter sets
forth certain restrictions on the ability of an Ohio corporation to
engage in certain business combinations and other transactions that
involve shareholders that have the ability to exercise 10% or more of
the voting power of such corporation, and submission of the proposed
adoption for approval to Elder-Beerman's shareholders at the 2000
Annual Meeting;
(e) the amendment of Regulation 34 of Elder-Beerman's Amended
Code of Regulations (the "Code of Regulations") to lower from 72% to a
simple majority the shareholder approval required to amend or repeal
any Regulation in the Code of Regulations including those dealing with
the time and place of shareholder meetings, who may call special
meetings of shareholders, the order of business (including advance
notice of business to be brought) at shareholder meetings, the size of
the Board of Directors, the filling of newly-created directorships and
Board of Directors vacancies, the removal of directors, the nomination
of directors (including advance notice of the intent to nominate
directors) and the amendment of the Code of Regulations, and submission
of the proposed amendment for approval to Elder-Beerman's shareholders
at the 2000 Annual Meeting;
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<PAGE> 68
(f) the amendment of Regulation 3(a) of Elder-Beerman's Code
of Regulations to permit a shareholder or shareholders who own 10%
rather than 50% of the outstanding Common Shares to call special
meetings of shareholders, and submission of the proposed amendment for
approval to Elder-Beerman's shareholders at the 2000 Annual Meeting;
(g) the amendment of Regulation 7(c) of Elder-Beerman's Code
of Regulations to provide that any shareholder who desires to bring
business before an annual meeting of Elder-Beerman's shareholders must
notify Elder-Beerman not more than 90 days, but not less than 45 days
(rather than not less than 60 days), in advance of such meeting of its
intent to do so and of the nature of such business, and submission of
the proposed amendment for approval to Elder-Beerman's shareholders at
the 2000 Annual Meeting;
(h) the amendment of Regulation 12 of Elder-Beerman's Code of
Regulations to provide that any shareholder who desires to propose any
nominees for election to Elder-Beerman's Board of Directors must notify
Elder-Beerman not more than 90 days, but not less than 45 days (rather
than not less than 60 days), in advance of such meeting of its intent
to do so and of the identity of its proposed nominees, and submission
of the proposed amendment for approval to Elder-Beerman's shareholders
at the 2000 Annual Meeting;
(i) the amendment of Regulation 9 of Elder-Beerman's Code of
Regulations to lower from 72% to a simple majority the shareholder
approval required to alter the size of the Board of Directors, and
submission of the proposed amendment for approval to Elder-Beerman's
shareholders at the 2000 Annual Meeting;
(j) the adoption of a new Regulation 35 to Elder-Beerman's
Code of Regulations, pursuant to which Elder-Beerman would opt out of
the provisions of the Ohio Control Share Acquisition Act, which Act
sets forth certain restrictions on the ability of persons to acquire
20% or more of the stock of an Ohio corporation, and submission of the
proposed adoption for approval to Elder-Beerman's shareholders at the
2000 Annual Meeting;
(k) the execution, delivery and performance of this Agreement
by Elder-Beerman; and
(l) the agreement and confirmation of the Board of Directors
that, under the Company's Rights Agreement, dated as of December 30,
1997, as amended by Amendment No. 1 dated as of November 11, 1998, by
and between Elder-Beerman and Norwest Bank Minnesota, N.A. (the "Rights
Agreement"), (i) none of the parties to this Agreement is an Acquiring
Person (as defined in the Rights Agreement) and (ii) a Distribution
Date, a Triggering Event or a Share Acquisition Date (as such terms are
defined in the Rights Agreement ) will not occur by reason of either
the execution of this Agreement or the consummation of the transactions
contemplated hereby.
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<PAGE> 69
PPM and Snyder shall have the right to review and reasonably approve the forms
of the proposed amendments to Elder-Beerman's Articles and Code of Regulations
described in Sections 1(b) through 1(j) hereof.
Section 2. JOINT PRESS RELEASE. Elder-Beerman, PPM and Snyder agree
that, as promptly as practicable after the execution of this Agreement, they
shall issue a joint press release regarding the matters contemplated in this
Agreement, which press release is substantially in the form attached hereto as
Annex A. Until the date of the 2000 Annual Meeting, the parties agree that no
other public release or announcement concerning the matters contemplated herein
shall be issued without the prior consent of Elder-Beerman, PPM and Snyder, and
any such announcement shall be a joint announcement.
Section 3. REVISED PROXY MATERIALS. Elder-Beerman agrees that, as
promptly as practicable after the date of this Agreement, it shall prepare and
file with the Securities and Exchange Commission (the "SEC") revised proxy
materials pursuant to which the Board of Directors will: (a) propose and
recommend for approval of the shareholders at the 2000 Annual Meeting the
amendments to Elder-Beerman's Articles and Code of Regulations described in
Sections 1(b) through 1(j) hereof, and (b) nominate and recommend the New
Nominees for election to the Board of Directors at the 2000 Annual Meeting.
Elder-Beerman agrees that PPM and Snyder shall have the right to review and
reasonably approve the revised proxy materials, including without limitation the
text and order of presentation of the proposed amendments to Elder-Beerman's
Articles and Code of Regulations, prior to the filing thereof with the SEC.
Elder-Beerman shall have the right to adjourn or postpone the 2000 Annual
Meeting for such reasonable period of time not to exceed 30 days as may be
necessary to permit clearance of revised proxy materials with the SEC and/or to
permit adequate opportunity for the timely mailing of such revised proxy
materials to the shareholders of Elder-Beerman. If the 2000 Annual Meeting is so
adjourned or postponed in accordance with the immediately preceding sentence,
Elder-Beerman, PPM and Snyder agree that they shall issue a joint press release
regarding the reason for the adjournment or postponement and the date the 2000
Annual Meeting will be re-convened or held. Elder-Beerman, PPM and Snyder agree
to actively seek shareholder approval of each of the items set forth in Section
1 hereof. The Directors agree to vote their respective shares in favor of each
of the items set forth in Section 1 hereof. If asked to do so by Elder-Beerman,
the Directors agree to make telephone calls in order to solicit and otherwise
support the amendments to Elder-Beerman's Articles and Code of Regulations
described in Sections 1(b) through 1(j) hereof and the election of the New
Nominees. During the term of this Agreement, the Directors shall refrain from
making any negative or critical comments, oral or written, regarding the
amendments described in Sections 1(b) through 1(j) hereof or about the New
Nominees.
Section 4. 2000 ANNUAL MEETING OF SHAREHOLDERS.
(a) Each party to this Agreement (other than Elder-Beerman)
(i) shall cause all Common Shares beneficially owned (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder) by such party to be voted at the 2000 Annual Meeting in
favor of (x) the amendments to Elder-Beerman's Articles and Code of
Regulations described in Sections 1(b) through 1(j) hereof, and (y) the
election as
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<PAGE> 70
aforesaid of the New Nominees to the Board of Directors and (ii) other
than the proposed amendment to Elder-Beerman's Equity and Performance
Plan to increase by 500,000 the number of Common Shares available under
such plan, shall not bring any business before the 2000 Annual Meeting
except as expressly contemplated hereby.
(b) Elder-Beerman agrees that it shall as promptly as
practicable either during or after the 2000 Annual Meeting (i) duly
file with the Secretary of State of the State of Ohio a Certificate of
Amendment to its Articles setting forth such of the amendments to the
Articles referred to in Sections 1(b) through 1(d) hereof that have
been approved by the shareholders at the 2000 Annual Meeting and (ii)
implement such of the amendments to its Code of Regulations referred to
in Sections 1(e) through 1(j) hereof.
Section 5. TERMINATION OF PROXY CONTEST; OTHER ACTIVITIES RELATED TO
2000 ANNUAL MEETING. Except as otherwise permitted in this Section 5, PPM agrees
that it shall immediately terminate all activities with respect to its
solicitation of proxies in connection with the 2000 Annual Meeting or any
adjournment thereof. PPM and Snyder each agrees that it (a) shall not solicit,
directly or indirectly, any proxies or participate in any "solicitation" of any
"proxy" (as such terms are defined in Rule 14a-1 under the Exchange Act) with
respect to matters to be presented at the 2000 Annual Meeting, other than
solicitations in favor of the approval of each of the matters set forth in
Sections 1(a) through 1(j) hereof, (b) shall not become a "participant" (as such
term is used in Rule 14a-11 under the Exchange Act) in any election contest
relating to the 2000 Annual Meeting, (c) shall promptly file an amendment to its
Schedule 13D to reflect the termination of PPM's proxy contest and the
provisions of this Agreement and (d) shall not take any other actions
inconsistent with the matters contemplated hereby. Elder-Beerman shall bear the
reasonable, documented costs and expenses incurred by PPM and its
representatives in connection with (w) PPM's activities with respect to its
solicitation of proxies in connection with the 2000 Annual Meeting prior to the
date hereof, (x) PPM's activities with respect to the review and revision of
Elder-Beerman's proxy materials prior to the date on which Elder-Beerman files
final, definitive proxy materials with the SEC, (y) the execution and delivery
of this Agreement and (z) the consummation of the transactions contemplated
hereby, such costs and expenses not to exceed $250,000. Such amounts shall be
paid by Elder-Beerman within five business days after receipt of appropriate
evidence of such costs and expenses.
Section 6. NO PROXY CONTESTS; LIMITATIONS ON OTHER SHAREHOLDER ACTIONS.
During the period commencing on the date hereof and ending on the date that is
75 days prior to the first anniversary of the date of the 2000 Annual Meeting,
each party to this Agreement (other than Elder-Beerman):
(a) shall cause all shares of capital stock of Elder-Beerman
that have the right to vote generally in the election of directors,
that are beneficially owned (within the meaning of Regulation 13D and
Rules 13d-3 and 13d-5 under the Exchange Act) by such party (i) to be
present, in person or by proxy, at the 2000 Annual Meeting so that all
such shares may be counted for the purpose of determining if a quorum
is present at the 2000 Annual Meeting and (ii) to be voted in favor of
the New Nominees and in favor of each
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<PAGE> 71
of the proposals set forth in Sections 1(a) through 1(j) hereof at the
2000 Annual Meeting;
(b) shall not (i) form, join or otherwise participate in any
"group" (within the meaning of Section 13(d)(3) of the Exchange Act or
Rule 13d-5 thereunder) or (ii) otherwise act in concert with any other
person for the purpose of holding or voting Common Shares if the
purpose of such action is to circumvent any provisions of this
Agreement;
(c) shall not directly or indirectly (except through
Elder-Beerman pursuant to due authorization) solicit any proxies or
consents or in any way participate in any "solicitation" of any "proxy"
(as such terms are defined in Rule 14a-11 under the Exchange Act) with
respect to Common Shares in any election contest with respect to the
Board of Directors of Elder-Beerman or become a "participant" (as such
term is used in Rule 14a-1 under the Exchange Act) in any election
contest with respect to the Board of Directors of Elder-Beerman or
request or induce or attempt to induce any other person to take any
such actions with respect to an election contest related to the Board
of Directors of Elder-Beerman;
(d) shall not call, request the call of, or seek to call, any
special meeting of shareholders for the purpose of an election contest
with respect to the Board of Directors of Elder-Beerman, and, if a
shareholder not party to this Agreement calls any special meeting of
shareholders for the purpose of an election contest with respect to the
Board of Directors of Elder-Beerman, shall oppose such shareholder's
election contest efforts;
(e) shall not enter into any discussions, negotiations,
arrangements or understandings with any other person with respect to
any of the foregoing matters referred to in this Section 6; and
(f) shall not make any public announcement critical of the
composition of the Board of Directors (including, without limitation by
means of a press release or commentary in a Schedule 13D or other SEC
filings).
During the period commencing on the date that is 75 days prior to the first
anniversary of the date of the 2000 Annual Meeting and ending on the date of the
2001 Annual Meeting, each party to this Agreement (other than Elder-Beerman)
shall refrain from calling, requesting the call of, or seeking to call, any
special meeting of shareholders.
Section 7. 2001 ANNUAL MEETING. Each of the parties hereto agrees that
it shall seek to cause the 2001 Annual Meeting to be held no less than twelve
months from the date of the 2000 Annual Meeting, but no more than thirteen
months from the date of the 2000 Annual Meeting.
Section 8. TERMINATION OF THE AGREEMENT. In the event that the
shareholders fail to elect of each of the New Nominees to the Board of Directors
at the 2000 Annual Meeting or in the event that Elder-Beerman or any of the
Directors fails to exercise good faith in fulfilling the obligations (as set
forth in Section 3) to actively seek shareholder approval of each of the items
set forth in Sections 1(a) through (j) hereof, all obligations of the parties
hereunder (other
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than the obligations set forth in Section 4(b) hereof) shall automatically
terminate immediately after the 2000 Annual Meeting.
Section 9. WAIVER. Elder-Beerman hereby waives the notice requirements
set forth in Regulation 7(c) of Elder-Beerman's Regulations so that the New
Nominees can stand for election to Elder-Beerman's Board of Directors at the
2000 Annual Meeting.
Section 10. MISCELLANEOUS.
(a) All notices, requests or instruction hereunder shall be in
writing and delivered personally or sent by registered or certified
mail, postage prepaid or by telecopy (or like transmission), as
follows:
(1) if to Elder-Beerman:
The Elder-Beerman Stores Corp.
3155 El-Bee Road
Dayton, OH 45439
Attention: Secretary
Fax: (937) 296-4625
with a copy to:
Lyle G. Ganske, Esq.
Jones Day Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Fax: (216) 579-0212
(2) if to PPM:
Stuart J. Lissner
Managing Director
PPM America, Inc.
225 West Wacker Drive
Suite 1200
Chicago, IL 60606
Fax: (312) 634-0741
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(3) if to Snyder:
Margot Murtaugh
Snyder Capital Management, Inc.
350 California Street
Suite 1460
San Francisco, CA 94104
Fax: (415) 391-9437
with copies to:
Eugene I. Davis
Pirinate Consulting Group, L.L.C.
5 Canoe Brook Drive
Livingston, NJ 07039
Fax: (973) 535-1843
J. Andrew Rahl, Jr., Esq.
Anderson Kill & Olick, P.C.
1251 Avenue of the Americas
New York, NY 10020-1182
Fax: (212) 278-1733
(4) if to any other party hereto, at its
address set forth in the records of
Elder-Beerman.
Any of the above addresses may be changed at any time by notice given
as provided above; provided, however, that any such notice of change of
address shall be effective only upon receipt. All notices and other
communications given to any party hereto in accordance with the
provisions hereof shall be deemed to have been given on the date of
receipt, provided that any notice or other communication that is
received other than during regular business hours of the recipient
shall be deemed to have been given at the opening of business on the
next business day of the recipient.
(b) This Agreement contains the entire agreement between the
parties hereto with respect to the transactions contemplated hereby and
supersedes and amends all prior understandings, arrangements and
agreements with respect to the subject matter hereof. No modification
hereof shall be effective unless in writing and signed by the party
against which it is sought to be enforced. The parties hereto, by
written agreement, may make any modification or amendment of this
Agreement, but no such modification or amendment will be effective
unless signed by all of the parties hereto. The captions appearing
herein are for the convenience of the parties only and shall not be
construed to affect the meaning of the provisions of this Agreement.
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<PAGE> 74
(c) Each of the parties hereto shall use such party's
reasonable best efforts to take such actions as may be necessary or
reasonably requested by the other parties hereto to carry out and
consummate the transactions contemplated by this Agreement. No party to
this Agreement directly or indirectly shall (i) challenge the validity
or enforceability of any provision of this Agreement or the matters
contemplated hereby or (ii) commence any lawsuit or other legal
proceeding, or take any other action, that seeks to frustrate the
performance of this Agreement in accordance with its terms.
(d) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio applicable in the case of
agreements made and to be performed entirely within such State.
(e) Each of the parties hereto recognizes that any breach of
the terms of this Agreement may give rise to irreparable harm for which
money damages would not be an adequate remedy, and accordingly agree
that, in addition to other remedies, any non-breaching party shall be
entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce the terms and provisions of
this Agreement by a decree of specific performance in any action
instituted in any court of the United States or any state hereof having
jurisdiction without the necessity of proving the inadequacy as a
remedy of money damages.
(f) This Agreement and all of the provisions hereof shall be
binding upon and shall inure to the benefit of the parties hereto and
their respective successors, heirs, legal representatives and permitted
assigns, but neither this Agreement nor any of the rights, interests,
or obligations hereunder may be assigned by any of the parties hereto
without the prior written consent of the other parties and any such
attempted assignment without consent shall be void.
(g) This Agreement is not intended, and shall not be
construed, to confer any rights or remedies hereunder upon any party
other than the parties hereto, and those parties designated as
directors pursuant to Section 1(a), which parties shall be entitled to
enforce their rights under such provisions to which they are entitled
to benefits.
(h) Any term or provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability
without rendering invalid or unenforceable the remaining terms and
provisions of this Agreement, or any such terms in any other
jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, such provision shall be interpreted to be only so broad
as is enforceable.
(i) This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
(j) Each party hereto (other than Elder-Beerman) is signing
this Agreement in its or his/her capacity as a shareholder and not in a
capacity as a director or officer (except on behalf of Elder-Beerman),
it being understood that this Agreement is
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<PAGE> 75
not intended to limit or abridge the fiduciary responsibility of the
directors of Elder-Beerman.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first above written.
THE ELDER-BEERMAN STORES CORP.
By: /s/ Frederick J. Mershad
--------------------------------------
Name: Frederick J. Mershad
Title: Chairman of the Board and Chief
Executive Officer
/s/ Dennis S. Bookshester
-----------------------------------------
Dennis S. Bookshester
/s/ Stewart M. Kasen
-----------------------------------------
Stewart M. Kasen
/s/ Charles Macaluso
-----------------------------------------
Charles Macaluso
/s/ Steven C. Mason
-----------------------------------------
Steven C. Mason
/s/ Frederick J. Mershad
-----------------------------------------
Frederick J. Mershad
/s/ Thomas J. Noonan, Jr.
-----------------------------------------
Thomas J. Noonan, Jr.
-10-
<PAGE> 76
/s/ Bernard Olsoff
-----------------------------------------
Bernard Olsoff
/s/ Laura H. Pomerantz
-----------------------------------------
Laura H. Pomerantz
/s/ Jack A. Staph
-----------------------------------------
Jack A. Staph
/s/ John J. Wiesner
-----------------------------------------
John J. Wiesner
-11-
<PAGE> 77
PPM AMERICA, INC.
By: /s/ Stuart J. Lissner
----------------------------
Name: Stuart J. Lissner
Title: Managing Director
PPM AMERICA SPECIAL INVESTMENTS
CBO II, L.P.
By: PPM America CBO II Management Company
its General Partner
By: /s/ Stuart J. Lissner
--------------------------------------
Name: Stuart J. Lissner
Title: Vice President
PPM AMERICA SPECIAL INVESTMENTS
FUND, L.P.
By: PPM America Fund Management GP, Inc.
its Managing General Partner
By: /s/ Stuart J. Lissner
--------------------------------------
Name: Stuart J. Lissner
Title: Managing Director
SNYDER CAPITAL MANAGEMENT, INC.
By: /s/ Alan Snyder
---------------------------
Name: Alan Snyder
Title: President
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<PAGE> 78
[LOGO]
THE ELDER-BEERMAN STORES CORP.
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, AUGUST 24, 2000
8:00 A.M. EST
DAYTON MARRIOTT HOTEL
1414 SOUTH PATTERSON BOULEVARD
DAYTON, OHIO 45409
THE ELDER-BEERMAN STORES CORP. PROXY
3155 EL-BEE ROAD, DAYTON, OHIO 45439
--------------------------------------------------------------------------------
This proxy is solicited by the Board of Directors for use at the Annual Meeting
on August 24, 2000.
The shares of stock you hold in your account will be voted as you specify on
this card.
If no choice is specified, the proxy will be voted "FOR" Items 1, 2, 3, 4, 5, 6
and 7.
By signing the proxy, you revoke all prior proxies and appoint Scott J. Davido
with full power of substitution, to vote your shares on matters shown on the
reverse side and any other matters that may come before the Annual Meeting and
all adjournments.
See reverse for voting instructions.
<PAGE> 79
[ELDER-BERMAN LOGO]
Mark, sign and date your proxy card, fold it in half and return it in the
postage paid envelope we have provided or return it to THE ELDER-BEERMAN STORES
CORP., c/o Shareowner Services, P.O. Box 64873, St. Paul, MN 55164-0873.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
ITEMS 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, AND 11.
<TABLE>
<S> <C> <C> <C> <C>
1. Election of directors 01 Dennis S. Bookshester 03 Eugene I. Davis [ ] Vote FOR [ ] Vote WITHHELD
02 Mark F. C. Berner 04 Charles H. Turner all nominees from all nominees
(except as marked)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE,
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) _____________________________________
2. Proposal #2 - Amendment to the Company's Equity and Performance Incentive Plan [ ] For [ ] Against [ ] Abstain
3. Proposal #3 - Adoption of an amendment to Article X of the Company's Articles [ ] For [ ] Against [ ] Abstain
4. Proposal #4 - Adoption of an amendment to Article IX of the Company's Articles [ ] For [ ] Against [ ] Abstain
5. Proposal #5 - Adoption of a new Article XIV to the Company's Articles [ ] For [ ] Against [ ] Abstain
6. Proposal #6 - Adoption of an amendment to Regulation 34 of the Regulations [ ] For [ ] Against [ ] Abstain
7. Proposal #7 - Adoption of an amendment to Regulation 9 of the Regulations [ ] For [ ] Against [ ] Abstain
8. Proposal #8 - Adoption of an amendment to Regulation 3(a) of the Regulations [ ] For [ ] Against [ ] Abstain
9. Proposal #9 - Adoption of an amendment to Regulation 7(c) of the Regulations [ ] For [ ] Against [ ] Abstain
10. Proposal #10 - Adoption of an amendment to Regulation 12 of the Regulations [ ] For [ ] Against [ ] Abstain
11. Proposal #11 - Adoption of a new Regulation 35 to the Regulations [ ] For [ ] Against [ ] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR ITEMS 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11.
Attending the Annual Meeting? Mark Box [ ]
Address change? Mark Box [ ]
Indicate changes below: Date___________________________
______________________________________________
Signature(s) in Box
Please sign exactly as your name(s) appears on
Proxy. If held in joint tenancy, all persons must
sign. Trustees, administrators, etc., should
include title and authority. Corporations should
provide full name of corporation and title of
authorized officer signing the proxy.
If you need assistance in voting your shares, please
call our proxy solicitor at 1-800-566-9061.
</TABLE>
