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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] 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 Rule 14a-11(c) or Rule 14a-12
The BON-TON STORES, INC.Bon-Ton Stores, Inc.
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[BON-TON LOGO]
THE BON-TON STORES, INC.
2801 EAST MARKET STREET
YORK, PA 17402
May 12, 200015, 2001
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders which willto
be held at 9:00 a.m. on Tuesday, June 13, 2000,19, 2001, at the Heritage Hills Conference
Center, 2700 Mount Rose Avenue, York, Pennsylvania. Enclosed is the official
notice of meeting, the proxy statement, the proxy card and our 19992000 Annual
Report.
You may now vote your shares via the Internet by accessing the voting site
shown on your proxy card, or you may vote by telephone by calling the toll-free
number shown on your proxy card. In either case you will need the "control
number" that is imprinted on your proxy card. I encourage you to try one of
these new voting methods this year.
Your vote is important.important to us. Even if you plan to attend the meeting,
I encourage
you toplease sign, date and return your proxy in the enclosed postage-paid envelope.envelope or
vote by telephone or over the Internet.
Sincerely,
/s/ Heywood Wilansky
Heywood Wilansky
PresidentTim Grumbacher
Tim Grumbacher
Chairman of the Board and
Chief Executive Officer
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THE BON-TON STORES, INC.
2801 EAST MARKET STREET
YORK, PA 17402
NOTICE OF ANNUAL MEETING
The Annual Meeting of Shareholders of The Bon-Ton Stores, Inc. will be held
on Tuesday, June 13, 2000,19, 2001, at 9:00 a.m., at the Heritage Hills Conference
Center, 2700 Mount Rose Avenue, York, Pennsylvania.
The purposes of this year's meeting are:
1. To elect a Board of Directors for a one-year term; 2. To approve and
adopt The Bon-Ton Stores, Inc. 2000 Stock Incentive
Plan;
3. To approve and adopt The Bon-Ton Stores, Inc. 2000
Performance-Based Compensation Plan for Heywood Wilansky;
4. To ratify the appointment of Arthur Andersen LLP as independent
accountants for 2000; and
5.2. To consider any other matters as may properly come before the
meeting.
Your BoardShareholders who owned shares of Directors recommends you vote in favor of the election of the
Directors and each of the other proposals.
Only shareholders of recordour stock at the close of business on April 28, 2000 are
entitled to notice of,May
4, 2001 may attend and to vote at the meeting. Please reviewIf you cannot attend the attachedmeeting,
you may vote by telephone or over the Internet as instructed on the enclosed
proxy statement concerningcard or by mailing the business to be
transacted atproxy card in the Annual Meeting.enclosed postage-prepaid
envelope. Any shareholder attending the meeting may vote in person, even though
he or she has already returned a proxy card or voted by telephone or over the
Internet.
ROBERT E. STERN
Vice President and
Corporate Secretary
York, Pennsylvania
May 12, 200015, 2001
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WHETHERPLEASE VOTE BY TELEPHONE OR NOT YOU INTEND TO BE ATOVER THE MEETING, PLEASE COMPLETEINTERNET AS INSTRUCTED ON THE ENCLOSED
PROXY CARD OR COMPLETE, SIGN AND DATE THE PROXY CARD AS PROMPTLY AS POSSIBLE AND
RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. THIS WILLENCLOSED ENVELOPE. IF YOU VOTE BY TELEPHONE OR OVER THE
INTERNET, DO NOT PREVENT YOU FROM VOTING AT THE MEETING.RETURN YOUR PROXY CARD.
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CONTENTS
Voting Securities and Security Ownership.................... 2
Outstanding Shares and Voting Rights...................... 2
Principal Shareholders.................................... 3
Security Ownership of Management.......................... 5
Election of Directors....................................... 6
Meetings and Committees of the Board of Directors......... 7
Compensation of Directors................................. 7
Executive Compensation...................................... 8
Summary Compensation Table................................ 8
Stock Option Grants....................................... 8
Stock Option Exercises and Holdings....................... 9
Employment Agreements..................................... 9
Supplemental Retirement Benefits.......................... 10
Executive Severance....................................... 10
Stock Performance Graph..................................... 10
Report on Executive Compensation............................ 11
Report of the Audit Committee............................... 13
Accountant's Fees........................................... 14
Relationship with Independent Accountants................... 14
Section 16(a) Beneficial Ownership Reporting Compliance..... 14
Incorporation by Reference.................................. 14
Certain Transactions........................................ 15
Shareholder Proposals....................................... 15
Appendix A -- Audit Committee Charter....................... A-1
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THE BON-TON STORES, INC.
------------------------
PROXY STATEMENT
The Board of Directors of The Bon-Ton Stores, Inc. isWe are providing this proxy statement to solicit your proxy for use at the
Annual Meeting of Shareholders. TheseThe proxy materials, which consist of the Annual
Report, the Notice of Annual Meeting, this proxy statement and the proxy card,
are first being sent to our shareholders on or about May 12, 2000.15, 2001.
We do not anticipate that any matters will be raised at the meeting other
than those described in the notice. If any other matters come before the
meeting, the persons named as your proxyproxies will be authorized to act on these in accordance with their
judgment.
When your proxy card is returned properly signed, or you have effectively
voted over the Internet or by telephone, your shares will be voted in accordance
with your instructions. If your proxy card is signed and returned without
specifying choices, the shares will be voted "for" the Board nominees
for directors and "for" each of the other proposals presented in this proxy
statement.nominees.
You may revoke your proxy before its exercise by notifying the Secretary of
the Company in writing, or by delivering a properly executed, later-dated proxy
card, by voting again over the Internet or by telephone, or by voting in person
at the meeting.
Your proxy is being solicited by the Board of Directors. We will bear the
cost of this solicitation, including the charges of brokerage houses, nominees
and fiduciaries in forwarding these materials to beneficial owners. This
solicitation may be made in person or by telephone or telecopy by our directors,
officers or employees, or by a professional proxy solicitation organization
engaged by us.
References in this proxy statement to a year refer to our fiscal year,
which is the 52 or 53 week period ending on the Saturday nearer January 31 of
the following calendar year (for example, a reference to 19992000 is a reference to
the fiscal year ending January 29, 2000)ended February 3, 2001).
VOTING SECURITIES AND SECURITY OWNERSHIP
OUTSTANDING SHARES AND VOTING RIGHTS
Only shareholders of record at the close of business on April 28, 2000,May 4, 2001 are
entitled to vote at the meeting. At that time, there were 12,264,59712,494,456 shares of
common stock and 2,989,853 shares of Class A common stock outstanding. The
common stock and the Class A common stock vote together on all matters. Holders
of common stock are entitled to one vote per share and holders of Class A common
stock are entitled to ten votes per share. There are no other classes of voting
securities outstanding. In the election of directors, shareholders do not have
cumulative voting rights.
The presence at the meeting, in person or by proxy, of persons entitled to
cast a majority of the shareholder votes will constitute a quorum.
TheIn the election of directors, requiresthe nine nominees receiving a plurality of
the votes cast (that is, the nine nominees receiving the greatest number of
votesvotes) will be elected). Eachelected. Approval of any other matter submitted to the
shareholders requires the affirmative vote of a majority of the votes cast. For
purposes of determining the number of votes cast on any matter, only those cast
"for" or "against""against," or, in the election of directors, "withhold," are included.
Abstentions and broker non-votes are counted only to determine whether a quorum
is present at the meeting. A broker "non-vote" occurs when a nominee for a
beneficial owner does not vote on a particular matter because the nominee does
not have discretionary voting power as to that item and has not received voting
instructions from the beneficial owner.
M. ThomasIf you own common stock in your own name, you are an "owner of record."
This means that you may use the enclosed proxy card to tell the persons named as
proxies how to vote your shares. If you fail to vote, the proxies cannot vote
your shares at the meeting.
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You have four voting options:
- INTERNET: You can vote over the Internet at the web address shown on your
proxy card. Internet voting is available 24 hours a day. If you have
access to the Internet, we encourage you to vote this way. IF YOU VOTE
OVER THE INTERNET, DO NOT RETURN YOUR PROXY CARD.
- TELEPHONE: You can vote by telephone by calling the toll-free telephone
number on your proxy card. Telephone voting is available 24 hours a day.
Easy-to-follow voice prompts allow you to vote your shares and confirm
that your instructions have been properly recorded. IF YOU VOTE OVER THE
TELEPHONE, DO NOT RETURN YOUR PROXY CARD.
- PROXY CARD: You can vote by mail by signing, dating and mailing your
proxy card in the postage-paid envelope which we have provided.
- VOTE IN PERSON: You can attend the Annual Meeting and vote at the
meeting.
If a broker, bank or other nominee holds your common stock for your benefit
but not in your name, your shares are in "street name." In that case, your bank,
broker or other nominee will send you a voting instruction form to use in voting
your shares. The availability of Internet and telephone voting depends on their
voting processes. Please follow the instructions on the voting instruction form
they send you.
If you are a participant in The Bon-Ton Stores, Inc. Profit
Sharing/Retirement Plan (the "401(k) Plan"), your proxy will incorporate all
shares you own through the 401(k) Plan, assuming your shares are registered in
the same name. Your proxy will serve as a voting instruction for the trustee of
the 401(k) Plan. If you own shares through the 401(k) Plan and you do not vote,
the plan trustee will vote your shares in the same proportion as shares for
which instructions were received from other shareholders under the plan.
The named proxies will vote all shares at the meeting that have been
properly voted (whether by Internet, telephone, or mail) and not revoked. If you
sign and return your proxy card but do not mark your proxy card to tell the
proxies how to vote your shares, the proxies will vote "for" the Board nominees.
If action is taken at the meeting on matters that are not described in this
proxy statement, the proxies will use their own judgment to determine how to
vote your shares.
Tim Grumbacher, who is the holder of shares of common stock and Class A
common stock entitled to vote approximately 61%77% of the votes entitled to be cast
at the meeting, has indicated that he will vote "for" each of the nominees for
director and "for" each other proposal set forth in this proxy statement.director. Consequently, the election of each of the nominees for director and the approval
of each of the other proposals in this proxy statement areis
assured.
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PRINCIPAL SHAREHOLDERS
This table sets forth certain information regarding beneficialshows owners of 5% or more of the common stock or Class A common
stock as of March 24, 2000.April 12, 2001, unless otherwise noted. Each person listed has sole
voting power and sole investment power as to the shares indicated unless
otherwise noted.
CLASS A COMMON STOCK COMMON STOCK(1)
--------------------- ---------------------
NUMBER OF NUMBER OF
NAME AND ADDRESS SHARES PERCENT SHARES PERCENT
- ---------------- --------- ------- --------- -------
M. Thomas Grumbacher.............................Tim Grumbacher................................... 2,951,490(2) 98.7% 5,644,497(3) 37.0%5,987,997(3) 39.4%
2801 East Market Street
York, PA 17402
Nancy T. Grumbacher.............................. 545,237(4) 18.2% 1,082,464(5) 8.5%
2801 E. Market Street
York, PA 17402
Dimensional Fund Advisors, Inc. ................. -- -- 906,200(6) 7.4%
1299 Ocean Avenue
Santa Monica, CA 90401
T. Rowe Price Associates, Inc....................Inc. .................. -- -- 1,538,500(4) 12.5%900,800(7) 7.4%
100 E. Pratt Street
Baltimore, MD 21202
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CLASS A COMMON STOCK COMMON STOCK(1)
--------------------- ---------------------
NUMBER OF NUMBER OF
NAME AND ADDRESS SHARES PERCENT SHARES PERCENT
- ---------------- --------- ------- --------- -------
Henry F. Miller.................................. 545,237(5)545,237(4) 18.2% 1,391,691(6) 10.9%891,691(8) 7.0%
1650 Arch Street -- 22nd Floor
Philadelphia, PA 19103
David R. Glyn.................................... 545,237(5)545,237(4) 18.2% 1,371,741(7) 10.7%871,741(9) 6.8%
1650 Arch Street -- 22nd Floor
Philadelphia, PA 19103
Nancy T. Grumbacher.............................. 545,237(5) 18.2% 1,082,464(8) 8.4%
2801 E. Market Street
York, PA 17402
Heywood Wilansky................................. -- -- 941,367(9) 7.5%
2801 East Market Street
York, PA 17402
The Prudential Insurance Company of America...... -- -- 903,025(10) 7.4%
751 Broad Street
Newark, NJ 07102-3777
Dimensional Fund Advisors, Inc................... 846,900(11) 6.9%
1299 Ocean Avenue
Santa Monica, CA 90401
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(1) Each share of Class A common stock is convertible into one share of common
stock. Accordingly, the number of shares of common stock for each person
includes the number of shares of common stock issuable upon conversion of
all shares of Class A common stock beneficially owned by such person. Also,
the total number of shares of common stock outstanding for purposes of
calculating percentage ownership of a person includes the number of shares
of Class A common stock beneficially owned by such person.
(2) Includes 545,237 shares of Class A common stock held by trusts for the
benefit of M. ThomasTim Grumbacher's children of which Nancy T. Grumbacher (Mr.
Grumbacher's wife), Henry F. Miller and David R. Glyn are the trustees. Mr.
Grumbacher disclaims beneficial ownership of all shares referred to in this
note.
(3) Includes (a) 185,773 shares of common stock held by The Grumbacher Family
Foundation, a charitable foundation of which M. ThomasTim Grumbacher, Nancy T.
Grumbacher and David J. Kaufman are the directors, (b) 545,237 shares of
Class A common stock and 321,504 shares of common stock held by trusts for
the benefit of Mr. Grumbacher's children of which Ms. Grumbacher, Henry F.
Miller and David R. Glyn are the trustees, (c) 24,950 shares of common stock
held by other trusts for the benefit of Mr. Grumbacher's children of which
Ms. Grumbacher and Mr. Miller are the trustees, and (d) 5,000 shares of
common stock held by a trust for the benefit of Mr. Grumbacher's grandchild
of which Ms. Grumbacher, Beth Elser and Mr. Glyn are the trustees, and (e)
500,000 shares of common stock held by a trust for the benefit of Mr.
Grumbacher's children of which Mr. Miller and Mr. Glyn are the trustees. Mr.
Grumbacher disclaims beneficial ownership of all shares referred to above.
Also includes options to purchase 44,550 shares.
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(4) Based solely on a Schedule 13G dated February 12, 2000 filed with the SEC
by T. Rowe Price Associates, Inc. and its affiliate. The Schedule 13G
indicates that T. Rowe Price is the beneficial owner of, and has sole
dispositive power as to, all such shares, and has sole voting power as to
404,900 shares. Its affiliate is the beneficial owner of, and has sole
voting power as to, 740,700 shares.
(5) Consists of Class A common stock held by trusts for the benefit of M.
ThomasTim
Grumbacher's children of which Nancy T. Grumbacher, Henry F. Miller and
David R. Glyn are the trustees. Ms. Grumbacher, Mr. Miller and Mr. Glyn each
disclaim beneficial ownership of all shares referred to in this note.
(6) Consists of (a) 24,950 shares of common stock held by trusts for the
benefit of M. Thomas Grumbacher's children, of which Nancy T. Grumbacher
and Henry F. Miller are the trustees, (b) 545,237 shares of Class A common
stock and 321,504 shares of common stock held by other trusts for the
benefit of M. Thomas Grumbacher's children of which Ms. Grumbacher, Mr.
Miller and David R. Glyn are the trustees, and (c) 500,000 shares of common
stock held by a trust for the benefit of M. Thomas Grumbacher's children of
which Mr. Miller and Mr. Glyn are the trustees. Mr. Miller disclaims
beneficial ownership of all shares referred to in this note.
(7) Consists of (a) 545,237 shares of Class A common stock and 321,504 shares
of common stock held by trusts for the benefit of M. Thomas Grumbacher's
children of which Nancy T. Grumbacher, Henry F. Miller and David R. Glyn
are the trustees, (b) 5,000 shares of common stock held by a trust for the
benefit of M. Thomas Grumbacher's grandchild of which Ms. Grumbacher, Beth
Elser and Mr. Glyn are the trustees, and (c) 500,000 shares of common stock
held by a trust for the benefit of M. Thomas Grumbacher's children of which
Mr. Miller and Mr. Glyn are the trustees. Mr. Glyn disclaims beneficial
ownership of all shares referred to in this note.
(8)(5) Consists of (a) 185,773 shares of common stock held by The Grumbacher Family
Foundation, a charitable foundation of which Nancy T. Grumbacher, M.
ThomasTim
Grumbacher and David J. Kaufman are the directors, (b) 545,237 shares of
Class A common stock and 321,504 shares of common stock held by trusts for
the benefit of M. ThomasTim Grumbacher's children of which Ms. Grumbacher, Henry F.
Miller and David R. Glyn are the trustees, (c) 24,950 shares of common stock
held by trusts for the benefit of M. ThomasTim Grumbacher's children of which Ms.
Grumbacher and Mr. Miller are the trustees, and (d) 5,000 shares of common
stock held by a trust for the benefit of M. ThomasTim Grumbacher's grandchild of
which Ms. Grumbacher, Beth Elser and Mr. Glyn are the trustees. Ms.
Grumbacher disclaims beneficial ownership of all shares referred to in this
note.
(9) Includes 83,333 shares issued pursuant to the Company's Amended and
Restated Stock Option and Restricted Stock Plan that are subject to
forfeiture as provided in such plan, 250,000 shares awarded pursuant to The
Bon-Ton Stores, Inc. Performance Based Stock Incentive Plan for Heywood
Wilansky that are subject to forfeiture as provided in such plan, and
options to purchase 351,900 shares.
(10) Based solely on a Schedule 13G dated January 31, 2000 filed with the SEC by
The Prudential Insurance Company of America. The Schedule 13G indicates
that Prudential is the beneficial owner of all such shares. Prudential has
sole voting and dispositive power as to 227,400 shares and shared voting
and dispositive power as to 675,625 shares.
(11)(6) Based solely on a Schedule 13G dated February 4, 20002, 2001 filed with the SEC by
Dimensional Fund Advisors, Inc. These shares are owned by investment
companies, trusts and accounts as to which Dimensional is investment advisor
or manager, and Dimensional disclaims beneficial ownership of all such
shares.
(7) Based solely on a Schedule 13G dated February 14, 2001 filed with the SEC by
T. Rowe Price Associates, Inc. ("Price Associates") and its affiliate. The
Schedule 13G indicates that, pursuant to reporting requirements, Price
Associates is the beneficial owner of such shares; however, Price Associates
disclaims that it is the beneficial owner of all such shares.
(8) Consists of (a) 24,950 shares of common stock held by trusts for the benefit
of Tim Grumbacher's children, of which Nancy T. Grumbacher and Henry F.
Miller are the trustees, and (b) 545,237 shares of Class A common stock and
321,504 shares of common stock held by other trusts for the benefit of Tim
Grumbacher's children of which Ms. Grumbacher, Mr. Miller and David R. Glyn
are the trustees. Mr. Miller disclaims beneficial ownership of all shares
referred to in this note.
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(9) Consists of (a) 545,237 shares of Class A common stock and 321,504 shares of
common stock held by trusts for the benefit of Tim Grumbacher's children of
which Nancy T. Grumbacher, Henry F. Miller and David R. Glyn are the
trustees, and (b) 5,000 shares of common stock held by a trust for the
benefit of Tim Grumbacher's grandchild of which Ms. Grumbacher, Beth Elser
and Mr. Glyn are the trustees. Mr. Glyn disclaims beneficial ownership of
all shares referred to in this note.
The holders of the Class A common stock have entered into an agreement
granting M. ThomasTim Grumbacher (or his personal representative) the right of first
refusal to acquire any shares of Class A common stock proposed to be
transferred.
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SECURITY OWNERSHIP OF MANAGEMENT
This table shows as of March 24, 2000,April 12, 2001, the holdings of each director, our Chief Executive
Officer, the four other most highly compensated executive officers during 19992000,
and of Heywood Wilansky, who served as Chief Executive Officer for a part of the
year (the "named executives"), and of each director, and of all directors and
executive officers as a group. Each person listed has sole voting power and sole
investment power with respect to the shares indicated, unless otherwise noted.
CLASS A COMMON STOCK COMMON STOCK(1)
----------------------- -----------------------
SHARES SHARES
BENEFICIALLY BENEFICIALLY
NAME OWNED PERCENT OWNED PERCENT
- ---- ------------ ------- ------------ -------
M. Thomas Grumbacher...............................Tim Grumbacher..................................... 2,951,490(2) 98.7% 5,644,497(3) 37.0%
Heywood Wilansky................................... -- -- 941,367(4) 7.5%5,987,997(3) 39.4%
Michael L. Gleim................................... -- -- 305,098(5) 2.5%396,528(4) 3.2%
Frank Tworecke..................................... -- -- 83,916(5) *
James H. Baireuther................................ -- -- 51,667(6)75,000(4) *
H. Stephen Evans................................... -- -- 53,358(4) *
Samuel J. Gerson................................... -- -- 4,000(6) *
Douglas G. Lamm.................................... -- -- 68,456(10)5,000(4) *
Lawrence J. Ring................................... -- -- 6,000(6)7,000(4) *
Robert C. Siegel................................... -- -- 3,000(6)4,000(4) *
Leon D. Starr...................................... -- -- 25,080(7) *
Frank Tworecke..................................... -- -- 17,250(8)25,580(6) *
Leon F. Winbigler.................................. -- -- 16,000(9)20,000(4) *
Thomas W. Wolf..................................... -- -- 6,000(6)7,000(4) *
Heywood Wilansky................................... -- -- 589,467(7) 4.8%
All directors and executive officers as a group (22(21
persons)......................................... 2,951,490 98.7% 7,308,547(11) 45.6%7,560,456(8) 48.2%
- ---------------
* less than 1%
(1) See note (1) to Principal Shareholders table.
(2) See note (2) to Principal Shareholders table.
(3) See note (3) to Principal Shareholders table.
(4) See note (9) to Principal Shareholders table.
(5) Includes 5,000 restricted shares and options to purchase 178,949 shares.
(6) Includes options to purchase the number of shares indicated: Mr.
BairuetherGleim -- 26,667183,949 shares; Mr. Baireuther -- 30,000 shares; Mr.
Evans -- 50,598 shares; Mr. Gerson -- 3,0004,000 shares; Mr. Ring -- 3,0004,000
shares; Mr. Siegel -- 1,0002,000 shares; Mr. Winbigler -- 3,000 shares; and Mr.
Wolf -- 1,0002,000 shares.
(7)(5) Includes 2,250 shares owned by Mr. Tworecke's children, as to which Mr.
Tworecke disclaims beneficial ownership, and options to purchase 66,666
shares.
(6) Includes 21,500 shares owned by Mr. Starr's spouse, as to which Mr. Starr
disclaims beneficial ownership, and options to purchase 1,0001,500 shares.
(7) Mr. Wilansky was formerly President and Chief Executive Officer -- he is no
longer with the Company. The information provided is as of June 27, 2000.
(8) Includes 2,250 shares owned by Mr. Tworecke's children, as to which Mr.
Tworecke disclaims beneficial ownership.
(9) Includes 2,000 shares owned by Mr. Winbigler's spouse, as to which Mr.
Winbigler disclaims beneficial ownership, and options to purchase 2,000506,766 shares.
(10) Includes 32,828 restricted shares and options to purchase 26,666 shares.
(11) Includes 391,220 restricted shares and options to purchase 808,584 shares.5
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PROPOSAL ONE
ELECTION OF DIRECTORS
The Board has proposedproposes the following nominees for election as directors to hold
office until the 20012002 Annual Meeting of Shareholders and until their respective
successors have been elected. Each is currently a director.director and has agreed to
serve if elected. Should a nominee bebecome unable or decline to serve before the
persons named asAnnual Meeting, the proxies willmay vote for a substitute the Board may recommendrecommends
unless the Board reduces the number of directors.
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M. THOMASTIM GRUMBACHER -- Director since 1967. Age 60.61. Chairman of the Board of The
Bon-Ton since August 1991.1991, and Chief Executive Officer since June 2000. From
1977 to 1989 he was President and from 1985 to 1995 he was Chief Executive
Officer of The Bon-Ton.
HEYWOOD WILANSKY -- Director since 1995. Age 52. President and Chief
Executive Officer of The Bon-Ton since August 1995. Prior to that, he was
employed by The May Department Stores Company for more than 19 years, last
serving as President and Chief Executive Officer of the Foley's division from
1992 to 1995. Mr. Wilansky is a director of First Washington Realty Trust, a
real estate organization which principally owns neighborhood shopping centers.
SAMUEL J. GERSON -- Director since 1996. Age 58.59. Director of Allmerica
Financial Corp., an insurance company. Mr. Gerson is a trustee emeritus of the
Kennedy Library Foundation, trustee associate of Boston College, and a board
member of Herald Media Group, Inc. and of College Coach, Inc. Mr. Gerson was
Chairman and Chief Executive Officer of Filene's Basement Corp., an off-price retailer, since 1984.
Mr. Gerson is a director of Allmerica Financial Corp., an insurance company, and
is a trustee associate of Boston College and Vice-Chairman of the Urban League
of Eastern Massachusetts. from 1984 to
June 2000. Filene's Basement Corp. filed for relief under Chapter 11 of the
Bankruptcy Code in August 1999, and sold substantially all its assets in March
2000.
It is currently winding up its affairs.
MICHAEL L. GLEIM -- Director since 1991. Age 57.58. Vice Chairman and Chief
Operating Officer of The Bon-Ton since December 1995. From 1991 to December 1995
he was Senior Executive Vice President and from 1989 to 1991 he was Executive
Vice President of The Bon-Ton.
Prior to joining us, Mr. Gleim was employed by
Federated Department Stores, Inc. for more than 25 years.
LAWRENCE J. RING -- Director since 1997. Age 51.52. Professor of Business
Administration at the College of William and Mary's Graduate School of Business
Administration in Williamsburg, Virginia for more than five years. Dr. Ring also
conducts an international consulting and executive education practice, and is a
director of Specialty Stores, Ltd., a retailer headquartered in Durban, South
Africa.
ROBERT C. SIEGEL -- Director since 1998. Age 63.64. Consultant to the apparel
and footwear industry since December 1998. From December 1993 to December 1998,
he was Chairman and Chief Executive Officer of The Stride Rite Corporation, a
shoe manufacturer and retailer. Mr. Siegel is a director of McNaughton Apparel
Group, Inc., a women's sportswear manufacturer.manufacturer, and of Skechers U.S.A., Inc., a
footwear manufacturer and retailer.
LEON D. STARR -- Director since 1991. Age 81.82. Management consultant to
department and specialty stores since 1984. Before that, he held various
positions with Allied Stores Corporation, a national operator of department
stores, for over 35 years. Allied operated
department stores nationwide.
FRANK TWORECKE -- Director since 1999. Age 53.54. Vice Chairman -- Chief
Merchandising Officer at The Bon-Ton since November 1999. From January 1996
until November 1999, he was President and Chief Operating Officer of Jos. A.
Bank Clothiers,
and from August 1994 until December 1995, President of Merry-Go-Round
Enterprises. Mr. Tworecke joined Merry-Go-Round while it was in the process of
reorganizing under Chapter 11. In February 1996, Merry-Go-Round began an orderly
wind-down of operations and liquidated its assets.Clothiers.
LEON F. WINBIGLER -- Director since 1991. Age 74.75. Retired Chairman and
Chief Executive Officer of Mercantile Stores Company, Inc., a national
department store operator.
THOMAS W. WOLF -- Director since 1998. Age 51.52. President of the Wolf
Organization, Inc., a building materials manufacturer and distributor, since
1985. He is Chairmana director of YorkWaypoint Financial Corporation, a savings and loan
association, a director of Manis Lumber Co., a building materials distributor,
and a director of Irex Corporation, a national building contractor.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1999,2000, the Board held fourfive meetings and took action by unanimous
consent without a meeting once.twice. The Board has an Executive Committee, an Audit
Committee and a Compensation and Stock Option Committee but does not have a
Nominating Committee. The primary functions of the committees are as follows:
Executive Committee - has the authority to act in place of the Board on
certain specified matters.
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- members are M. ThomasTim Grumbacher, Heywood
WilanskyFrank Tworecke and
Michael L. Gleim.
- did not hold anyheld twelve meetings during 1999.2000.
Audit Committee - reviews our internal controls, our auditing,
accounting and financial reporting processes, and
handles matters relating to our independent
auditors.accountants.
- oversees our regulatory and ethical compliance.
- members are Samuel J. Gerson, Lawrence J. Ring,
Robert C. Siegel, Leon F. Winbigler and Thomas W.
Wolf.
- held two meetings during 1999.2000.
Compensation and Stock
Option Committee - considers and determines the compensation of the Chairman of
the Board the President and Chief Executive Officer, the Vice
Chairman and Chief Operating Officer, and the
Vice Chairman and Chief Merchandising Officer,
and oversees the compensation of all other
employees.
- administers our compensationstock option and equity incentive
plans, including the 1991 Amended and Restated
Stock Option and Restricted Stock Plan, the 2000
Stock Incentive Plan, the Management Incentive
Plan, the Performance-Based Stock Incentive Plan
For Heywood Wilansky, and other compensation
plans.
- members are Samuel J. Gerson, Lawrence J. Ring,
Robert C. Siegel, Leon F. Winbigler and Thomas W.
Wolf.
- held two meetings during 1999.2000.
No director attended fewer than 75% of the total number of meetings of the
Board and committees on which he served except Samuel J. Gerson.served.
COMPENSATION OF DIRECTORS
We do not pay employee directors any separate compensation for serving as
directors. We pay each non-employee director who is not a consultant to The
Bon-Ton an annual fee of $20,000, $2,000 for attendance at each Board meeting
and $1,000 for attendance at each committee meeting. Each non-employee director
also receives an annual grant of options to purchase 1,000 shares of common stock.stock, the
amount of shares to be determined each year by the Compensation and Stock Option
Committee. Each non-employee director who is a consultant to The Bon-Ton
receives one-half of the compensation paid, and one-half of the options granted,
to the
othera non-employee directors.director. Mr. Starr is the only non-employee director who
provides consulting services to us. We reimburse all directors for any expenses
related to their Board service.
Mr. Starr has rendered consulting services to The Bon-Ton since 1984 and
received approximately $65,000 in consulting fees in 1999.2000. We anticipate we will
pay Mr. Starr approximately $65,000 in consulting fees in 2000.
PROPOSAL TWO
APPROVAL AND ADOPTION OF
THE BON-TON STORES, INC. 2000 STOCK INCENTIVE PLAN
Shareholders are being asked to approve and adopt The Bon-Ton Stores, Inc.
2000 Stock Incentive Plan (which we shall refer to as the "2000 Option Plan").
The Bon-Ton's long-term success depends on our ability to attract, retain,
and encourage dedicated, competent employees. To further these goals, the
Company adopted, and the shareholders approved, The Bon-Ton Stores, Inc. 1991
Stock Option Plan and amendments thereto (which we shall refer to as the "1991
Option Plan"). The 1991 Option Plan contains limits on the number of options and
shares which can be issued
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10
and provides that no shares or options can be issued after September 2001. As we
are nearing the share limitation and the end of the period during which shares
or options can be issued under the 1991 Option Plan, on March 3, 2000 the Board
approved the 2000 Option Plan, subject to shareholder approval and adoption.
THE 1991 OPTION PLAN
The total number of shares of common stock authorized for issuance under
the 1991 Option Plan is 1,900,000, and no shares may be issued under the 1991
Option Plan after September 15, 2001. As of March 3, 2000, options to purchase
1,737,588 shares had been granted and not forfeited, and 123,333 restricted
shares had been issued and not forfeited. Thus, on March 3, 2000, only 39,079
shares remained available under the 1991 Option Plan.
THE 2000 OPTION PLAN
The 2000 Option Plan authorizes the issuance of up to 400,000 shares of
common stock as either grants of options to purchase common stock or as awards
of common stock subject to substantial risk of forfeiture. Except with respect
to the number of shares authorized, the number of shares which may be granted to
any one person in any single year, and the period during which it is effective,
the 2000 Option Plan is substantially identical to the 1991 Option Plan
previously approved by the shareholders.
The material provisions of the 2000 Option Plan are as follows:
Number of Shares. The maximum number of shares that may be issued under
the 2000 Option Plan is 400,000, subject to adjustment to reflect certain
changes in the Company's capitalization (for example, a stock split). If any
shares are forfeited, or an option is terminated without the issuance of shares,
the shares will again be available for grant pursuant to the 2000 Option Plan.
Administration. The 2000 Option Plan is administered by the Board of
Directors, or, at the discretion of the Board, by a committee composed of two or
more members of the Board (for purposes of this Proposal Two, the "Committee").
To the extent possible, and to the extent the Board deems it necessary or
appropriate, each member of the Committee shall be a non-employee director and
an outside director. The Board may designate two committees to operate and
administer the Option Plan in its stead. The 1991 Option Plan presently is
administered by the Compensation Committee.
Eligibility. All employees, directors, consultants and advisors of the
Company or its subsidiaries and affiliates are eligible to receive options or
awards under the 2000 Option Plan. There are approximately 8,700 people eligible
under the 2000 Option Plan.
Term of the 2000 Option Plan. The 2000 Option Plan became effective March
3, 2000 and provides that no options or awards may be granted thereunder after
March 2, 2010.
Options and Awards. From time to time, at its discretion, the Committee
may select eligible recipients to whom options or awards will be granted,
determine when each option or award will be granted, determine the number of
shares subject to such option or award and determine the terms and conditions of
each option or award.
Options. Options may be either incentive stock options ("ISOs") or
non-qualified stock options. ISOs are intended to qualify as "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code. Unless
an option is designated as an ISO, it is a non-qualified option. Options are not
transferable except by will or by the laws of descent and distribution. No
option may be exercised unless at least six months have elapsed since the date
of the grant.
The exercise price of the options is determined by the Committee, provided
that the exercise price of an ISO is at least 100% of the fair market value of a
share of common stock on the grant date, or at least 110% of the fair market
value on the grant date if the recipient owns more than 10% of the combined
voting power of all classes of stock of the Company. The term of each option is
fixed by the Committee. The aggregate fair market value, determined as of the
grant date, of the shares as to which an ISO is exercisable for the first time
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by the recipient during any calendar year (under all incentive stock option
plans of the Company) may not exceed $100,000.
Maximum Grants. The maximum number of shares for which options may be
granted to any single grantee in any fiscal year is 200,000 shares.
Termination of Options. All options terminate on the earliest of:
a) The expiration of the term specified in the option, which shall not
exceed ten years from the date of grant or five years from date of grant of
an ISO if the grantee on the grant date owns more than 10% of the combined
voting power of all classes of stock of the Company;
b) The expiration of 90 days from the date the grantee's employment
with the Company or its affiliates terminates for any reason other than
disability or death or as specified in subparagraphs (d) or (e) below;
c) The expiration of one year from the date the grantee's employment
with the Company or its affiliates terminates due to death or disability;
d) A finding by the Committee that the grantee has breached his
employment contract or has been engaged in disloyalty to the Company or an
affiliate; or
e) Such time as the Committee may determine if there is a change of
control of the Company as defined in the 2000 Option Plan.
Payment for Options. A grantee may pay for shares in cash, certified check
or such other mode of payment as the Committee may approve, including payment in
shares of common stock held by the grantee for at least six months.
Awards. The 2000 Option Plan permits awards of shares of common stock
which have restrictions on the recipient's eligibility to sell or transfer the
shares. The Committee will determine the period, which generally will extend for
at least six months from the date of grant, during which the recipient may not
sell, transfer, pledge or assign these shares. These restrictions may lapse in
installments, as determined by the Committee. The Committee may, at its sole
discretion, waive any restrictions in whole or in part. The Committee will
determine the rights that recipients will have with respect to restricted
shares, including the right to vote restricted shares and the right to receive
dividends. A share certificate will be issued with respect to the restricted
shares which will bear appropriate legends until such time as all restrictions
lapse. If a recipient terminates his employment for any reason other than death
or disability, all restricted shares remaining subject to restrictions will be
forfeited by the recipient and canceled by the Company.
Provisions Relating to a Change of Control of the Company. In the event of
a change of control of the Company, the Committee may take whatever action with
respect to options and awards outstanding it deems necessary or desirable,
including acceleration of the expiration or termination date or the date of
exercisability of an option or removing any restrictions from or imposing any
additional restrictions on any outstanding awards.
A "change of control" will be deemed to have occurred if: (a) the Company's
shareholders (or the Board of Directors, if shareholder action is not required)
approve a plan or other arrangement pursuant to which the Company will be
dissolved or liquidated; (b) the Company's shareholders (or the Board of
Directors, if shareholder action is not required) approve a definitive agreement
to sell or otherwise dispose of substantially all of the assets of the Company;
(c) subject to certain exceptions, the Company's shareholders (or the Board if
shareholder action is not required) and the other constituent corporation's
shareholders (or its board if shareholder action is not required) have approved
a definitive agreement to merge or consolidate the Company with or into such
other corporation; (d) any entity, person or group other than M. Thomas
Grumbacher, members of his family, his lineal descendants or entities of which
such persons are the beneficial owners of at least 50% of the voting interests,
the Company or any of its subsidiaries or any employee benefit plan (or related
trust) sponsored or maintained by the Company or any subsidiary of the Company,
becomes the beneficial owner or has obtained voting control over securities
representing more than 50% of the voting power
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12
of the Company's outstanding voting stock; or (e) directors constituting a
majority of the Board have been members of the Board of Directors for less than
12 months, unless the nomination for election of each new director who was not a
director at the beginning of such 12-month period was approved by a vote of at
least two-thirds of the directors then still in office who were the directors at
the beginning of such period.
Amendment and Termination. The Board may amend the 2000 Option Plan,
provided that the Board may not (a) change the class of individuals eligible to
receive an ISO, (b) increase the maximum number of shares as to which options
and awards may be granted or (c) make any other change or amendment as to which
shareholder approval is required in order to satisfy the conditions set forth in
Rule 16b-3 under the Securities Exchange Act, in each case without obtaining
shareholder approval within 12 months before or after such action. No option or
award will be adversely affected by any such amendment without the consent of
the grantee or recipient.
Federal Income Tax Consequences. The following is a summary of certain
federal income tax consequences of the issuance of options and the acquisition
of shares by exercising options or receiving awards of shares. It does not
present a complete analysis of all relevant federal tax consequences and does
not discuss state or local income tax laws.
(a) ISOs. An ISO is an option that meets certain requirements under the
Code and is subject to special tax treatment provided the grantee complies with
certain holding requirements applicable to the shares acquired. In general, the
grantee will not recognize regular taxable income upon either the grant or the
exercise of an ISO. The grantee will recognize capital gain or loss on a
disposition of the shares acquired, provided the grantee does not dispose of
those shares within two years from the date the ISO was granted or within one
year from the date the shares were acquired by the grantee. For regular federal
income tax purposes, the maximum tax rate applicable to capital gains is
dependent on the length of time the shares were held. If the shares were held
for more than one year, the maximum regular federal tax rate applicable to the
gain will be 20%. If the shares were held for one year or less, the gain on the
sale will be taxed at the same tax rate applicable to other taxable income. If
the grantee does not dispose of the shares acquired within two years of the date
the ISO was granted or within one year of the date the shares were acquired by
the grantee, the Company will not be allowed a deduction by reason of the grant
or exercise of an ISO.
As a general rule, if the grantee disposes of the shares acquired before
satisfying both holding period requirements (a "disqualifying disposition"), the
gain recognized by the grantee will be taxed as ordinary income to the extent of
the difference between the fair market value of the shares on the date of
exercise and the adjusted basis of the shares, and the Company will be entitled
to a deduction in that amount. The income recognized will not, however, exceed
the difference between the amount actually realized on the disposition and the
adjusted basis of the shares (which would limit the amount of income recognized
if, for example, the value of the shares declined after the option was
exercised). The gain (if any) in excess of the amount treated as ordinary income
will be treated as a long or short term capital gain (based on the length of
time the grantee held the shares).
The amount by which the fair market value of a share at the time of
exercise exceeds the option exercise price will be included in the computation
of the grantee's "alternative minimum taxable income" in the year the grantee
exercises the ISO. Currently, the maximum alternative minimum tax rate is 28%.
If a grantee pays alternative minimum tax with respect to the exercise of an
ISO, the amount of such tax paid will be allowed as a credit against regular tax
liability in subsequent years. The grantee's basis in the shares for purposes of
the alternative minimum tax will be adjusted when income from a disposition of
the shares is included in alternative minimum taxable income.
(b) Non-qualified Stock Options. A grantee of a non-qualified stock option
(which is an option other than an ISO or which is designated as not intended to
be an ISO) will not recognize taxable income at the time of grant, and the
Company will not be allowed a deduction by reason of the grant. The grantee will
generally recognize ordinary income when the option is exercised. The amount of
income will be generally equal to the excess of the fair market value of the
shares received upon exercise (determined at the time of exercise) over the
option exercise price paid for the shares. The Company will, subject to various
limitations, be allowed a deduction in the same amount. Upon disposition of
these shares, the grantee will recognize a long
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or short term capital gain or loss equal to the difference between the amount
realized on disposition and the grantee's basis in the share (which ordinarily
would be the fair market value of the shares on the date the option was
exercised).
(c) Restricted Shares. The recipient of an award will not recognize income
and the Company will not be entitled to a deduction at the time of the award
because the restricted shares are subject to a substantial risk of forfeiture
and are not transferable. When the risk of forfeiture and the restrictions
lapse, the recipient will recognize compensation income and the Company will be
entitled to a deduction (subject generally to a $1,000,000 limitation on
deductible compensation of certain employees of the Company as provided under
Section 162(m) of the Code) in an amount equal to the then fair market value of
the restricted shares. Except as provided below, an award recipient may
nevertheless elect pursuant to Section 83(b) of the Code to include the
restricted shares in his income at their fair market value at the time of award,
in which event the Company would be entitled to a corresponding deduction. Such
election must be made within 30 days after the award. If an award recipient who
makes a Section 83(b) election forfeits the restricted shares to the Company,
the recipient will not recognize a loss on such forfeiture. In some cases, the
particular restrictions with respect to an award may be such that an award
recipient will not be entitled to make the Section 83(b) election.
The foregoing discussion of the material provisions of the 2000 Option Plan
does not purport to be complete and is qualified by reference to the full text
of the 2000 Option Plan.
The Board of Directors approved the 2000 Option Plan on March 3, 2000.
Approval of the 2000 Option Plan requires the affirmative vote of a majority of
the votes cast by holders of common stock and Class A common stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL AND
ADOPTION OF THE BON-TON STORES, INC. 2000 STOCK INCENTIVE PLAN
PROPOSAL THREE
APPROVAL AND ADOPTION OF THE BON-TON STORES, INC. 2000
PERFORMANCE-BASED COMPENSATION PLAN
FOR HEYWOOD WILANSKY
The Bon-Ton Stores, Inc. 2000 Performance-Based Compensation Plan for
Heywood Wilansky (which we will refer to in this Proposal Three as the
"compensation plan") is a performance-based plan that is intended to supplement
the performance-based portions of Mr. Wilansky's employment agreement with the
Company dated August 18, 1995, as amended. The compensation plan was adopted by
the Board of Directors on the recommendation of the Compensation Committee and
is subject to the approval of shareholders.
Under the compensation plan, effective as of February 1, 2003, the
outstanding principal amount of certain loans made to Mr. Wilansky under his
employment agreement in connection with certain tax liabilities attributable to
stock awards made to him shall be forgiven, and an additional cash payment shall
be made to Mr. Wilansky equal to the tax liability attributable to such debt
forgiveness, provided the performance goals established under the terms of the
compensation plan are achieved. Achievement of the performance goals is required
to be certified in writing by the Compensation Committee. In addition, Mr.
Wilansky's obligation to make interest payments with respect to these loans is
deferred pursuant to certain provisions of his employment agreement, and may be
forgiven, as well, and an additional cash payment shall be made to Mr. Wilansky
equal to the tax liability attributable to such interest forgiveness, provided
the applicable performance target established by the Compensation Committee has
been achieved and certified in writing. This debt forgiveness and the payment of
the additional amounts to cover Mr. Wilansky's tax liabilities attributable to
benefits under the compensation plan is contingent on the approval of the
compensation plan by the shareholders.
The design and administration of the compensation plan are intended to
cause all taxable compensation attributable to the compensation plan to be
treated as "performance-based compensation" as that term is used for purposes of
Section 162(m) of the Internal Revenue Code. As a consequence, the provisions of
the Code
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which would otherwise limit the deductibility by us of certain executive
compensation in excess of $1,000,000, should not be applicable to any
compensation expense attributable to the compensation plan.
The provisions of the compensation plan are generally described below.
Eligibility. Heywood Wilansky is the only participant in the compensation
plan.
Shareholder approval and term of compensation plan. The compensation plan
goes into effect, subject to shareholder approval, as of April 25, 2000, and
shall continue through February 1, 2003, unless terminated sooner by the Board
of Directors.
Benefits under the compensation plan. Effective February 1, 2003, the
outstanding principal amount of certain loans made to Mr. Wilansky under the
terms of his employment agreement in connection with certain tax liabilities
attributable to stock awards made to him shall be forgiven, and an additional
cash payment shall be made to him equal to the tax liability attributable to
such debt forgiveness. In no event shall the benefits to be received by Mr.
Wilansky pursuant to the compensation plan, when aggregated with certain other
benefits provided to him in connection with his loans, including forgiveness of
interest and certain cash payments to compensate him for the tax liability
attributable to such forgiveness of interest (as provided for under the terms of
the employment agreement), exceed $4,000,000.
The benefits under the compensation plan will be granted to Mr. Wilansky
only if the performance goals established by the Compensation Committee for the
Company's fiscal years ending on or about February 1, 2001, February 1, 2002 and
February 1, 2003 (or such other performance periods as may be established in
connection with the compensation plan) are achieved. The performance goals
established under the terms of the compensation plan will be in terms of the
Company's net after tax income or its earnings per share, as determined by the
Compensation Committee, subject to adjustment by the Compensation Committee,
either reducing or increasing the target otherwise required to be achieved to
take into account a significant acquisition or disposition of business assets or
operations or an extraordinary one time gain or charge affecting the Company's
net after tax earnings or earnings per share, as the case may be, but in all
cases, any such adjustment shall only be made to the extent that would be
consistent with the requirements under the Code for the benefits under the
compensation plan to be treated as performance-based compensation for purposes
of Code Section 162(m). The achievement of these performance goals must be
certified in writing by the Compensation Committee.
In addition, in order for Mr. Wilansky to be eligible for the benefits
under the compensation plan, he must remain employed by the Company at all times
from April 25, 2000 through the date as of which he becomes eligible for the
benefits under the compensation plan, and he must, at all times between April
25, 2000 and February 1, 2003, own at least the total number of shares of common
stock granted to him pursuant to paragraph 1(c) of his employment agreement and
the shares of common stock granted to him pursuant to paragraph 3(c) of his
employment agreement. However, the number of shares which he shall be required
to own on February 1, 2003 shall be reduced by 83,333 in the event the Company's
share price reaches $14 per share at any time between April 25, 2000 and
February 1, 2003, and by an additional 83,333 shares in the event the share
price reaches $15, $16, $17 and $18 per share respectively.
Reduction of Benefits. If the per share price of the common stock equals
or exceeds $14 at any time between April 25, 2000, and February 1, 2003, the
portion of the outstanding principal, if any, to be forgiven under the
compensation plan shall be determined by applying the applicable percentage set
forth below to the amount of outstanding principal that would have been forgiven
under the compensation plan if the share price of the common stock had not
equaled or exceeded $14.
SHARE PRICE APPLICABLE PERCENTAGE
- ----------- ---------------------
$14............................................... 80%
$15............................................... 60%
$16............................................... 40%
$17............................................... 20%
$18 or above...................................... 0%
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The applicable percentage to be used to determine the reduction in benefits
shall be determined by reference to the highest per share price attained by the
Company's common stock at any time between April 25, 2000, and February 1, 2003.
Administration of the compensation plan. The compensation plan is
administered by the Compensation Committee which will at all times consist
exclusively of two or more "outside directors" (as that term is defined under
Section 162(m) of the Code). The resolution of any questions arising with
respect to the compensation plan will be determined by the Compensation
Committee, and all such determinations shall be final and conclusive.
Amendment and termination of the compensation plan. The Company may,
acting through the Board, terminate or revoke the compensation plan at any time
and may amend the compensation plan from time to time, provided that neither the
termination, revocation or amendment of the compensation plan may, without the
written approval of Heywood Wilansky, reduce the benefit to which he would
otherwise be entitled, and provided further that no changes that would increase
the benefit available shall be effective without approval by the Compensation
Committee and without disclosure to and approval by the shareholders in a
separate vote prior to the date Heywood Wilansky would become entitled to such
increased benefit. In addition, the compensation plan may be modified or amended
by the Compensation Committee as it deems appropriate in order to comply with
any rules, regulations or other guidance promulgated by the Internal Revenue
Service with respect to applicable provisions of the Code.
Federal tax issues. Section 162(m) of the Code limits the deductibility of
compensation in excess of $1,000,000 to certain employees of publicly held
companies (this limitation is referred to herein as the "million dollar cap"),
unless the compensation comes within certain exceptions. One exception to the
million dollar cap is available for "performance-based compensation." In order
for taxable compensation to be within this exception, a number of requirements
must be satisfied, including the establishment of performance goals by a
committee of two or more "outside" members of the Company's Board, disclosure to
the shareholders of the material terms of the performance-based bonus
arrangement under which the bonus is to be paid, and approval by the
shareholders of that arrangement. Additional rules apply to the ongoing
administration of such an arrangement in order for compensation to qualify as
performance-based.
In general the compensation is intended to provide compensation only on the
attainment of the performance goals established by the Compensation Committee.
If the compensation plan is put into effect in accordance with its terms, is
approved by the Company's shareholders, and is administered in accordance with
the provisions set forth therein, the taxable compensation attributable to the
benefits under the compensation plan should be "performance-based compensation"
that is exempt from the million dollar cap.
The following table sets forth the maximum benefits that may be received by
Heywood Wilansky if the compensation plan is approved.
NAME AND POSITION DOLLAR VALUE
- ----------------- ------------
Heywood Wilansky......................................... $4,000,000(1)
President and
Chief Executive Officer
- ---------------
(1) Maximum benefit to be received if all performance goals are met, the
additional requirements for benefits are satisfied and the per share price
of the common stock does not equal or exceed $14 at any time during the
period commencing April 25, 2000 and ending February 1, 2003.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL AND
ADOPTION OF THE BON-TON STORES, INC. 2000 PERFORMANCE-BASED
COMPENSATION PLAN FOR HEYWOOD WILANSKY.
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PROPOSAL FOUR
RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT ACCOUNTANTS
Subject to shareholder ratification, the Board, upon recommendation of the
Audit Committee, has reappointed Arthur Andersen LLP, which served as our
independent accountants in 1999, to serve as our independent accountants for
2000. If the shareholders do not ratify this appointment, other independent
accountants will be considered by the Board upon recommendation of the Audit
Committee.
A representative of Arthur Andersen LLP is expected to be present at the
meeting and will have the opportunity to make a statement and be available to
respond to appropriate questions.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
This table sets forth, for the last three years, the compensation paid or
accrued to each of the named executives:
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- ------------------------------------------------------------------ ------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY($SALARY ($) BONUS($BONUS ($) COMPENSATION($COMPENSATION ($) AWARDS($AWARDS ($)(1) OPTIONS(#) COMPENSATION($ OPTIONS (#) COMPENSATION ($)
- ----------------- ---- ---------- --------- -------- --------------- ---------------------------- ---------- -------------------------- ----------------
Heywood Wilansky........... 1999 1,000,000 587,935 455,833(2)Tim Grumbacher............. 2000 278,846 -- 9,302 -- -- 427,082(3)
President and 1998 996,154 621,100 106,471 3,562,500 250,000 989,591
Chief Executive Officer 1997 800,000 264,000 872,423 --
99,000 1,065,260
M. Thomas Grumbacher.......Chairman of the 1999 350,000 -- 8,445 -- -- --
ChairmanBoard of theDirectors and 1998 350,000 73,626 8,061 -- -- --
Board of Directors 1997 350,000 87,120 7,931 -- 43,300 --Chief Executive Officer
Michael L. Gleim........... 2000 483,536 75,000 11,030 -- -- --
Vice Chairman and 1999 441,090 93,968 11,100 -- -- --
Vice Chairman andChief Operating Officer 1998 427,659 110,550 11,436 40,00040,000(1) 15,000 49,575
Frank Tworecke(2).......... 2000 484,754 75,000 144,595(3) -- -- --
Vice Chairman and 1999 90,000 -- 31,471 -- -- --
Chief OperatingMerchandising
Officer 1997 414,417 132,000 9,848 -- 49,600 291,147
James H. Baireuther........ 2000 319,115 30,000 9,724 -- -- --
Executive Vice President, 1999 258,115 35,000 9,229 -- -- 28,220(4)
Executive Vice President,28,220
Chief Financial Officer 1998 239,192 35,000 9,076 -- 10,000 99,040
Chief Financial Officer 1997 224,808 42,000 6,367 -- -- 85,306
Douglas G. Lamm............ 1999 308,500 -- 9,600H. Stephen Evans........... 2000 271,572 6,753 15,358 -- -- --
Senior Vice President, 1998 307,269 12,622 9,684 343,750 25,000 --
GMM 1997 254,808 67,329 9,406 89,9821999 254,810 17,348 14,650 -- -- --
Real Estate, Legal and 1998 244,816 19,210 14,729 -- -- --
Governmental Affairs
Heywood Wilansky(4)........ 2000 1,042,299 170,000 40,759 -- -- 718,749(5)
Former President and 1999 1,000,000 587,935 455,833 -- -- 427,082
Chief Executive Officer 1998 996,154 621,100 106,471 3,562,500 250,000 989,591
- ---------------
(1) Mr. Wilansky's award was made under The Bon-Ton Stores, Inc.
Performance-Based Stock Incentive Plan for Heywood Wilansky and vests in
three equal installments on February 1, 2001, February 1, 2002 and February
1, 2003. Mr. Gleim's award was made under the 1991 Option Plan andThis represents a grant of 5,000 restricted shares, which will vest on
August 31, 2001, and Mr. Lamm's award was made under the 1991 Option Plan
and will vest in three equal installments on February 1, 2001, February 1,
2002 and February 1, 2003. At January 29, 2000, the aggregate number of
restricted shares and market2001. The value of such shares were: Mr. Wilansky --
333,333 shares with a market value of $1,208,332; Mr. Gleim -- 5,000 shares
with a market value of $18,125; Mr. Lamm -- 32,828 shares with a market
value of $119,002. No dividends will be paid on these restricted shares at the end of common stock.2000 was
$15,625.
(2) Mr. Tworecke joined the Company in 1999.
(3) Includes $123,802 of payments made by the Company to Mr. Tworecke pursuant
to the loan forgivenessrepayment provisions of $375,000his employment contract.
(4) In June 2000, Mr. Wilansky ceased to be an employee of the Company. Pursuant
to his separation agreement, the restricted stock previously granted to him
became fully vested. In addition, Mr. Wilansky will continue to receive his
base salary of $1,000,000 per year and other benefits through January 31,
2003, subject to mitigation requirements contained in the separation
agreement, and he is entitled to the benefits available under the
supplemental retirement plan previously established for him. These benefits
represent a $5.7 million liability to the Company as provided in Mr. Wilansky's
employment agreement.
(3) Amount realized on vestingof February 3, 2001.
(5) Represents the value of restricted shares of common stock.
(4) Relocation reimbursements.
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17stock which became fully vested.
STOCK OPTION GRANTS
No stock option grants were made to any of the named executives during
1999.2000. We do not have any plan which permits the granting of stock appreciation
rights.
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12
STOCK OPTION EXERCISES AND HOLDINGS
There were no options exercised by any of the named executives during 1999.2000.
The following table shows the number and value of unexercised stock options (exercised
and unexercised)
for the named executives during 1999.
OPTION EXERCISES DURING 1999 AND2000.
OPTION VALUES AT JANUARY 29, 2000FEBRUARY 3, 2001
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
JANUARY 29, 2000FEBRUARY 3, 2001 AT JANUARY 29, 2000(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE(#) REALIZEDFEBRUARY 3, 2001(1)
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- --------
----------- ------------- ----------- -------------
Heywood Wilansky............Tim Grumbacher............................. 44,550 -- -- 219,067 265,666 0 0
M. Thomas Grumbacher........--
Michael L. Gleim........................... 183,949 5,000 -- --
22,900 43,300 0 0
Michael L. Gleim............Frank Tworecke............................. 66,666 133,334 -- --
158,283 43,066 $11,400 0
Douglas G. Lamm.............James H. Baireuther........................ 26,667 3,333 -- --
18,333 16,667 0 0
James H. Baireuther.........Stephen Evans........................... 49,598 1,000 -- --
18,334 11,666 0 0Heywood Wilansky........................... -- -- -- --
- ---------------
(1) In-the-money options are options having an exercise price below $3.63,$3.125, the
year-end share price. Value is calculated by multiplying the difference
between the option exercise price and $3.63$3.125 by the number of shares
underlying the option.
EMPLOYMENT AGREEMENTS
Heywood Wilansky
Mr. Wilansky's employment agreement continues until January 31, 2003, and
provides for an annual base salary of $1,000,000. He is eligible for an annual
cash bonus based upon The Bon-Ton's performance and his individual performance
according to criteria established by the Compensation Committee. The maximum
bonus attainable is 100% of his base salary. The shares of common stock and
options to purchase common stock granted to Mr. Wilansky under The Bon-Ton
Stores, Inc. Performance Based Stock Incentive Plan For Heywood Wilansky will
vest over time. The Company has made loans to Mr. Wilansky to pay for certain
tax liabilities attributable to the stock awards made to him by the Company. If
certain performance goals are achieved by the Company, Mr. Wilansky satisfies
certain other requirements and the per share price of the Company's common stock
does not reach $18 per share between April 25, 2000 and February 1, 2003, the
Company will forgive some or all of the outstanding principal amount of these
loans and make a cash payment to Mr. Wilansky equal to the tax liability
attributable to such debt forgiveness. In addition, if Mr. Wilansky is still
employed by the Company and has not breached his employment agreement in any
material respect, the interest payments due on the tax loans will be forgiven,
and the Company will make a cash payment to Mr. Wilansky equal to the tax
liability attributable to such forgiveness of interest. In no event shall the
sum of this debt and interest forgiveness and the compensation for tax liability
resulting therefrom exceed $4,000,000. If Mr. Wilansky is discharged without
cause (as defined in his employment agreement), he will continue to receive his
base salary for the greater of the remaining term of his employment agreement or
one year, his bonus for the year in which he is discharged will be determined on
a pro-rata basis, and he will be entitled to immediate vesting of his restricted
stock awards, options and retirement benefits. If Mr. Wilansky voluntarily
terminates his employment following a change of control, he will be entitled to
his base salary for the remaining term of his employment agreement and to
immediate vesting of his restricted stock and stock options. In addition, we
have established a supplemental retirement plan for Mr. Wilansky which will
provide
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supplemental retirement income of approximately $300,000 per year commencing
when he reaches age 55 or following his retirement or other termination of
employment after reaching age 55. We believe the present value of the aggregate
cost of this supplemental retirement plan over time, assuming an interest rate
of 6%, is approximately $3,100,000.
Michael L. Gleim
Mr. Gleim's employment agreement expires January 31, 2002 and provides for
an annual base salary of $450,000. He is also eligible for an annual bonus to be
determined by the Compensation Committee. If Mr. Gleim is discharged without
cause or resigns for good reason (each as defined in his employment agreement),
he will continue to receive his base salary and other benefits for the greater
of the remaining term of the agreement or one year from termination of
employment.
Frank Tworecke
Mr. Tworecke's employment agreement commenced November 11, 1999 and
continues to February 1, 2003. It provides for an annual base salary of $450,000
and a bonus in accordance with criteria established by the Compensation
Committee up to a maximum bonus of 75% of his base salary. If Mr. Tworecke is
discharged without cause or resigns for good reason (each as defined in the
employment agreement), he will continue to receive his base salary and other
benefits for one year if the discharge or resignation occurs after November 11,
2001, or for a year and a half if the discharge or resignation occurs earlier.
Heywood Wilansky
The Company entered into an employment agreement with Mr. Wilansky which
was to expire January 31, 2003, pursuant to which Mr. Wilansky was entitled to
receive an annual base salary of $1,000,000 and an annual bonus based on the
attainment of performance goals. The agreement provided that in the event the
Company discharged Mr. Wilansky without cause or Mr. Wilansky resigned for good
reason (each as defined in the agreement), Mr. Wilansky would continue to
receive his base salary and other benefits for the remaining term of the
agreement. As previously noted, Mr. Wilansky left the Company on June 27, 2000;
this termination of employment was deemed to be a discharge by the Company
without cause and, as such, Mr. Wilansky is entitled to receive his base salary
(paid in bi-weekly installments) for the remaining term of the agreement (i.e.,
until January 31, 2003). Mr. Wilansky also received a $170,000 cash bonus he
would have been entitled to receive for fiscal 2000 based solely on the
Company's performance. In addition, 333,333
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13
shares of restricted stock issued to Mr. Gleim will beWilansky and options to purchase
265,666 shares of the Company's common stock immediately vested upon Mr.
Wilansky's resignation. The stock options were exercisable for a period of 90
days. Mr. Wilansky did not exercise any of the stock options within the 90 day
period.
SUPPLEMENTAL RETIREMENT BENEFITS
The Company has established a nonqualified, unfunded retirement plan for
certain key executives. Under the terms of this plan, each participant is
entitled to supplementalan annual retirement income of $30,000 per yearbenefit if he or she remains employed by the
Company through January
31, 2002, and if Mr. Gleim and the Company agree to extend his employment beyond
that date, his supplemental retirement income shallfor a stated period, with an increase by $10,000 per yearin this annual benefit for each
full year of his employment withthereafter that the Company after January 31, 2002.
Supplemental Retirement Benefit
We have entered into an agreement with Mr. Baireuther which provides that
he will be entitled to supplemental retirement income of $30,000 per year if heparticipant remains so employed, by the Company through February 1, 2005, and that his
supplemental retirement income will increase $10,000 per year for each full year
of his employment with the Company after February 1, 2005,subject, in some
cases, to a maximum retirement income of $80,000 per year.
Executive Severanceannual benefit.
The table below reflects the benefits available under this plan.
ANNUAL IF EMPLOYED ANNUAL INCREASE MAXIMUM ANNUAL
PARTICIPANT BENEFIT THROUGH THEREAFTER BENEFIT
- ----------- ------- ----------------- --------------- --------------
Frank Tworecke................. $50,000 November 10, 2004 $15,000 $125,000
Michael L. Gleim............... 30,000 January 31, 2002 10,000 --
James H. Baireuther............ 30,000 February 1, 2005 10,000 80,000
EXECUTIVE SEVERANCE
We have entered into severance agreements with certain of our executive
officers other than Messrs. Grumbacher, Wilansky, Gleim and Frank Tworecke, Vice
Chairman and Chief Merchandising Officer, which generally
provide for payment of one year's base salary if the executive officer is
terminated without cause (as defined in such agreement).
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STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total shareholder return on Common Stockcommon stock from January 28, 1995February 2, 1996 through January
29, 2000,February
3, 2001, the cumulative total return on the CRSP Total Return Index for The
Nasdaq Stock Market (US Companies) and the Nasdaq Retail Trade Stocks Index
during such period. The comparison assumes $100 was invested on January 28, 1995February 2, 1996
in the Common StockCompany's common stock and in each of the foregoing indices and assumes
the reinvestment of any dividends.
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14
THE BON-TON STORES, INC.
STOCK PERFORMANCE GRAPH
FISCAL 2000
[STOCK PERFORMANCE GRAPH]
BON-TON NASDAQ NASDAQ RETAIL
------- ------ -------------
2/2/96 100 100 100
2/1/97 133.33 129.68 123.41
1/30/98 266.67 153.45 144.41
1/29/99 150 239.15 175.88
1/29/00 69.05 361.05 144.23
2/3/01 59.52 251.48 108.16
- --------------------------------------------------------------------------------
NASDAQ
Date NASDAQ RETAIL BON-TON
- --------------------------------------------------------------------------------
1/28/95
2/2/96 100.00 100.00 100.00
2/2/96 49.41 145.57 112.29
2/1/97 65.88 188.77 138.58129.68 123.41 133.33
1/30/98 131.76 223.39 162.16153.45 144.41 266.67
1/29/99 74.12 348.13 197.49239.15 175.88 150.00
1/29/00 34.12 525.58 161.96361.05 144.23 69.05
2/3/01 251.48 108.16 59.52
- --------------------------------------------------------------------------------
REPORT OF THEON EXECUTIVE COMPENSATION COMMITTEE
The Compensation Committee, which consists of only non-employee directors,
approves all general policies affecting the compensation of The Bon-Ton's
executive officers. The Compensation Committee determines the compensation of
Heywood Wilansky, President and Chief Executive Officer, M. ThomasTim Grumbacher, Chairman of the Board and Chief Executive Officer, Michael L.
Gleim, Vice Chairman and Chief Operating Officer, and Frank Tworecke, Vice
Chairman and Chief Merchandising Officer, and utilizes recommendations from the
Executive Committee with respect to the compensation of all other executive
officers, but retains the authority to determine the compensation of such other
executive officers and may accept, reject or modify, in its discretion, the
Executive Committee's recommendations.
The basic forms of executive compensation are annual compensation, in the
form of salary and bonus, and long-term incentives, currently consisting
primarily of stock options. The Compensation Committee seeks to achieve a mix of
these to properly compensate and motivate the Company's executives. In doing so,
the Compensation Committee considers various aspects of the Company's operating
results as well as its financial condition, and considers each executive's role
in such achievement.
1611
2015
Annual Compensation -- Salary and Bonus
Annual compensation is comprised of a base salary and a possible bonus. The
Compensation Committee set the base salary of M. Thomas Grumbacher for 1999. The
base salaries of Heywood Wilansky, Michael L. Gleim and Frank Tworecke are established pursuant to
employment agreements which were approved by the Compensation Committee based on
a variety of factors, including the general level of executive compensation in
the industry, the general level of executive compensation at The Bon-Ton and the
evaluation of the importance of the executive to The Bon-Ton. The base salaries
of the remainder of the Company's senior executives are approved annually by the
Compensation Committee upon recommendations from the Executive Committee based
on such subjective factors as individual and Company performance. The
Compensation Committee commissions an independent contractor to conduct periodic
surveys of executive compensation in the department store industry and utilizes
such survey information in making its decisions on executive compensation.
The Compensation Committee believes it appropriate that an increasing
amount of the potential annual compensation for these senior executives be in
the form of an annual bonus which is dependent upon The Bon-Ton's performance.
Mr. Wilansky's annualThe bonus is determined pursuant to The Bon-Ton Stores, Inc.
Five Year Cash Bonus Plan for Heywood Wilansky which was approved by the
shareholders in 1998. For2000 for each of Mr. Gleim the bonus for 1999and Mr. Tworecke was determined under a
bonus plan based on the Company's net income during 1999. For 1999, the2000. The Compensation
Committee certified that the performance goals required tobonuses be
achieved under these plans were reached, which resulted in bonuses paid to these executives in the amounts
indicated in the Summary Compensation Table.
For executive officers other than Messrs. Grumbacher, Wilansky, Gleim and Tworecke,
we adopted the Management Incentive Plan, which provides for the granting of
cash bonuses to participants based on a combination of Company performance,
measured by earnings before interest, and the participant's individual
performance, measured against various personal goals and objectives established
at the beginning of the year. The Management Incentive Plan is currently
administered by the Compensation Committee. Bonus payouts are discretionary and
no bonus payouts may be made if the Company fails to achieve established minimum
performance goals. Management Incentive Plan participants had the right to elect
to receive a portion of their bonus in restricted shares of common stock which
shares were issued in the name of the participant but are not eligible for
resale until bonus awards for such participants are made. In
addition, theThe Compensation
Committee may accelerate the vesting of the unvested restricted shares.
A cash bonus award or option grant may, in addition, be made at the
discretion of the Compensation Committee without regard to whether any specified
criteria are met.
Compensation of the Chief Executive Officer
The Compensation Committee set the base salary for Tim Grumbacher for 2000,
prior to his resuming the position of Chief Executive Officer. This base salary
remained unchanged after Mr. Grumbacher resumed the position of Chief Executive
Officer. Mr. Grumbacher did not receive a bonus for 2000.
Mr. Wilansky, the Company's former Chief Executive Officer, left the
Company on June 27, 2000. Mr. Wilansky will continue to be compensated pursuant
to a severance agreement he entered into with the company that was approved by
the Compensation Committee. The terms of Mr. Wilansky's compensation are more
fully described above in the discussion of "Executive Compensation: Employment
Agreements."
Long-Term Incentives -- Stock Options and Restricted Stock Awards
The Compensation Committee administers theThe Bon-Ton Stores, Inc. 1991 Stock
Option Plan and The Bon-Ton Stores, Inc. 2000 Stock Incentive Plan, both of
which providesprovide for the grant of stock options and restricted stock awards. These
options and awards are intended to help align the executive officers' interests
with those of shareholders by increasing such officers' stake in The Bon-Ton.
Stock options and restricted stock awards generally vest over a number of
years, and any unvested options or shares of restricted stock are usually
forfeited 90 days after termination of the recipient's employment. Such awards,
therefore, are also intended to encourage recipients to remain in the employ of
The Bon-Ton over a substantial period of time.
Of the 243,00010,500 total stock options granted in 1999, 93.6% were granted to
The Bon-Ton's executive officers but2000, none were granted to the
named executives.
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Qualifying Executive Compensation for Deductibility Under Provisions of the
Internal Revenue Code
The Internal Revenue Code provides that a publicly-held corporation may not
generally deduct compensation for its chief executive officer and certain other
executive officers to the extent that compensation for the executive exceeds
$1,000,000 unless such compensation is "performance based" as defined in the
Code. The Compensation Committee has takendoes not anticipate that compensation for any
of the Company's executives shall exceed $1,000,000 in 2001. If any executive's
compensation may exceed that threshold, the Compensation Committee will take
such actions as are appropriate to qualify, to the extent it
17
21 determines such
actions are in the best interests of the Company, compensation paid to
executives for deductibility under the Code. Nevertheless, the Compensation
Committee has in the past, and may in the future, recommend or approve payment
of compensation that may not be deductible under these provisions if the
Compensation Committee has determined that such payments are in the best
interests of the Company.
Members of the Compensation Committee:
Leon F. Winbigler, Chairman
Samuel J. Gerson
Lawrence J. Ring
Robert C. Siegel
Thomas W. Wolf
REPORT OF THE AUDIT COMMITTEE
The functions of the Audit Committee's overall obligation is twofold, to monitorCommittee are focused on three areas:
- the adequacy of the Company's internal controls and financial reporting
process and the reliability of the Company's financial statements.
- the independence and performance of the Company's independent
accountants.
- the Company's compliance with legal and regulatory requirements.
The Audit Committee meets with management periodically to overseeconsider the
adequacy of the Company's internal controls and the objectivity of its financial
reporting. These matters are discussed with the Company's independent
accountants and with appropriate Company management to
ensure they fulfill their fiduciary dutiesfinancial personnel.
The Audit Committee meets privately with the independent accountants who
have unrestricted access to the shareholders.
To further this obligation, the Audit Committee adopted, and the entire
Board approved, a formal written audit committee charter. This charter defines
the rolemembers of the Audit Committee and specifies how theCommittee. The Audit
Committee will
perform its responsibilities.also recommends to the Board the appointment of the independent
accountants and reviews periodically their performance and independence from
management.
The members of the Audit Committee are all "independent" directors which means
that no memberas
defined in the listing standards of the Committee:
- wasNational Association of Securities
Dealers.
The Board has adopted a written charter setting out the audit related
functions the Audit Committee is to perform. A copy of that charter is attached
to this proxy statement as Appendix A.
Management has primary responsibility for the Company's financial
statements and the overall reporting process, including the Company's system of
internal controls.
The independent accountants audit the annual financial statements prepared
by management, express an employeeopinion as to whether those financial statements
fairly present the financial position, results of The Bon-Ton during the last three years;
- received compensation from The Bon-Ton, other than for services as a
memberoperations and cash flows of
the Company in conformity with generally accepted accounting principles and
discuss with the Audit Committee any issues they believe should be raised.
This year, the Audit Committee held two meetings. The Audit Committee
reviewed the Company's audited financial statements and met with both management
and Arthur Andersen LLP, the Company's independent accountants, to discuss those
financial statements. Management has represented to the Audit Committee that the
financial statements were prepared in accordance with generally accepted
accounting principles.
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17
The Audit Committee has received from and discussed with Arthur Andersen
LLP the written disclosure and the letter required by Independence Standards
Board exceeding $60,000 duringStandard No. 1 (Independence Discussions with Audit Committees). These
items relate to that firm's independence from the last year;
- is a family member of anyone who was employedCompany. The Audit Committee
also discussed with Arthur Andersen LLP any matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
Based on these reviews and discussions, the Audit Committee recommended to
the Board that the Company's audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2001.
The Bon-Ton as an
executive officer duringAudit Committee has recommended and the past three years;
-Board has been a partner, controlling shareholder or executive officer with any
business to which The Bon-Ton made payments, or from which The Bon-Ton
received payments, during anyapproved the selection of
the last three yearsCompany's independent accountants.
Members of the Audit Committee:
Lawrence J. Ring, Chairman
Samuel J. Gerson
Robert C. Siegel
Leon F. Winbigler
Thomas W. Wolf
ACCOUNTANT'S FEES
During 2000, we retained Arthur Andersen LLP, our independent accountant,
to provide services in excessthe following categories and amounts:
Audit fees................................................ $233,000
Financial information systems design and implementation
fees.................................................... --
All other fees............................................ $169,000
The Audit Committee also considered whether the provision of $200,000; or
-non-audit
services by our independent accountant is compatible with maintaining auditor
independence.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The firm of independent accountants recommended by the Audit Committee and
selected by the Board for 2001 is Arthur Andersen LLP. The Board expects that a
representative of Arthur Andersen LLP will be present at the meeting, will be
given an executive of another company where any of The Bon-Ton's executives
serve on the compensation committee.opportunity to make a statement at such meeting if he desires to do so,
and will be available to respond to appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Executive officers, directors and persons who own more than 10% of either
class of the Company's stock are required to file reports of ownership and
changes in ownership with the SEC and furnish the Company with copies of these
reports. Based on the Company's review of the reports received and on written
representations from those who are subject to these requirements, we believe
that all 19992000 filing requirements were mettimely made except forthat Leon F. Winbigler
filed a Form 34 with respect to the purchase of 5,000 shares of common stock one
day late and Michael L. Gleim filed a Form 4 with respect to the purchase of
6,000 shares of common stock one day late. The Company did not receive any
written representations from Heywood Wilansky concerning his filing, or failure
to file, any required reports.
INCORPORATION BY REFERENCE
To the extent that this proxy statement is incorporated by David R.
Glyn, a trusteereference into
any other filing by the Company under the Securities Act of certain trusts which, in1933 or the
aggregate, hold more than 10%Securities Exchange Act of 1934, the sections of this proxy statement entitled
Report of the common stock (including sharesCompensation Committee, Report of Classthe Audit Committee (to the
extent permitted by the rules of the Securities and Exchange Commission) and
Stock Price Performance Graph, as well as the Audit Committee Charter attached
as Appendix A, common stock convertible into
common stock) which was inadvertently filed late.will not be deemed incorporated unless specifically provided
otherwise in such filing.
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CERTAIN TRANSACTIONS
The Company leases its Oil City, Pennsylvania store from M. ThomasTim Grumbacher
pursuant to a lease entered into on January 1, 1981. The rental payments during
19992000 under this lease were $223,500. The Oil City lease terminates on July 31,
2006 and the Company has five five-year renewal options.
The Company leased its Butler, Pennsylvania store from M. Thomas Grumbacher
under a lease dated February 17, 1988. This lease was terminated on September 1,
1999. Mr. Grumbacher was the ground tenant from the owner of the shopping
center. At the termination of the lease from Mr. Grumbacher to the
18
22
Company, the Company entered into a lease of this location directly with the
owner of the shopping center. The rental payments during 1999 paid to Mr.
Grumbacher were $136,500.
The Company leases the land for its York Galleria store from MBM Land
Associates Limited Partnership ("MBM"), a partnership of which M. ThomasTim Grumbacher,
through a wholly-owned corporation, and certain trusts established for the
benefit of his three children, are the partners. This lease was terminated in
December 2000 when the Company purchased this land. The lease expires on
September 30, 2019,land and the Company hasstore were
immediately sold to an independent third party and leased back by the right to extend the term of the
lease for six additional periods of five years each.Company.
Rental payments by the Company to MBM during 1999 under2000, prior to termination of this
lease, were $63,000.$57,750.
The Company also leasesleased from MBM a portion of the property on which its
distribution center is located. The remainder iswas leased from Mr. Grumbacher.
Aggregate annual rental payments underThese leases were terminated in December 2000 when the leases are $162,000 until January 1,
2001.Company purchased this
land. The major portion of the land and the distribution center were immediately
sold to an independent third party and leased back by the Company. During 1999,2000,
Mr. Grumbacher and MBM received rental payments underprior to termination of these
leases aggregating $126,767$118,976 and $35,233,$29,524, respectively. Each of the leases
terminates on May 31, 2017, and the Company has two five-year renewal options
under each lease at the then fair market rental value.
Total lease payments to M. ThomasTim Grumbacher and affiliated entities during 19992000
were $585,000.
In 1995, in connection with his employment, we made a non-interest bearing
$750,000 loan to Heywood Wilansky. This loan was to be forgiven in two
installments provided Mr. Wilansky remained employed by the Company. One
installment was forgiven in December 1997, and the balance was forgiven on April
30, 1999.
In accordance with the terms of Mr. Wilansky's employment agreement, we
made loans to Mr. Wilansky in 1998 and in 1999, each in the principal amount of
the tax liability attributable to the vesting of restricted shares in each such
year. The 1998 loan is in the amount of $480,447, and bears interest at 4.25%
per annum; the 1999 loan is in the amount of $207,775, and bears interest at
4.00% per annum. Interest on each is payable annually, and the principal of each
is payable on the earlier of termination of Mr. Wilansky's employment or the
sale of those shares of common stock which gave rise to the tax liability.$429,750.
In 1999, we made a $160,000 loan to Frank Tworecke pursuant to the terms of
his employment agreement. This loan bears interest at 5.57% per annum and is
repayable in 36 equal installments. As of May 14, 2000,February 3, 2001, the principal amount
outstanding was $139,340.$96,090.
Pursuant to Heywood Wilansky's employment agreement, the Company made a
loan to Mr. Wilansky in 1998 in the amount of $480,447, and made a loan to Mr.
Wilansky in 1999 in the amount of $207,775. Mr. Wilansky repaid both of these
loans in full on the termination of his employment.
SHAREHOLDER PROPOSALS
Shareholder proposals for the 20012002 Annual Meeting of Shareholders must be
received by the Company by January 15, 20012002 in order to be considered for
inclusion in the Company's proxy statement and form of proxy relating to that
meeting.
A shareholder may wish to have a proposal presented at the 20012002 Annual
Meeting of Shareholders but not included in the Company's proxy statement and
form of proxy for that meeting. If notice of any such proposal is received by
the Company after March 30, 2001,2002, such proposal shall be deemed "untimely" for
purposes of Rule 14a-4(c) under the Securities Exchange Act of 1934 and,
therefore, the Company will have the right to exercise discretionary voting
authority with respect to such proposal.
By order of the Board of Directors
ROBERT E. STERN
Vice President and
Corporate Secretary
May 12, 200015, 2001
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APPENDIX A
THE BON-TON STORES, INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of The Bon-Ton Stores, Inc. (the "Company") shall be composed of three
or more directors who are independent of the management of the Company and are
free of any relationship that, in the opinion of the Board, would interfere with
their exercise of independent judgment as a committee member. All members of the
Committee shall be financially literate with at least one member having
accounting or other related financial management expertise.
The members of the Committee shall be elected by the Board at its annual
organizational meeting and shall serve until their successors shall be duly
elected and qualified. Unless a Chair is elected by the Board, the members of
the Committee may designate a Chair by majority vote of the full Committee
membership. The Committee shall report through its Chair to the Board following
meetings of the Committee. Minutes or other records of meetings and activities
of the Committee shall be maintained.
STATEMENT OF POLICY
The Committee shall provide assistance to the Board in fulfilling its
responsibility to the shareholders, potential shareholders, and investment
community relating to corporate accounting, reporting practices, and the quality
and integrity of the financial reports of the Company. In so doing, it is the
responsibility of the Committee to maintain free and open means of communication
between the directors, independent accountants (the "Accountants") and the
management of the Company.
MEETINGS
The Committee shall meet at least two times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management and the Accountants in
separate executive sessions to discuss any matters that the Committee or each of
these groups believe should be discussed privately. In addition, the Committee,
or its Chair, will meet with the Accountants and management to review the
Company's financials consistent with item 4. (see next page)
RESPONSIBILITIES
In carrying out its responsibilities, the Committee's policies and
procedures should remain flexible to best react to changing conditions and to
ensure to the directors and shareholders that the corporate accounting and
reporting practices of the Company are in accordance with all requirements and
are of the highest quality.
In carrying out these responsibilities, the Committee shall:
Documents/Reports Review
1. Review and update this Charter periodically, at least annually, as
conditions dictate.
2. Review the Company's annual financial statements and any reports or other
financial information submitted to any governmental body or the public,
including any certification, report, opinion or review rendered by the
Accountants.
3. Review the reports to management prepared in the contract audit function and
management's response.
4. Review with management and the Accountants the 10-Q prior to its filing or
prior to the release of earnings if significant events, transactions or
changes in accounting estimates occur which affect the
A-1
2320
quality of the Company's financial reporting. The Chair may represent the
entire Committee for purposes of this review.
Independent Accountants
5. Recommend to the Board the selection of the Accountants, considering
independence and effectiveness, and approve the fees and other compensation
to be paid to the Accountants. On an annual basis, the Committee should
review the Accountants formal written statement regarding all significant
relationships the Accountants have with the Company to determine the
Accountants' independence. The Committee will instruct the Accountants that
the Board is the client.
6. Review the performance of the Accountants and approve any proposed discharge
of the Accountants when circumstances warrant.
7. Periodically consult with the Accountants, without management present, about
internal controls and the fullness and accuracy of the financial statements.
Financial Reporting Processes
8. In consultation with the Accountants, review the integrity of the financial
reporting processes, both internal and external.
9. Consider the Accountants' judgments about the quality and appropriateness of
the Company's accounting principles as applied in its financial reporting.
10. Inquire of management and the Accountants about significant risks or
exposures and assess the steps management has taken to minimize such risks
to the Company.
11. Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the
Accountants or management.
Process Improvement
12. Following completion of the annual audit, review separately with management
and with the Accountants any significant difficulties encountered during the
course of the audit, including any restrictions on the scope of the work or
access to required information.
13. Review any significant disagreement between management and the Accountants
in connection with the preparation of the financial statements.
14. Review with the Accountants and with management the extent to which changes
or improvements in financial or accounting practices, as approved by the
Committee, have been implemented. (This review should be conducted at an
appropriate time subsequent to implementation of changes or improvements, as
determined by the Committee.)
Ethical and Legal Compliance
15. Review and update periodically the Company's Code of Ethical Standards and
Business Practices (the "Code") and ensure that management has established a
system to enforce the Code.
16. Review management's monitoring of the Company's compliance with the Code and
periodically determine that management has the proper review system in place
to ensure that the Company's financial statements, reports and other
financial information disseminated to governmental organizations and the
public satisfy legal requirements.
17. Review activities, organizational structure and qualifications of the
contract audit function.
18. Review legal compliance matters, including corporate securities trading
policies, with Company counsel.
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21
19. Review with Company counsel any legal matter that could have a significant
impact on the financial statements.
20. Perform any other activities consistent with this Charter, the Company's
By-laws and governing law, as the Committee or the Board deems necessary or
appropriate.
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22
THE BON-TON STORES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of THE BON-TON STORES,BON-TON-STORES, INC. (the "Company")
hereby appoints Heywood WilanskyTim Grumbacher and Michael L. Gleim, or either of them, with
full power of substitution, to act as attorneys and proxies for the undersigned
and to vote all shares of stock of the Company which the undersigned is entitled
to vote if personally present at the Annual Meeting of Shareholders of the
Company, to be held at the Heritage Hills Conference Center, 2700 Mount Rose Avenue,
York, PA 17402 on June 13, 200019, 2001, at 9:00 a.m., provided that said proxies are
authorized and directed to vote as indicated with respect to the
matters set forth
on the opposite side of this Proxy.proxy.
UNLESS OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED "FOR" THE ELECTION OF ALL
NOMINATED DIRECTORS, "FOR" APPROVAL AND ADOPTION OF THE BON-TON STORES,
INC. 2000 STOCK INCENTIVE PLAN, "FOR" APPROVAL AND ADOPTION OF THE BON-TON
STORES, INC. 2000 PERFORMANCE-BASED COMPENSATION PLAN FOR HEYWOOD WILANSKY AND
"FOR" RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS. THIS PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY TO
VOTE WITH RESPECT TO ANY OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE
MEETING.DIRECTORS. This proxy also delegates discretionary authority to vote
with respect to any other business which may properly come before the meeting.
(TO BE SIGNED ON REVERSE SIDE.)
SEE REVERSE
SIDESIDE)
24
[x]23
PLEASE DATE, SIGN AND MAIL YOUR PROXY
CARD BACK AS SOON AS POSSIBLE.
ANNUAL MEETING OF SHAREHOLDERS
THE BON-TON STORES, INC.
JUNE 19, 2001
- Please Detach and Mail in the Envelope Provided -
- --------------------------------------------------------------------------------
A /X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD
1. Election of Directors. [ ] [ ] M. Thomas Grumbacher, Heywood Wilansky,FOR WITHHELD
1. Election of NOMINEES: Tim Grumbacher
Directors: / / / / Samuel J. Gerson
Michael L. Gleim
FOR, except vote withheld for the Lawrence J. Ring
following nominee(s): Robert C. Siegel
Leon D. Starr
Frank Tworecke
_______________________________________ Leon F. Winbigler
Thomas W. Wolf
For, except vote withheld from the following nominees(s):
______________________________________________________
FOR AGAINST ABSTAIN
2. Approve and adopt The Bon-Ton Stores, [ ] [ ] [ ]
Inc. 2000 Stock Incentive Plan.
3. Approve and adopt The Bon-Ton Stores, [ ] [ ] [ ]
Inc. 2000 Performance-Based Compen-
sation Plan for Heywood Wilansky.
4. Ratification of the appointment of [ ] [ ] [ ]
Arthur Andersen LLP as the Company's
independent accountants.
SIGNATURE(S) _____________________________________________ DATE________________________________________________________________ Date:_________, 2001
NOTE: Please sign exactly as your name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. 24
ANNUAL MEETING OF SHAREHOLDERS OF
THE BON-TON STORES, INC.
JUNE 19, 2001
PROXY VOTING INSTRUCTIONS
TO VOTE BY MAIL
- ---------------
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS
POSSIBLE.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- --------------------------------------------
PLEASE CALL TOLL-FREE 1-800-PROXIES AND FOLLOW THE INSTRUCTIONS. HAVE YOUR
CONTROL NUMBER AND THE PROXY CARD AVAILABLE WHEN YOU CALL.
TO VOTE BY INTERNET
- -------------------
PLEASE ACCESS THE WEB PAGE AT "WWW.VOTEPROXY.COM" AND FOLLOW THE ON-SCREEN
INSTRUCTIONS. HAVE YOUR CONTROL NUMBER AVAILABLE WHEN YOU ACCESS THE WEB PAGE.
YOUR CONTROL NUMBER IS --
---------------------------------
- Please Detach and Mail in the Envelope Provided -
FOR WITHHELD
1. Election of NOMINEES: Tim Grumbacher
Directors: / / / / Samuel J. Gerson
Michael L. Gleim
FOR, except vote withheld for the Lawrence J. Ring
following nominee(s): Robert C. Siegel
Leon D. Starr
Frank Tworecke
____________________________________________ Leon F. Winbigler
Thomas W. Wolf
SIGNATURE(S)_______________________________________________ Date:_________, 2001
NOTE: Please sign exactly as your name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.