<PAGE> 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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12.
</TABLE>
THE ELDER-BEERMAN STORES CORP.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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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<PAGE> 2
THE ELDER-BEERMAN STORES CORP.
[ELDER-BEERMAN LOGO]
3155 El-Bee Road
Dayton, Ohio 45439
---------------------------------------------------
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
---------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, SEPTEMBER 21, 2000
AT 8:00 A.M. EASTERN DAYLIGHT TIME
DAYTON MARRIOTT HOTEL
1414 S. PATTERSON BLVD.
DAYTON, OHIO 45409
<PAGE> 3
THE ELDER-BEERMAN STORES CORP.
3155 El-Bee Road
Dayton, Ohio 45439
August 21, 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, September 21, 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, in which 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 6, 2000, members of the Board of Directors met
with representatives from PPM and discussed the proposals that PPM intended to
bring before the annual meeting. On the basis of these discussions, the Company,
all but one member of the Company's 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.
/s/ Frederick J. Mershad
Frederick J. Mershad
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 4
THE ELDER-BEERMAN STORES CORP.
3155 El-Bee Road
Dayton, Ohio 45439
------------------------
NOTICE OF ANNUAL MEETING
------------------------
The Annual Meeting of Shareholders of The Elder-Beerman Stores Corp.
("Elder-Beerman" or the "Company") will be held on September 21, 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.
<PAGE> 5
(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.
(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 August 7, 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
/s/ Frederick J. Mershad
Frederick J. Mershad
Chairman of the Board, President
and Chief Executive Officer
August 21, 2000
YOUR VOTE IS IMPORTANT
Please promptly fill out, sign, date and mail the enclosed proxy card
whether or not you plan to attend the annual meeting. A self-addressed envelope
is enclosed for your convenience. No postage is required if mailed in the United
States. Returning a signed proxy will not prevent you from attending the meeting
and voting in person, if you desire.
------------------------
Also enclosed is a copy of our Annual Report for the year ended 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.
<PAGE> 6
THE ELDER-BEERMAN STORES CORP.
3155 El-Bee Road
Dayton, Ohio 45439
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 21, 2000
DATE OF THE PROXY STATEMENT -- AUGUST 21, 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, September 21, 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 21, 2000, to all shareholders of record at the close of
business on August 7, 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, in which 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. Based on an agreement reached at a meeting on July 6,
2000 between designated members of the Board of the Directors and
representatives of PPM and Snyder Capital Management, Inc. ("Snyder"), the
Company's largest shareholder, on July 19, 2000, the Company, PPM, Snyder and
all but one of the members of the Company's Board of Directors 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
<PAGE> 7
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 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
August 7, 2000, there were 14,888,829 shares of common stock outstanding.
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<PAGE> 8
INFORMATION REGARDING TABULATION OF THE VOTE
Elder-Beerman has a policy that all proxies, ballots and votes tabulated at
a meeting of the shareholders are confidential. Representatives of Wells Fargo
Bank Minnesota, NA, will tabulate votes and act as Inspectors of Election at the
Annual Meeting.
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.
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<PAGE> 9
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.
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
paid $30,000 to Morrow & Co. as an advance on expenses. 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 for 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. To date, the Company has paid
approximately $49,000 to PPM and its advisors.
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
4
<PAGE> 10
"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.
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.
Based on an agreement reached at a meeting on July 6, 2000 between
designated members of the Board of Directors and representatives of PPM and
Snyder, at a meeting held on July 21, 2000, the Company's Board of Directors
ratified the Settlement Agreement and approved the amendments to the Company's
Articles and Regulations and recommended such amendments for approval by the
shareholders.
TERMINATION OF SETTLEMENT AGREEMENT
The Settlement Agreement will automatically terminate if the shareholders
fail to elect each of the New Nominees to the Board of Directors at the Annual
Meeting or if 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. If some or all of the amendments
to the Articles and Regulations are adopted, but not all of the New Nominees are
elected to the Board of Directors, the Settlement Agreement will terminate. The
Company, PPM and Snyder agreed that if the New Nominees were not elected, PPM
and Snyder should not be subject to any restrictions on their ability to
commence or participate in an election contest with respect to the Company's
Board of Directors. A major objective of the Settlement Agreement is to allow
the Company's shareholders to have a better opportunity to voice their concerns
about the Company. The Company, PPM and Snyder want these nominees to serve on
the Board of Directors as soon as possible, so that the shareholders will have
their representatives on the Board of Directors. If the New Nominees are not
elected, PPM and Snyder may, for example, form "groups" (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), solicit proxies with respect to an election contest or call a
special meeting of shareholders for the purpose of an election contest.
5
<PAGE> 11
If the Settlement Agreement is terminated, substantially all obligations of
the parties thereto shall terminate.
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.
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.
6
<PAGE> 12
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.
OPPOSITION TO SETTLEMENT AGREEMENT
Mr. Muskovich, the former President and Chief Operating Officer of the
Company, was terminated by the Company on June 29, 2000. Mr. Muskovich will
serve as a director until the Annual Meeting when his term will expire and has
not been re-nominated for election to the Board of Directors. After the
termination of his employment by the Company, Mr. Muskovich informed the Company
that he objects to the Settlement Agreement and the Charter Amendments, and has
voted against them. Mr. Muskovich is not a party to the Settlement Agreement.
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 in September, 1999 and
Winfield, West Virginia in September, 1999.
- The implementation of a planner/distributor merchandising structure,
which commenced in February, 1999 and was completed during the first
quarter of 2000. A planner/distributor organization separates the
merchandising functions into (i) buyers, who select merchandise and
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 its inventory investment.
- The implementation of an innovative proprietary point of sale system in
May, 2000 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 stock 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 Charleston, West Virginia on
June 14, 2000 and Wheeling, West Virginia on July 4, 2000.
7
<PAGE> 13
- The purchase of 1.1 million shares ($7 million) of the Company's Common
Stock between August 30, 1999 and November 23, 1999, pursuant to the
two-year, $24 million stock repurchase program implemented during fiscal
year 1999.
After its announcement on February 28, 2000 that the Company engaged
Wasserstein Perella & Co. to explore strategic alternatives (including a sale of
the Company, a merger with another retailer or a divestiture of stores), members
of management and the Board of Directors and the Company's advisors discussed a
variety of potential transactions with interested parties. The Company entered
into confidentiality agreements with eight parties and sent information
regarding the Company to those parties. The Company received indications of
interest to purchase all of the outstanding Common Stock of the Company from two
potential buyers. Members of the Company's management and the Company's advisors
engaged in further conversations with the two parties that had expressed
interest in the Company and reported such discussions to the Board of Directors.
After reviewing the indications of interest and the results of discussions that
management and the Company's advisors had with the interested parties, the Board
of Directors determined that the terms of the transactions proposed were not in
the best interest of the Company's shareholders because, among other things, the
price to be paid to the shareholders was inadequate. On August 11, 2000, the
Board of Directors decided that the Company should cease its exploration of
strategic alternatives and focus its efforts on the Company's strategic business
plan.
The Board of Directors does not believe there will be any negative impact
on any future efforts to sell the Company if the Charter Amendments are adopted
since the adoption of certain of the Charter Amendments may make it easier to
effect a sale of the Company. For instance, if the proposal to opt out of the
Ohio Control Share Acquisition Act is adopted, it will be easier to effect a
tender offer for the Company's shares. Additionally, if elected, the nominees
for director will be involved in any future efforts to sell the Company.
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
calls for:
- A shift in the Company's merchandising strategy. The Company plans to
aggressively grow its opening price point and moderate priced value
driven assortments, with an intense focus on ladies' and men's apparel,
ladies' shoes and the home store. The Company also intends to grow its
already strong cosmetic business.
- An acceleration of "new concept store" development. The Company will
capitalize on its successful, newly developed concept stores that were
introduced in the third and fourth quarter of 1999. The Company has
previously announced the fall season openings of three new concept stores
in Howell, Michigan, West Bend, Wisconsin and Jasper, Indiana. New
concept store openings will be accelerated beginning in the spring of
2001. The Company will also incorporate some of the most successful
operational elements of the concept stores into existing stores over the
next 18 months. About one-half of the existing stores will be modified
prior to the Christmas 2000 shopping season, with the balance to be
converted in 2001.
The new concept stores, smaller than the typical department store,
maximize the flexibility and use of selling space in a customer-friendly
setting through a floor plan that features movable interior walls, a
neutral color palate, high capacity floor fixturing and extensive
wallscaping. These stores are located in smaller, secondary markets where
there is less competition, allowing Elder-Beerman to position itself as
the retail destination of first choice. Features of these stores include:
- Highly visible centralized service centers conveniently located in
main aisles throughout the store, which are staffed during all store
hours, providing efficient, convenient transactions and quality
customer service.
- Assisted service cosmetics and shoes available on open sell fixtures
for ease of selection.
- And The Zone, a combined juniors and young men's shop that creates
an exciting specialty store within a store to capture sales from the
next generation of customers.
8
<PAGE> 14
- Streamlining of the Company's organizational structure. An aggressive
streamlining initiative is planned to improve profits in the near term
through significant, permanent expense reductions of $10 to $12 million
(pretax) during fiscal year 2001 and an additional $5 to $7 million
(pretax) during fiscal year 2002. The Company's expense cutting
initiatives touch all aspects of the Company's operations, with
particular emphasis on reductions in corporate office expense, work
simplification and/or elimination and systems enhancement. The expense
cutting steps include a job reduction (which occurred on August 11, 2000)
affecting approximately 130 people. These reductions affected all
departments and all levels. Employees at the Company have been notified
of the plan, and those affected will receive severance packages
consistent with Company policy and industry standards.
The Company's decision to reposition its merchandising direction was driven
in part by a thorough market analysis conducted by ROI Retail Strategies, a
consumer research firm, and a complete reevaluation of the Company's strategic
plan with the assistance of Renaissance Partners, LP, a retail consulting firm.
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.
Elder-Beerman and certain other persons may be deemed to be "participants"
within the meaning of Regulation 14A under the Exchange Act. The participants in
this solicitation may include the current directors of Elder-Beerman, the
nominees for director and Scott J. Davido, Executive Vice President -- Chief
Financial Officer, Treasurer and Secretary of Elder-Beerman.
9
<PAGE> 15
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.
10
<PAGE> 16
NOMINEES FOR DIRECTOR AT THE ANNUAL MEETING:
<TABLE>
<CAPTION>
DIRECTOR
NAME SINCE AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
---- -------- --- ----------------------------------------------------
<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 as a
Director of ThinkSheet, Inc., and served as a
Director of Renaissance Technologies from 1997
through March, 2000. Mr. Berner is also a member of
the bar of the State of New York.
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>
11
<PAGE> 17
DIRECTORS IN CLASS III WITH TERMS CURRENTLY SCHEDULE TO EXPIRE IN 2001:
<TABLE>
<CAPTION>
DIRECTOR
NAME SINCE AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
---- -------- --- ----------------------------------------------------
<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 of Elder-Beerman from January
1997 to December 1997 and since June 30, 2000. 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>
12
<PAGE> 18
DIRECTORS IN CLASS I WITH TERMS CURRENTLY SCHEDULED TO EXPIRE IN 2002:
<TABLE>
<CAPTION>
DIRECTOR
NAME SINCE AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
---- -------- --- ----------------------------------------------------
<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").
Laura H. Pomerantz............. 1997 52 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>
13
<PAGE> 19
DIRECTORS IN CLASS II WITH TERMS EXPIRING AT THE ANNUAL MEETING AND WHO WERE NOT
NOMINATED FOR RE-ELECTION TO THE BOARD:
<TABLE>
<CAPTION>
DIRECTOR
NAME 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 62 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. and The Loewen
Group, Inc. and as a member of the Advisory
Committee of the Board of Directors of Fiesta
Stores, Inc.
</TABLE>
14
<PAGE> 20
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.
Currently options to acquire approximately 1,469,552 shares of Common Stock have
been granted under the Plan and approximately 364,122 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 shares of Common Stock 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-
15
<PAGE> 21
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.
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
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<PAGE> 22
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.
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;
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<PAGE> 23
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, 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 exercisable 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
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<PAGE> 24
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.
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 August 1, 2000 was $3.84 per share.
PLAN BENEFITS
It is not possible to determine the future awards that will be received by
participants in the Plan. Set forth in the table below are the number of
Non-Qualified Stock Options and Restricted Shares that were granted under the
Plan during the Company's fiscal year 1999 and through July 29, 2000, to each of
(i) the chief executive officer and the four most highly compensated executive
officers of the Company, (ii) all present executive officers as a group and
(iii) all employees, including all present officers who are not executive
officers, as a group.
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<PAGE> 25
PLAN BENEFITS
EQUITY AND PERFORMANCE INCENTIVE PLAN
<TABLE>
<CAPTION>
RESTRICTED SHARES GRANTED
GRANT/AWARD STOCK OPTIONS EXERCISE -------------------------
NAME AND POSITION DATE GRANTED PRICE($) NUMBER VALUE ($)(1)
----------------- ----------- ------------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Frederick J. Mershad.............. 2000
Chairman and Chief Executive 1999 90,000 8.00 75,000 581,250(2)
Officer 100,000 9.60
110,000 11.20
John A. Muskovich................. 2000
President, Chief Operating 1999 48,000(3) 8.00 40,000 310,000(2)
Officer 53,500(3) 9.60
until June 29, 2000 58,500(3) 11.20
Scott J. Davido................... 2000 5,000 29,690
Executive Vice President -- 1999 15,000 9.125 5,000 45,625
Chief Financial Officer, 10,000 9.125
Treasurer and Secretary......
Charles P. Shaffer................ 2000
Executive Vice President -- 1999 15,000 9.125 1,108 5,540(5)
Merchandising and Marketing 25,000 6.750 10,000 67,500
James M. Zamberlan................ 2000 5,000 29,690
Executive Vice 1999 20,000 9.125
President -- Stores
Executive Officer Group (4)....... 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(5)
</TABLE>
---------------
(1) Reflects value on date of award.
(2) Vests three years from date of grant only if certain performance objectives
are met. Mr. Muskovich's shares were canceled when he was terminated on June
29, 2000.
(3) One-third of Mr. Muskovich's options vested before his termination on June
29, 2000. Those options will expire on September 30, 2000. All unvested
options have been canceled.
(4) Includes five executives listed above.
(5) 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.
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).
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<PAGE> 26
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 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
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ITEM NUMBERS 3-11
THE CHARTER AMENDMENTS
The Board of Directors supports adoption of the Charter Amendments, even
though it had previously opposed them. The Board of Directors decided to support
the Charter Amendments after discussions with its largest shareholders. The
Board of Directors and management decided that the concerns of the Company's
shareholders needed to be addressed. The Board of Directors believes that
adoption of the Charter Amendments will provide the Company's shareholders with
a better overall opportunity to have a voice in the operations of the Company.
After the announcement of the Settlement Agreement, two of the Company's other
large shareholders (James D. Bennett and The D3 Family Fund) filed amendments to
their Schedule 13D filings to express their support for the Charter Amendments.
The Board of Directors believes that if shareholders who own almost 50% of the
Company's outstanding Common Stock want an opportunity to become more involved
in the corporate governance of the Company, they should be able to do so. The
Board of Directors believes that adoption of the Charter Amendments will provide
all of the Company's shareholders with this opportunity.
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.
The provisions in the articles noted in the preceding paragraph may have the
effect of discouraging a sale of the Company and may also render the removal of
the current Board of Directors and management of the Company more difficult.
However, by lowering from 72% to a majority of the outstanding Common Stock the
approval required to amend these articles, a majority of the shareholders would
be able to change them.
OTHER CONSIDERATIONS
In considering this proposal, shareholders should be aware that the
provisions in the current Article X that require a 72% shareholder vote 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
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<PAGE> 28
provisions may be changed by the holders of a majority (rather than a 72%
supermajority) of the Company's Common Stock if the amendment to Article X is
approved. This proposed amendment to Article X could disproportionately benefit
significant shareholders such as PPM and Snyder because their large
shareholdings would allow them more influence in any approval process that seeks
to change my provision of the Articles.
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.
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. Requiring each director to stand for election annually allows shareholders
an opportunity to register their views on the performance of both the entire
Board and each director individually. Shareholders can more easily change the
composition of the Board if they are dissatisfied with the performance of the
current directors.
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. A shift to
an annual election system could encourage directors to focus on shorter-term
rather than long-range goals. Declassifying the Board also could allow
substantial shareholders an increased opportunity to affect the composition of
the Board.
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<PAGE> 29
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
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. Chapter 1704
allows the Board of Directors, and not the Company's shareholders, to initially
decide if interested shareholders can acquire shares 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. Interested shareholders seeking to acquire control of
the Company will not necessarily be required to negotiate with the Board of
Directors prior to entering into certain business combinations and other
transactions with the Company if Article XIV is adopted. Additionally, larger
shareholders such as PPM and Snyder, could disproportionately benefit from the
adoption of a new Article XIV since they are interested shareholders and will be
able to enter into interested party transactions with the Company without a
waiting period or approval by the Board of Directors.
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
24
<PAGE> 30
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.
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. By requiring a higher percentage of the Company's
outstanding Common Stock to amend regulations regarding special meetings of
shareholders and electing and removing directors, shareholders may be precluded
from calling meetings to make changes that shareholders deem favorable.
OTHER CONSIDERATIONS
In considering this proposal, shareholders should be aware that the
provisions in Regulations that require a 72% shareholder vote 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. Large shareholders, such as PPM and
Snyder, could disproportionately benefit from the amendment to Regulation 34
because, due to their large ownership of the Company's Common Stock, such
shareholders would have more ability to influence any approval process designed
to change any provision of the Regulations.
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
25
<PAGE> 31
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. The proposed amendment would enable
shareholders to more easily impact the composition of the Board of Directors by
adding new members to the Board of Directors or, potentially, by removing
incumbent directors.
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 directors on the
Board of Directors could have the effect of enhancing the stability of the Board
of Directors and the Company. This proposed amendment to Regulation 9 could make
it easier for a large shareholder or group of large shareholders working in
concert to alter the size of the Board of Directors.
VOTE REQUIRED
On July 21, 2000, the Board of Directors approved the amendment to
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
26
<PAGE> 32
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 Stock 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.
By adopting the amendment to Regulation 3(a), the Company will be following the
Revised Model Business Corporation Act (drafted by the American Bar
Association's Committee on Corporate Law), which establishes a threshold of 10%
of the outstanding Common Stock to call a special meeting of the Company's
shareholders. Allowing a lower percentage of the Company's outstanding Common
Stock to call special meetings will enable shareholders to take action on
proposals that may be favorable to the shareholders without having to wait for
the Company's next annual meeting.
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. Adoption of this amendment could
make it easier for a shareholder making an unsolicited offer for the Company to
call a special meeting without first talking to the Board of Directors and
giving the Board of Directors time to evaluate the offer. The Board of Directors
acknowledges that large shareholders, such as PPM and Snyder, that control more
than 10% of the outstanding Common Stock could disproportionately benefit from
the adoption of this proposal because such shareholders would be able to call
special meetings whenever they wanted to.
VOTE REQUIRED
On July 21, 2000, the Board of Directors approved the amendment to
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
27
<PAGE> 33
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. Longer notice requirements limit to some degree the
ability of shareholders to bring business before the annual meeting.
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. The longer notice period allows the Board of Directors
extra time to evaluate the proposal and make a recommendation to shareholders or
state its position on the proposal. The adoption of this proposal could
disproportionately benefit large shareholders such as PPM and Snyder because a
shorter advance notice requirement could allow such shareholders to combine
their voting influence with a greater element of surprise to gain a potential
strategic advantage over the Company when proposing business before a
shareholder meeting. However, any solicitation of proxies by a shareholder of
the Company in support of such business still would be subject to the proxy
rules under the Exchange Act. Because compliance with the proxy rules would
require a shareholder who desired to solicit proxies in support of a business
proposal to file publicly available preliminary proxy materials with the
Securities and Exchange Commission (which materials could be instantly accessed
by the Company and the other shareholders via the Internet) with respect to such
solicitation, relaxation of these advance notice requirements would not make it
very likely that a significant shareholder could force and win a vote at a
shareholder meeting without any notice to other shareholders.
VOTE REQUIRED
On July 21, 2000, the Board of Directors approved the amendment to
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
28
<PAGE> 34
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.
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. If this proposal is adopted,
the Board of Directors will still be entitled to nominate its own slate of
directors. Any solicitation of proxies by a shareholder of the Company in
support of alternative directors would still be subject to the proxy rules under
the Exchange Act. Because compliance with the proxy rules would require a
shareholder who desired to solicit proxies in support of an alternative slate of
directors to publicly file preliminary proxy materials with the Securities and
Exchange Commission with respect to such solicitation, relaxation of the advance
notice requirements would not make it likely that other shareholders would not
be notified of the alternative slate of directors.
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.
The longer notice period would allow the Board of Directors 15 more days to
evaluate the proposed nominees and make a recommendation to shareholders or
state its position on the proposed nominees.
VOTE REQUIRED
On July 21, 2000, the Board of Directors approved the amendment to
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
29
<PAGE> 35
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 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. Additionally, larger shareholders such as PPM and Snyder,
could disproportionately benefit from the adoption of this proposal since they
will be able to acquire additional shares of Common Stock without providing
prior notice to the Company of their intent to acquire more shares and without
receiving the approval of the acquisition of such shares from the Company's
shareholders.
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
30
<PAGE> 36
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
31
<PAGE> 37
Nominating and Corporate Governance Committee is responsible for the process of
evaluating the overall performance of the Board of Directors and its individual
members to ensure effective operations of the Board of Directors and overall
corporate governance. The Nominating and Corporate Governance Committee does not
consider nominees recommended by shareholders. Instead, these nominees would be
considered by the entire Board of Directors.
COMPENSATION OF ELDER-BEERMAN'S DIRECTORS
Compensation
Directors who are employees of Elder-Beerman do not receive any separate
fees or other remuneration for serving as a director or a member of any
Committee of the Board. For fiscal year 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. At the beginning of
each fiscal year, nonemployee directors each receive $10,000 in restricted
shares of Common Stock. The restricted shares vest over a three-year period.
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.
32
<PAGE> 38
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 August 7, 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.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP (1) OF CLASS
---------------- ----------------------- --------
<S> <C> <C>
Snyder Capital Management, Inc.............................. 3,118,150(2) 20.94
350 California Street, Suite 1460
San Francisco, CA 94104
PPM America, Inc............................................ 1,966,868(3) 13.21
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
James D. Bennett............................................ 1,126,323(4) 7.56
Bennett Management Corporation
2 Stamford Plaza, Suite 1501
281 Tresser Boulevard
Stamford, CT 06901
The D3 Family Fund.......................................... 900,000(5) 6.04
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........................................ 400,929(6) 2.69
John A. Muskovich........................................... 165,749(6) 1.11
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):................................................. 803,450 5.48%
</TABLE>
---------------
* less than 1%
33
<PAGE> 39
(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 July 19, 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 July 19, 2000) of such shares in Amendment No. 4 to Schedule 13D dated
July 21, 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 July 21, 2000) of such
shares in a Schedule 13D/A 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 August 3,
2000) of such shares in a Schedule 13D filed August 4, 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 August 7, 2000.
<TABLE>
<CAPTION>
STOCK OPTIONS EXERCISABLE
NAME BY OCTOBER 6, 2000
---- -------------------------
<S> <C>
Mr. Mershad............................................. 207,601
Mr. Muskovich........................................... 115,734
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
</TABLE>
(7) Includes 1,000 shares of Common Stock with shared voting or investment
power.
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.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
NAME OWNERSHIP PERCENT OF CLASS
---- -------------------- ----------------
<S> <C> <C>
Mark F.C. Berner........................ 0 0
Eugene I. Davis......................... 0 0
Charles H. Turner....................... 0 0
</TABLE>
34
<PAGE> 40
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.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------- ---------------------------------
AWARDS PAYOUTS
----------------------- -------
SECURITIES
OTHER RESTRICTED UNDERLYING ALL
ANNUAL STOCK OPTIONS/ LTIP OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(2) ($) (#) ($) ($)(4)(5)
------------------ ---- ------- ------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frederick J. Mershad....... 1999 600,000 581,250 300,000 7,665
Chairman and 1998 559,263 120,000 29,403 1,050,000 75,000 9,970
Chief Executive Officer 1997 503,344 500,000 51,251 683,703 194,000
John A. Muskovich.......... 1999 425,000 310,000(6) 160,000(7) 6,000
President, 1998 412,207 85,000 473,127(6) 30,000(7) 9,950
Chief Operating Officer 1997 267,335 598,750 505,325(6) 126,000(7)
through June 29, 2000
Scott J. Davido............ 1999 217,596 36,000 60,550 45,625 25,000 382
Executive Vice 1998 174,076 21,280 26,626 26,599 4,585
President -- 1997 15,935 27,500(1) 3,124 21,000
Chief Financial Officer,
Treasurer and Secretary
Charles P. Shaffer......... 1999 243,654 44,303(3) 95,190 40,000 7,159
Executive Vice 1998 220,769 60,000 37,495 5,483
President -- 1997 190,385 60,000 37,505 25,000 1,349
Merchandising and
Marketing
James M. Zamberlan......... 1999 309,808 53,156 20,000 2,712
Executive Vice 1998 278,803 79,650 234,892 15,000 8,050
President -- 1997 139,944 41,313 20,386 61,000
Stores
</TABLE>
---------------
(1) Includes a $25,000 signing bonus paid in fiscal year 1997.
(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.
(6) Unvested Restricted Stock Awards were forfeited upon Mr. Muskovich's
termination on June 29, 2000. As of August 15, 2000, the remaining
"Restricted Stock Awards" (in dollars) granted to Mr. Muskovich are as
follows:
1999 $0
1998 $280,014
1997 $0
(7) Unvested Options/SARs were forfeited upon Mr. Muskovich's termination on
June 29, 2000. As of August 15, 2000, the remaining "Number Of Securities
Underlying Options/SARs" granted to Mr. Muskovich is as follows:
1999 53,334
1998 12,000
1997 50,400
All such options will expire on September 30, 2000.
35
<PAGE> 41
STOCK OPTIONS
The following table sets forth information concerning stock option grants
made to the Named Executive Officers during fiscal year 1999 pursuant to the
Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATE OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS/SARS EMPLOYEES IN OF BASE EXPIRATION ---------------------
NAME GRANTED(#)(1)(2) FISCAL YEAR PRICE($/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)(3) 6.08 8.00 2/25/06 139,441 340,923
53,500(1)(3) 6.78 9.60 2/25/06 69,819 294,387
58,500(1)(3) 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.
(3) Unvested Options/SARs were forfeited upon Mr. Muskovich's termination on
June 29, 2000. As of August 15, 2000, the remaining "Number Of Securities
Underlying Options/SARs" granted to Mr. Muskovich is as follows:
16,000 at an exercise price of $8.00 per share
17,834 at an exercise price of $9.60 per share
19,500 at an exercise price of $11.20 per share
All such options will expire on September 30, 2000.
36
<PAGE> 42
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information about stock options exercised
during fiscal year 1999 by the Named Executive Officers and the fiscal year-end
value of unexercised options held by the Named Executive Officers. All of such
options were granted under the Plan.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS HELD AT OPTIONS/SARS HELD AT
SHARES VALUE JANUARY 29, 2000(#) JANUARY 29, 2000($)(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(2) 259,600(2) $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.
(2) Unvested Options/SARs were forfeited upon Mr. Muskovich's termination on
June 29, 2000. As of August 15, 2000, the remaining "Number Of Securities
Underlying Options/SARs" granted to Mr. Muskovich is as follows:
Exercisable: 56,400
Unexercisable: 0
All such options will expire on September 30, 2000.
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.
37
<PAGE> 43
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. Mr. Muskovich's job was eliminated as part of the Company's
expense reductions in connection with its strategic business plan. Pursuant to
the terms of Mr. Muskovich's Employment Agreement, the Company was required to
give Mr. Muskovich notice six months prior to December 30, 2000 if the Company
elected not to renew his Employment Agreement. As a result, the Company
terminated Mr. Muskovich prior to June 30, 2000 and prior to the other job
reductions (which occurred on August 11, 2000) in connection with the Company's
strategic business plan. The Company gave Mr. Muskovich notice on June 29, 2000
that the Company would terminate his Employment Agreement and his employment.
Pursuant to the terms of his Employment Agreement, Mr. Muskovich will receive
payments equal to the remaining base salary that would have been distributed to
him by the Company under the remaining term of his Employment Agreement, which
expires on December 30, 2001. Mr. Muskovich was not terminated as a result of or
in contemplation of the Settlement Agreement.
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.
Election of the four nominees for director will not constitute a "change in
control" under the Employment Agreements since a majority of the Board of
Directors will be deemed to be "Incumbent Directors" (as defined in the
Employment Agreements) if the proposed nominees are elected.
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 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
38
<PAGE> 44
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 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
39
<PAGE> 45
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 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
40
<PAGE> 46
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 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
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<PAGE> 47
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.
[GRAPH]
<TABLE>
<CAPTION>
REGIONAL
S&P DEPT STORE
SMALLCAP PEER GROUP
QUARTER-END EBSC 600 INDEX INDEX
----------- ------ --------- ----------
<S> <C> <C> <C>
February 1998................................. 100.00 100.00 100.00
May 1998...................................... 165.00 107.00 116.00
August 1998................................... 140.00 93.00 91.00
October 1998.................................. 71.00 84.00 57.00
January 1999.................................. 54.00 93.00 59.00
May 1999...................................... 51.00 91.00 53.00
July 1999..................................... 37.00 97.00 58.00
October 1999.................................. 41.00 93.00 53.00
January 2000.................................. 30.00 103.00 40.00
</TABLE>
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<PAGE> 48
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. On August 18, 2000, Mr. Muskovich repaid the
loan in full, with interest.
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 Exchange Act 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.
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
February 3, 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.
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<PAGE> 49
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.
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<PAGE> 50
ANNEX A
THE ELDER-BEERMAN STORES CORP.
EQUITY AND PERFORMANCE INCENTIVE PLAN
(AS AMENDED AND RESTATED AS OF SEPTEMBER 21, 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. sec.sec. 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 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
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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 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
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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. 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
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or controls, directly or indirectly, more than 50% of the total combined voting
power represented by all classes of stock issued by such corporation.
"Tandem Appreciation Right" means an Appreciation Right granted in
tandem with an Option Right.
"Voting Shares" means at any time the then-outstanding securities
entitled to vote generally in the election of directors of the Corporation.
ARTICLE II
SHARES AVAILABLE UNDER THE PLAN
2.1 SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as provided
in Section 6.1 of the Plan, the number of Common Shares that may be issued or
transferred (i) upon the exercise of Option Rights or Appreciation Rights, (ii)
as Restricted Shares and released from substantial risks of forfeiture thereof,
(iii) as Deferred Shares, (iv) in payment of Performance Shares or Performance
Units that have been earned, (v) as awards to Non-Employee Directors or (vi) in
payment of dividend equivalents paid with respect to awards made under the Plan
may not exceed in the aggregate 2,750,000 (2,250,000 of which were approved in
1997 and 500,000 of which are being added as of September 21, 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.
(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
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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 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.
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(j) Any grant of Option Rights may specify Performance Objectives that
must be achieved as a condition to the exercise of such rights.
(k) Option Rights granted under the Plan may be (i) options, including,
without limitation, Incentive Stock Options, that are intended to qualify under
particular provisions of the Code, (ii) options that are not intended so to
qualify, or (iii) combinations of the foregoing.
(l) The Board may, at or after the Date of Grant of any Option Rights
(other than Incentive Stock Options), provide for the payment of dividend
equivalents to the Optionee on either a current or deferred or contingent basis
or may provide that such equivalents will be credited against the Option Price.
(m) The exercise of an Option Right will result in the cancellation on a
share-for-share basis of any Tandem Appreciation Right authorized under Section
3.3 of the Plan.
(n) No Option Right may be exercised more than 10 years from the Date of
Grant.
(o) Each grant of Option Rights will be evidenced by an agreement
executed on behalf of the Corporation by an officer and delivered to the
Optionee and containing such terms and provisions, consistent with the Plan, as
the Board may approve.
3.3 APPRECIATION RIGHTS. (a) The Board may also authorize the granting to
any Optionee of Tandem Appreciation Rights in respect of Option Rights granted
hereunder at any time prior to the exercise or termination of such related
Option Rights; provided, however, that a Tandem Appreciation Right awarded in
relation to an Incentive Stock Option must be granted concurrently with such
Incentive Stock Option. A Tandem Appreciation Right will be a right of the
Optionee, exercisable by surrender of the related Option Right, to receive from
the Corporation an amount determined by the Board, which will be expressed as a
percentage of the Spread (not exceeding 100%) at the time of exercise.
(b) The Board may also authorize the granting to any Participant of
Free-Standing Appreciation Rights. A Free-Standing Appreciation Right will be a
right of the Participant to receive from the Corporation an amount determined by
the Board, which will be expressed as a percentage of the spread (not exceeding
100%) at the time of exercise.
(c) Each grant of Appreciation Rights may utilize any or all of the
authorizations, and will be subject to all of the requirements, contained in the
following provisions:
(i) Any grant may specify that the amount payable on exercise of
an Appreciation Right may be paid by the Corporation in cash, in Common
Shares or in any combination thereof and may either grant to the
Participant or retain in the Board the right to elect among those
alternatives.
(ii) Any grant may specify that the amount payable on exercise of
an Appreciation Right may not exceed a maximum specified by the Board at
the Date of Grant.
(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.
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.
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(e) Each grant or sale of Deferred Shares will be evidenced by an
agreement executed on behalf of the Corporation by any officer and delivered to
and accepted by the Participant and will contain such terms and provisions,
consistent with the Plan, as the Board may approve.
3.6 PERFORMANCE SHARES AND PERFORMANCE UNITS. The Board may also authorize
the granting of Performance Shares and Performance Units that will become
payable to a Participant upon achievement of specified Performance Objectives.
Each such grant may utilize any or all of the authorizations, and will be
subject to all of the requirements, contained in the following provisions:
(a) Each grant will specify the number of Performance Shares or
Performance Units to which it pertains, which number may be subject to
adjustment to reflect changes in compensation or other factors; provided,
however, that no such adjustment will be made in the case of a Covered Employee.
(b) The Performance Period with respect to each Performance Share or
Performance Unit will be such period of time (not less than one year, except in
the event of retirement, disability or death of the Participant or a Change of
Ownership or other similar transaction or event, if the Board so determines)
commencing with the Date of Grant as is determined by the Board at the Date of
Grant.
(c) Any grant of Performance Shares or Performance Units will specify
Performance Objectives which, if achieved, will result in payment or early
payment of the award, and each grant may specify in respect of such specified
Performance Objectives a minimum acceptable level of achievement below which no
payment will be made and will set forth a formula for determining the number of
Performance Shares or Performance Units that will be earned if performance is at
or above the minimum level, but falls short of full achievement of the specified
Performance Objectives. The grant of Performance Shares or Performance Units
will specify that, before the Performance Shares or Performance Units are earned
and paid, the Board must certify that the Performance Objectives have been
satisfied.
(d) Each grant will specify a minimum acceptable level of achievement in
respect of the specified Performance Objectives below which no payment will be
made and will set forth a formula for determining the amount of payment to be
made if performance is at or above such minimum but short of full achievement of
the Performance Objectives.
(e) Each grant will specify the time and manner of payment of
Performance Shares or Performance Units which have been earned. Any grant may
specify that the amount payable with respect thereto may be paid by the
Corporation in cash, in Common Shares or in any combination thereof and may
either grant to the Participant or retain in the Board the right to elect among
those alternatives.
(f) Any grant of Performance Shares may specify that the amount payable
with respect thereto may not exceed a maximum specified by the Board at the Date
of Grant. Any grant of Performance Units may specify that the amount payable or
the number of Common Shares issued with respect thereto may not exceed maximums
specified by the Board at the Date of Grant.
(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
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Appreciation Rights will be exercisable during the Optionee's lifetime only by
him or her or by his or her guardian or legal representative.
(b) The Board may specify at the Date of Grant that part or all of the
Common Shares that are (i) to be issued or transferred by the Corporation upon
the exercise of Option Rights or Appreciation Rights, upon the termination of
the Deferral Period applicable to Deferred Shares or upon payment under any
grant of Performance Shares or Performance Units or (ii) no longer subject to
the substantial risk of forfeiture and restrictions on transfer referred to in
Section 3.4 of the Plan, will be subject to further restrictions on transfer.
3.8 PARTICIPATION BY EMPLOYEES OF A DESIGNATED SUBSIDIARY. As a condition
to the effectiveness of any grant or award to be made hereunder to a Participant
who is an employee of a Designated Subsidiary, regardless whether such
Participant is also employed by the Corporation or another Affiliate, the Board
may require the Designated Subsidiary to agree to transfer to the Participant
(as, if and when provided for under the Plan and any applicable agreement
entered into between the Participant and the Designated Subsidiary pursuant to
the Plan) the Common Shares that would otherwise be delivered by the Corporation
upon receipt by the Designated Subsidiary of any consideration then otherwise
payable by the Participant to the Corporation. Any such grant or award may be
evidenced by an agreement between the Participant and the Designated Subsidiary,
in lieu of the Corporation, on terms consistent with the Plan and approved by
the Board and the Designated Subsidiary. All Common Shares so delivered by or to
a Designated Subsidiary will be treated as if they had been delivered by or to
the Corporation for purposes of Section 2.1 of the Plan and all references to
the Corporation in the Plan are deemed to refer to the Designated Subsidiary
except with respect to the definitions of the Board and the Committee and in
other cases where the context otherwise requires.
3.9 AWARDS ON THE EFFECTIVE DATE. Long-term incentive awards pursuant to
this Article will be initially made on the Effective Date as provided in Exhibit
A hereto, with such awards to each applicable employee based on gain objective
and salary.
ARTICLE IV
AWARDS TO NON-EMPLOYEE DIRECTORS
4.1 PURPOSE. The purpose of providing awards to non-employee directors is
to provide the Corporation a means to attract and retain qualified directors,
provide an incentive for such directors to act in the best interests of the
Corporation's shareholders, reinforce such directors' mutuality of interest with
shareholders and promote the long-term interests of the Corporation.
4.2 AWARDS TO NON-EMPLOYEE DIRECTORS. The Board may, from time to time and
upon such terms and conditions as it may determine, authorize the granting to
Non-Employee Directors of Option Rights (other than Incentive Stock Options) and
may also authorize the grant or sale of Restricted Shares to Non-Employee
Directors. A grant of Option Rights may be in lieu of all or a portion of such
Non-Employee Director's annual retainer, as elected by the Non-Employee
Director. Each grant of Option Rights awarded pursuant to this Section will be
upon terms and conditions consistent with Section 3.2 of the Plan. Each grant or
sale of Restricted Shares pursuant to this Article will be upon terms and
conditions consistent with Section 3.4 of the Plan.
4.3 AWARDS ON THE EFFECTIVE DATE. Awards to non-employee directors will be
initially made on the Effective Date as provided in Exhibit A hereto.
ARTICLE V
ANNUAL INCENTIVE AWARDS
5.1 PURPOSE. The purpose of the annual incentive awards provided under the
Plan is to provide for the grant of short-term performance awards to certain key
employees of the Corporation or a Subsidiary based on their attainment of
predetermined goals which will further the interests of the Corporation and its
shareholders.
5.2 DEFINITIONS. As used in this Article,
"Annual Incentive Award" means an award made pursuant to this Article.
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"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 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.
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(c) CHANGE OF OWNERSHIP. If a Participant is employed on the date a
Change of Ownership occurs, the Participant will be eligible to receive an
Annual Incentive Award for the year in which such Change of Ownership occurs of
not less than the Annual Incentive Award payable for the year immediately
preceding such year.
5.8 ADMINISTRATION. (a) This Article will be administered by the Board,
which is the "administrator" for purposes of, and to the extent required by,
ERISA (the "Administrator"). The Board will have such powers as may be necessary
to discharge its duties hereunder, including, but not by way of limitation, to
construe and interpret any provision of this Article or related provisions of
the Plan or of any related agreement, notification or document (including,
without limitation, by supplying omissions from, correcting deficiencies in, or
resolving inconsistencies or ambiguities in the language of this Article or
related provisions of the Plan or such agreement, notification or document), to
determine the rights and status under this Article of Participants and other
persons, to decide disputes arising under this Article and to make any
determinations and findings with respect to benefits under this Article and the
persons entitled thereto as may be required for the purposes of this Article.
(b) The Board may, from time to time, employ and/or designate agents and
delegate to them such administrative duties as it sees fit, and may from time to
time consult with legal counsel who may be counsel to the Corporation. No member
of the Board may act in respect of his own interests under this Article. All
decisions and determinations by the Administrator will be final and binding on
all parties. All decisions of the Board will be made by the vote of the
majority, including actions in writing taken without a meeting.
(c) All elections, notices and directions under this Article by a
Participant must be made on such forms and in such manner as the Board
prescribes.
5.9 CLAIMS PROCEDURE. To the extent required by ERISA, the Board will
provide to any Participant or beneficiary whose claim for benefits under this
Article has been fully or partially denied (the "claimant") a written notice
setting forth (a) the specific reasons for such denial, (b) a designation of any
additional material or information required and (c) an explanation of this claim
review procedure. Such notice will state that the claimant is entitled to
request a review in writing, by the Board, of the decision denying the claim.
The claim will be reviewed by the Board who may, but need not, grant the
claimant a hearing. On review, the claimant may have legal representation,
examine pertinent documents and submit issues and comments in writing. The
decision on review 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.
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6.2 FRACTIONAL SHARES. The Corporation will not be required to issue any
fractional Common Shares pursuant to the Plan. The Board may provide for the
elimination of fractions or for the settlement of fractions in cash.
6.3 WITHHOLDING TAXES. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under the Plan, and
the amounts available to the Corporation for such withholding are insufficient,
it will be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Corporation for payment of the balance of such taxes required to be
withheld, which arrangements (in the discretion of the Board) may include
relinquishment of a portion of such benefit. The Corporation and a Participant
or such other person may also make similar arrangements with respect to the
payment of any taxes with respect to which withholding is not required.
6.4 ADMINISTRATION OF THE PLAN. (a) Except as otherwise provided in Section
5.8 of the Plan, the Plan will be administered by the Board, which may from time
to time delegate all or any part of its authority under the Plan to a committee
of the Board (or subcommittee thereof). A majority of the committee (or
subcommittee thereof) will constitute a quorum, and the action of the members of
the committee (or subcommittee thereof) present at any meeting at which a quorum
is present, or acts unanimously approved in writing, will be the acts of the
committee (or subcommittee thereof). To the extent of any such delegation,
references in the Plan to the Board (other than in Section 6.5(a) of the Plan)
are deemed to be references to any such committee or subcommittee.
(b) The interpretation and construction by the Board of any provision of
the Plan or of any agreement, notification or document evidencing the grant of
Option Rights, Appreciation Rights, Restricted Shares, Deferred Shares,
Performance Shares or Performance Units and any determination by the Board
pursuant to any provision of the Plan or of any such agreement, notification or
document will be final and conclusive. No member of the Board may be liable for
any such action or determination made in good faith.
6.5 AMENDMENTS, ETC. (a) The Board may at any time and from time to time
amend the Plan in whole or in part; provided, however, that any amendment which
must be approved by the shareholders of the Corporation in order to comply with
applicable law or the rules of any national securities exchange upon which the
Common Shares are traded or quoted will not be effective unless and until such
approval has been obtained. Presentation of the Plan or any amendment thereof
for shareholder approval may not be construed to limit the Corporation's
authority to offer similar or dissimilar benefits under other plans without
shareholder approval.
(b) The Board will not, without the further approval of the shareholders
of the Corporation, authorize the amendment of any outstanding Option Right to
reduce the Option Price. Furthermore, no Option Right may be canceled and
replaced with awards having a lower Option Price without further approval of the
shareholders of the Corporation. This Subsection is intended to prohibit the
repricing of "underwater" Option Rights and may not be construed to prohibit the
adjustments provided for in Section 6.1 of the Plan.
(c) The Board also may permit Participants to elect to defer the
issuance of Common Shares or the settlement of awards in cash under the Plan
pursuant to such rules, procedures or programs as it may establish for purposes
of the Plan. The Board also may provide that deferred issuances and settlements
include the payment or crediting of dividend equivalents or interest on the
deferral amounts.
(d) The Board may condition the grant of any award or combination of
awards authorized under the Plan on the surrender or deferral by the Participant
of his or her right to receive a cash bonus or other compensation otherwise
payable by the Corporation or a Subsidiary to the Participant.
(e) In case of termination of employment by reason of death, disability
or normal or early retirement, or in the case of hardship or other special
circumstances, of a Participant who holds an Option Right or Appreciation Right
not immediately exercisable in full, or any Restricted Shares as to which the
substantial risk of forfeiture or the prohibition or restriction on transfer has
not lapsed, or any Deferred Shares as to which the Deferral Period has not been
completed, or any Performance 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
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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 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.
<PAGE> 64
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. 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
<PAGE> 65
timely must be so received not later than the close of business on the tenth
calendar day following the day on which public announcement is first made of the
date of the annual meeting. To be in proper written form, such shareholder's
notice must set forth or include: (i) the name and address, as they appear on
the Corporation's books, of the shareholder giving the notice and of the
beneficial owner, if any, on whose behalf the nomination is made; (ii) a
representation that the shareholder giving the notice is a holder of record of
stock of the Corporation entitled to vote at such annual meeting and intends to
appear in person or by proxy at the annual meeting to nominate the person or
persons specified in the notice; (iii) the class and number of shares of stock
of the Corporation owned beneficially and of record by the shareholder giving
the notice and by the beneficial owner, if any, on whose behalf the nomination
is made; (iv) a description of all arrangements or understandings between or
among any of (A) the shareholder giving the notice, (B) the beneficial owner on
whose behalf the notice is given, (C) each nominee, and (D) any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder giving the notice; (v) such other
information regarding each nominee proposed by the shareholder giving the notice
as would be required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission had the nominee been
nominated, or proposed to be nominated, by the Board of Directors; and (vi) the
signed consent of each nominee to serve as a director of the Corporation if so
elected. The presiding officer of any annual meeting may, if the facts warrant,
determine that a nomination was not made in accordance with this Regulation 12,
and if he or she should so determine, he or she will so declare to the meeting,
and the defective nomination will be disregarded. Notwithstanding the foregoing
provisions of this Regulation 12, a shareholder must also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder with respect to the matters set forth in
this Regulation 12.
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 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
<PAGE> 67
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;
(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,
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<PAGE> 68
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. 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 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.
-3-
<PAGE> 69
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 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
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<PAGE> 70
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 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
-5-
<PAGE> 71
(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.
(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
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<PAGE> 72
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 not intended to limit or abridge the
fiduciary responsibility of the directors of Elder-Beerman.
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<PAGE> 73
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.
/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
-8-
<PAGE> 74
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> 75
[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>
<PAGE> 76
[LOGO]
THE ELDER-BEERMAN STORES CORP.
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, SEPTEMBER 21, 2000
8:00 A.M. EST
DAYTON MARRIOTT HOTEL
1414 SOUTH PATTERSON BOULEVARD
DAYTON, OHIO 45409
THE ELDER-BEERMAN STORES CORP.
3155 EL-BEE ROAD, DAYTON, OHIO 45439 PROXY
-------------------------------------------------------------------------------
This proxy is solicited by the Board of Directors for use at the Annual Meeting
on September 21, 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,
7, 8, 9, 10 and 11.
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.
