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(THE BON-TON PHOTO)
Proxy Statement
and Notice of 20032004
Annual Meeting
(THE BON-TON LOGO)(LOGO WITH PICTURE OF WOMAN)
[THE BON-TON[BON-TON LOGO]
THE BON-TON STORES, INC.
2801 EAST MARKET STREET
YORK, PA 17402
May 15, 2003WWW.BONTON.COM
June 17, 2004
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders to
be held at Bon-Ton's corporate offices at 2801 East Market Street, York,
Pennsylvania on Wednesday, July 21, 2004, beginning at 9:00 a.m. on Tuesday, June 17, 2003, 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 20022003
Annual Report.
You may vote your shares via the Internet by accessing the voting site
shown on your proxy card, by telephone by calling the toll-free number shown on
your proxy card, by mail using the proxy card, or in person by attending and
voting at the meeting.
Your vote is important to us. Even if you plan to attend the meeting,
please sign, date and return your proxy in the enclosed postage-paid envelope or
vote by telephone or over the Internet.
Sincerely,
/s/ Tim Grumbacher
Tim Grumbacher
Chairman of the Board and
Chief Executive Officer
THE BON-TON STORES, INC.
2801 EAST MARKET STREET
YORK, PA 17402
WWW.BONTON.COM
NOTICE OF ANNUAL MEETING
The Annual Meeting of Shareholders of The Bon-Ton Stores, Inc. will be
held on Tuesday, June 17, 2003,Wednesday, July 21, 2004, at 9:00 a.m., at the Heritage Hills Conference
Center, 2700 Mount Rose Avenue,Bon-Ton's corporate offices
at 2801 East Market Street, York, Pennsylvania.
The purposes of this year's meeting are:
1. To elect an eleveneight member Board of Directors for a one-year term.
2. To amend The Bon-Ton Stores, Inc. 2000 Stock Incentive Plan to
increase the maximum number of shares of stock available from an
aggregate of 400,000 shares to an aggregate of 1,900,000 shares.
3. To ratify the appointment of KPMG LLP as independent auditor for
2003.2004.
3. To approve The Bon-Ton Stores, Inc. Cash Bonus Plan.
4. To approve the Amendment to The Bon-Ton Stores, Inc. 2000 Stock
Incentive Plan.
5. To consider any other matters as may properly come before the
meeting.
Shareholders who owned shares of our stock at the close of business on
May 2, 200326, 2004 may attend and vote at the meeting. If you cannot attend the
meeting, youYou may vote by telephone or
over the Internet as instructed on the
enclosed proxy card or by mailing the proxy card in the enclosed postage-paid
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,
General Counsel and Secretary
York, Pennsylvania
May 15, 2003June 17, 2004
Please vote by telephone or over the Internet as instructed on the enclosed
proxy card or complete, sign and date the proxy card as promptly as possible and
return it in the enclosed envelope. If you vote by telephone or over the
Internet, do not return your proxy card.
CONTENTS
Proxy Statement............................................. 1
Voting Procedures and Security Ownership.................... 1
Outstanding Shares and Voting Rights...................... 1
Principal Shareholders.................................... 23
Security Ownership of Directors and Executive Officers.... 56
Election of Directors....................................... 6
Meetings7
Board and Committees of the Board of Directors......... 7Committee Information..................... 8
Compensation of Directors................................. 8
Amendment of The Bon-Ton Stores, Inc. 2000 Stock Incentive
Plan...................................................... 910
Ratification of the Appointment of the Independent
Auditor................................................... 11
Approval of The Bon-Ton Stores, Inc. Cash Bonus Plan........ 11
Approval of the Amendment to The Bon-Ton Stores, Inc. 2000
Stock Incentive Plan...................................... 13
Executive Compensation...................................... 1418
Summary Compensation Table................................ 1418
Stock Option Grants....................................... 1418
Stock Option Exercises and Holdings....................... 1519
Employment Agreements..................................... 1519
Supplemental Retirement Benefits.......................... 1620
Executive Severance....................................... 1620
Equity Compensation Plan Information...................... 1620
Stock Performance Graph..................................... 1721
Report on Executive Compensation............................ 1721
Report of the Audit Committee............................... 1923
Independent Auditor's Fees.................................. 2024
Relationship withWith Independent Auditor....................... 2025
Section 16(a) Beneficial Ownership Reporting Compliance..... 2125
Certain Transactions........................................ 2125
Shareholder Proposals....................................... 21
Exhibit A -- Audit Committee Charter........................ A-126
THE BON-TON STORES, INC.
---------------------
PROXY STATEMENT
We are providing this proxy statement to solicit your proxy for use at
the Annual Meetingannual meeting of Shareholders.shareholders. The annual meeting will be held at 9:00 a.m.
on Wednesday, July 21, 2004 at Bon-Ton's corporate offices at 2801 East Market
Street, York, Pennsylvania. The 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 15, 2003.June 17, 2004.
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, your proxies will be authorized to act in accordance with their
judgment.
When your proxy card is returned properly signed, or you have effectively
votedsubmitted your proxy 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, your shares will be voted "for" the Board
nominees, "for" ratification of the appointment of KPMG LLP as independent
auditor, and "for" eachapproval of The Bon-Ton Stores, Inc. Cash Bonus Plan and
approval of the other proposals presented in this proxy statement.Amendment to The Bon-Ton Stores, Inc. 2000 Stock Incentive Plan.
You may revoke your proxy before its exercise by notifying the Secretary
of the Company in writing, by delivering a properly executed, later-dated proxy
card, by votingsubmitting your proxy 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, by telephone or by other means of
communication by our directors, officers or employees, or by a professional
proxy solicitation organization engaged by us.employees.
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 20022003 is a reference to
the fiscal year ended February 1, 2003)January 31, 2004).
VOTING PROCEDURES AND SECURITY OWNERSHIP
OUTSTANDING SHARES AND VOTING RIGHTS
Only shareholdersShareholders of record at the close of business on May 2, 2003,26, 2004, are
entitled to vote at the meeting. At that time, there were 12,142,08513,055,378 shares of
common stock and 2,989,8532,951,490 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.
In the election of directors, the elevenThe eight nominees receiving a plurality of the votes cast (that is, the
eleveneight nominees receiving the greatest number of votes) will be elected. A proxy
marked "withhold" with respect to the election of a director will not be voted
as to the director indicated, but will be counted for purposes of determining
whether there is a quorum.
Approval of any other matter submitted to the shareholders requires the affirmative vote of a majority
of the votes cast. Abstentions and broker non-votes are counted only to determine
whether a quorum is present at the meeting.meeting but are not counted as a vote in
favor or against a particular matter. 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.
If you own common stock in your own name, you are an "owner of record."
This means you may direct the persons named as proxies how to vote your shares.
If you fail to vote, the proxies cannot vote your shares at the meeting.
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 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 all 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 401(k)
Plan.
The Nasdaq Stock Market has proposed a regulation which providesregulations provide that if more than 50% of the
voting power in a company is held by an individual, group or another company,
the company is a "controlled" company. Using this definition, The Bon-Ton is a
"controlled" company because Tim Grumbacher, our Chairman of the Board and Chief
Executive Officer, is the beneficial owner of shares of common stock and Class A
common stock entitled to vote more than 50% of the votes entitled to be cast at
the meeting. Mr. Grumbacher has indicated that he will vote "for" each of the
nominees for director "for" amendment of the 2000 Stock Incentive Plan and "for" ratification ofeach other proposal described herein to be
presented at the appointment of KPMG LLP.annual meeting. Consequently, the election of each nominee for
director, amendment of the plan, and ratification of the appointment of KPMG LLP, is eachapproval of The Bon-Ton
Stores, Inc. Cash Bonus Plan and approval of the Amendment to The Bon-Ton
Stores, Inc. 2000 Stock Incentive Plan are assured.
2
PRINCIPAL SHAREHOLDERS
This table shows owners of 5% or more of the common stock or Class A common stock or
common stock as of April 4, 2003.May 3, 2004. 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
- ----------------------------------------------------------------------------------------
Tim Grumbacher 2,951,490(2) 98.7% 6,001,518(3) 39.5%100.0% 6,151,912(3) 38.3%
2801 E. Market Street
York, PA 17402
RS Investment Management L.P. -- -- 882,000(4) 6.8%
388 Market Street
San Francisco, CA 94111
Nancy T. Grumbacher 545,237(4) 18.2% 1,082,464(5) 8.5%545,237(5) 18.5% 758,314(6) 5.6%
2801 E. Market Street
York, PA 17402
Henry F. Miller 545,237(4) 18.2% 1,077,464(6) 8.5%545,237(5) 18.5% 749,414(7) 5.5%
1650 Arch Street - 22(nd) Floor
Philadelphia, PA 19103
Dimensional Fund Advisors, Inc. -- -- 747,500(8) 5.7%
1299 Ocean Avenue
Santa Monica, CA 90401
Advisory Research, Inc. -- -- 744,384(9) 5.7%
110 North Stetson Street, - 22(nd) Floor
Philadelphia, PA 19103
2
Class A Common Stock Common Stock(1)
--------------------- ---------------------
Number of Number of
Name and Address Shares Percent Shares Percent
- ----------------------------------------------------------------------------------------
Suite 5780
Chicago, IL 60601
Thomas W. Wolf 545,237(4) 18.2% 956,691(7) 7.5%545,237(5) 18.5% 702,541(10) 5.2%
2801 E. Market Street
York, PA 17402
Dimensional Fund Advisors, Inc. -- -- 883,700(8) 7.3%
1299 Ocean Avenue
Santa Monica, CA 90401
David R. Glyn 545,237(4) 18.2% 896,691(9) 7.0%545,237(5) 18.5% 642,541(11) 4.7%
1650 Arch Street - 22(nd) Floor
Philadelphia, PA 19103
M. Thomas Grumbacher Trust 181,746(10) 6.1% 288,914(10) 2.3%181,746(12) 6.2% 202,896(12) 1.5%
dated March 9, 1989 for benefit of
Matthew Reed Grumbacher
1650 Arch Street - 22(nd) Floor
Philadelphia, PA 19103
M. Thomas Grumbacher Trust 181,746(10) 6.1% 288,914(10) 2.3%181,746(12) 6.2% 202,896(12) 1.5%
dated March 9, 1989 for benefit of
Beth Anne Grumbacher Elser
1650 Arch Street - 22(nd) Floor
Philadelphia, PA 19103
M. Thomas Grumbacher Trust 181,745(10) 6.1% 288,913(10) 2.3%181,746(12) 6.2% 202,896(12) 1.5%
dated March 9, 1989 for benefit of
Max Aaron Grumbacher
1650 Arch Street - 22(nd) Floor
Philadelphia, PA 19103
(1) Each share of Class A common stock is convertible into one share of common
stock.stock at the holder's option. 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.
3
(2) Includes 545,237 shares of Class A common stock held by trusts for the
benefit of Mr. Grumbacher's children of which Nancy T. Grumbacher (Mr.
Grumbacher's wife), Thomas W. Wolf, 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) 185,773115,773 shares of common stock held by The Grumbacher Family
Foundation, a charitable foundation of which Mr. Grumbacher, Nancy T.
Grumbacher and Henry F. Miller are the directors, (b) 545,237 shares of
Class A common stock and 321,50463,454 shares of common stock held by trusts for
the benefit of Mr. Grumbacher's children of which Ms. Grumbacher, Thomas W.
Wolf, Mr. 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 Messrs. Wolf, Miller and Glyn are the
trustees, and (d) 5,0008,900 shares of common stock held by a trusttrusts for the
benefit of Mr. Grumbacher's grandchildgrandchildren of which Ms. Grumbacher, Beth
Elser, and Messrs. Wolf and Glyn are the trustees. Mr. Grumbacher disclaims
beneficial ownership of all shares referred to above.in this note. Also includes
options to purchase 44,550 shares of common stock.stock exercisable within 60
days of May 3, 2004.
(4) Based solely on a Schedule 13G dated February 14, 2004 filed by RS
Investment Management L.P. with the Securities and Exchange Commission.
(5) Consists of Class A common stock held by trusts for the benefit of Tim
Grumbacher's children of which Nancy T. Grumbacher, Thomas W. Wolf, Henry
F. Miller and David R. Glyn are the trustees. Ms. Grumbacher and Messrs.
Wolf, Miller and Glyn each disclaim beneficial ownership of all shares
referred to in this note.
3
(5)(6) Consists of (a) 185,773115,773 shares of common stock held by The Grumbacher
Family Foundation, a charitable foundation of which Ms. Grumbacher, Tim
Grumbacher and Henry F. Miller are the directors, (b) 545,237 shares of
Class A common stock and 321,50463,454 shares of common stock held by trusts for
the benefit of Mr. Grumbacher's children of which Ms. Grumbacher, Thomas W.
Wolf, Mr. 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 Messrs. Wolf, Miller and Glyn are the
trustees, and (d) 5,0008,900 shares of common stock held by a trusttrusts for the
benefit of Mr. Grumbacher's grandchildgrandchildren of which Ms. Grumbacher, Beth
Elser and Messrs. Wolf and Glyn are the trustees. Ms. Grumbacher disclaims
beneficial ownership of all shares referred to in this note.
(6)(7) Consists of (a) 185,773115,773 shares of common stock held by The Grumbacher
Family Foundation, a charitable foundation of which Tim Grumbacher, Nancy
T. Grumbacher and Mr. Miller are the directors, (b) 545,237 shares of Class
A common stock and 321,50463,454 shares of common stock held by trusts for the
benefit of Mr. Grumbacher's children of which Ms. Grumbacher and Thomas W.
Wolf, Mr. Miller and David R. Glyn are the trustees, and (c) 24,950 shares
of common stock held by other trusts for the benefit of Mr. Grumbacher's
children of which Ms. Grumbacher and Messrs. Wolf, Miller and Glyn are the
trustees. Mr. Miller disclaims beneficial ownership of all shares referred
to in this note.
(7)(8) Based solely on a Schedule 13G dated February 6, 2004 filed with the
Securities and Exchange Commission by Dimensional Fund Advisors, Inc.
(9) Based solely on a Schedule 13G dated February 12, 2004 filed by Advisory
Research, Inc. with the Securities and Exchange Commission.
(10) Includes (a) 545,237 shares of Class A common stock and 321,50463,454 shares of
common stock held by trusts for the benefit of Tim Grumbacher's children of
which Nancy T. Grumbacher, Mr. Wolf, Henry F. Miller and Mr. Glyn are the
trustees, (b) 24,950 shares of common stock held by other trusts for the
benefit of Mr. Grumbacher's children of which Ms. Grumbacher and Messrs.
Wolf, Miller and Glyn are the trustees, and (c) 5,0008,900 shares of common
stock held by a trusttrusts for the benefit of Mr. Grumbacher's grandchildgrandchildren of
which Ms. Grumbacher, Beth Elser and Messrs. Wolf and Glyn are the
trustees. Mr. Wolf disclaims beneficial ownership of
4
all shares referred to above. Also includes options to purchase 5,000
shares of common stock.
(8) Based solely on a Schedule 13G dated Februarystock exercisable within 60 days of May 3, 2003 filed with the
Securities and Exchange Commission 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.
(9)2004.
(11) Consists of (a) 545,237 shares of Class A common stock and 321,50463,454 shares of
common stock held by trusts for the benefit of Tim Grumbacher's children of
which Nancy T. Grumbacher, Thomas W. Wolf, Henry F. Miller and Mr. Glyn are
the trustees, (b) 24,950 shares of common stock held by other trusts for
the benefit of Mr. Grumbacher's children, of which Ms. Grumbacher and
Messrs. Wolf, Miller and Glyn are the trustees, and (c) 5,0008,900 shares of
common stock held by a trusttrusts for the benefit of Mr. Grumbacher's
grandchildgrandchildren of which Ms. Grumbacher, Beth Elser and Messrs. Wolf and Glyn
are the trustees. Mr. Glyn disclaims beneficial ownership of all shares
referred to in this note.
(10)(12) In notes (2), (3), (4), (5), (6), (7), (10) and (9)(11) above, we discussed trusts
for the benefit of Tim Grumbacher's children, of which Nancy T. Grumbacher,
Thomas W. Wolf, Henry F. Miller and David R. Glyn serve as trustees. This
is one of such trusts.
The holders of the Class A common stock have entered into an agreement
granting Tim Grumbacher (or his personal representative) the right of first
refusal to acquire any shares of Class A common stock proposed to be
transferred.
45
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
This table shows, as of April 4, 2003,May 3, 2004, the holdings of our Chief Executive
Officer, the four other most highly compensated executive officers during 20022003
(the "named executives"), each director, and 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
- --------------------------------------------------------------------------------------------
Tim Grumbacher 2,951,490(2) 98.7% 6,001,518(3) 39.5%100.0% 6,151,912(3) 38.3%
James H. Baireuther -- -- 156,034(4) 1.3%147,667(4) 1.1%
Robert B. Bank -- -- -- *--
Byron L. Bergren -- -- -- --
Philip M. Browne -- -- --2,500 *
Shirley A. Dawe -- -- -- *--
Marsha M. Everton -- -- -- *
John S. Farrell -- -- 32,041(4) *
Samuel J. Gerson -- -- 8,000(4)860 *
Michael L. Gleim -- -- 464,054(5) 3.8%443,289(5) 3.4%
William T. Harmon -- -- 88,573(6)53,671(6) *
Robert E. Salerno -- -- 2,100 *
Robert C. Siegel -- -- 7,000(4) *
Leon D. Starr -- -- 27,080(7) *
Frank TworeckeTworecke(12) -- -- 240,000(4) 1.9%264,814 2.0%
Thomas W. Wolf 545,237(8) 18.2% 956,691(9) 7.5%18.5% 702,541(9) 5.2%
All directors and executive officers
as a group (20(23 persons) 2,951,490(10) 98.7% 7,252,299(11) 46.2%100.0% 7,282,807(11) 44.8%
* 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) Includes options exercisable before June 4, 2003within 60 days of May 3, 2004 to purchase
the number of
shares indicated: Mr. Baireuther -- 63,334 shares; Mr. Farrell -- 3,000
shares; Mr. Gerson -- 7,000 shares; Mr. Siegel -- 5,000 shares; and Mr.
Tworecke -- 200,00030,000 shares.
(5) Includes 60,00093,000 shares owned by Mr. Gleim's spouse and 5,700 shares which
Mr. Gleim holds as to whichcustodian for his grandchildren. Mr. Gleim disclaims
beneficial ownership andof all of the foregoing shares. Also includes options
exercisable before June 4, 2003within 60 days of May 3, 2004 to purchase 156,711116,373 shares.
(6) Includes 1,440 shares owned by Mr. Harmon's spouse, as to which Mr. Harmon
disclaims beneficial ownership, and options exercisable before June 4, 2003within 60 days of
May 3, 2004 to purchase 25,000 shares.
(7) Includes 21,500 shares owned by Mr. Starr's spouse, as to which Mr. Starr
disclaims beneficial ownership, and options exercisable before June 4, 2003within 60 days of
May 3, 2004 to purchase 3,000 shares.
(8) See note (4)(5) to Principal Shareholders table.
(9) See note (7)(10) to Principal Shareholders table.
(10) See notes (2) and (4) to Principal Shareholders table.(8) above.
(11) See notes (3), (4), (5), (6), (7) and (7) to Security Ownership of Management
table.(9) above. Includes 675 shares held
in an IRA plan by the spouse of an executive officer as to which the
executive officer disclaims beneficial ownership. Also includes options
exercisable before June 4, 2003within 60 days of May 3, 2004 to purchase 550,32725,982 shares.
5(12) Mr. Tworecke resigned from the Company effective May 7, 2004.
6
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board proposes the following nominees for election as directors to
hold office until the 20042005 Annual Meeting of Shareholders and until their
respective successors have been elected. Each is currently a director and has
agreed to serve if elected. Should a nominee become unable or decline to serve
before the Annual Meeting, the proxies may vote for a substitute recommended by
the Governance and Nominating Committee of the Board,
recommends unless the Board reduces
the number of directors.
ROBERT B. BANK -- Director since 2002. Age 5657
President of Robert B. Bank Advisory Services, a private capital investment and
consulting firm, since 1990.
Mr. Bank is a director of Nautica Enterprises,
Inc., an apparel marketer.
PHILIP M. BROWNE -- Director since 2002. Age 4344
Senior Vice President and Chief Financial Officer of Advanta Corp., one of the
nation's largest providers of business credit cards to small businesses, since
June 1998. Prior to that, Mr. Browne was a partner at Arthur Andersen LLP, where
he was employed for more than 15 years. Mr. Browne is a director and a member of
the audit committee of AF&L Insurance Company, a privately held long-term care
and home health care insurance company.
SHIRLEY A. DAWE -- Director since 2002. Age 5657
Corporate Director and, since 1986, President of Shirley Dawe Associates, Inc.,
a Toronto based consumer goods marketing and merchandising consulting group, since 1986.group.
Prior to such time,1986, she held progressively senior merchandising positions with the
Hudson's Bay Company, a Canadian national department store chain, for over 15
years. Ms. Dawe is a director of OshKosh B'Gosh, Inc., a children's apparel
manufacturer; the National Bank of Canada; and Henry Birks & Sons, Inc., a Canadian
fine jewelry retailer; and Acorn, a Michigan-based women's apparel specialty
retailer.
MARSHA M. EVERTON -- Director since 2003. Age 5152
President and Chief Executive Officer of The Pfaltzgraff Co., a casual
dinnerware manufacturer, since January 2002. Ms. Everton was Vice President of
The Pfaltzgraff Co. for more than ten years prior, responsible during this
period for various departments including stores and direct marketing, corporate
development and market planning and administration.
SAMUEL J. GERSON -- Director since 1996. Age 61
Chairman of the Board of Genuone, Inc., which provides supply chain security
services, since January 2001. Mr. Gerson is a director of Allmerica Financial
Corp., 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. from 1984 to June 2000. Filene's Basement Corp. filed for relief
under chapter 11 of the U.S. Bankruptcy Code in August 1999 and sold
substantially all its assets in March 2000.
MICHAEL L. GLEIM -- Director since 1991. Age 6061
Vice Chairman and Chief Operating Officer of The Bon-Ton from December 1995 to
February 2002. 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.
TIM GRUMBACHER -- Director since 1967. Age 6364
Chairman of the Board of The Bon-Ton since August 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.
6
ROBERT E. SALERNO -- Director since 2002. Age 5556
Chief Operating Officer of Kieselstein-Cord International, a luxury accessories
wholesaler and retailer, since December 2002. Vice President and Chief Operating
Officer of Circline.Com, an internet based broker of fine arts and antiques,
from November 2001 to December 2002. From October 1999 to August 2001, Mr.
Salerno was Chief Executive Officer of Bluefish Clothing, an apparel marketer.
In November 1999, Bluefish Clothing filed for relief under chapter 11 of the
U.
S.U.S. Bankruptcy Code and the company was liquidated in November 2001. From June
1996 to
7
February 1999, he was Senior Vice President of Bergdorf Goodman, responsible for
all operational, financial and administrative functions.
ROBERT C. SIEGEL -- Director since 1998. Age 66
Chairman of Lacoste U.S.A., an apparel company, since January 1, 2002. From
December 1998 to December 2001, he was a consultant to the apparel and footwear
industry. 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 OshKosh B'Gosh, Inc., a children's apparel
manufacturer.
LEON D. STARR -- Director since 1991. Age 84
Management consultant to department and specialty stores since 1984. Prior to
such time, he held various positions with Allied Stores Corporation, a national
operator of department stores, for over 35 years.
THOMAS W. WOLF -- Director since 1998. Age 5455
President of the Wolf Organization, Inc., a building materials manufacturer and
distributor, since 1985. He is also a director of Irex Corporation, a national
building contractor.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS RECOMMENDS
VOTING "FOR" THE ELECTION OF THE
NOMINEES LISTED ABOVE
BOARD AND BOARD COMMITTEE INFORMATION
The Board of Directors has determined that each of Messrs. Bank, Browne
and Salerno, Ms. Dawe and Ms. Everton is an "independent" director as that term
is defined in the listing standards of the Nasdaq Stock Market.
During 2002,2003, the Board held six meetings and took action by unanimous
consent without a meeting fourfive times.
The Board has an Executive Committee, an Audit Committee, a Human
Resources and Compensation Committee, and a Governance and Nominating Committee.
The primary functions of the committees, the members thereof, and the number of
times the committees met during 20022003, and certain other information regarding
the committees are as follows:
AUDIT COMMITTEE
The members of the Audit Committee are Philip M. Browne, Chair, Robert B.
Bank and Robert E. Salerno. The Board has determined that Mr. Brown is an "audit
committee financial expert" as defined by SEC rules and the listing standards of
the Nasdaq Stock Market. The Audit Committee is composed entirely of
"independent" directors under applicable SEC rules and Nasdaq Stock Market
listing standards and operates under a Charter which was adopted by the Board of
Directors. This Charter is attached to this proxy statement as Annex A and is
posted in the Investor Relations section of the Company's website at
www.bonton.com.
The Audit Committee appoints and establishes the compensation for the
Company's independent auditor, approves in advance all engagements with the
independent auditor to perform non-audit services, reviews and approves the
procedures used to prepare the Company's periodic reports, reviews and approves
the Company's critical accounting policies, discusses the plans and reviews
results of the audit engagement with the independent auditor, reviews the
independence of the independent auditor, and oversees the Company's accounting
processes including the adequacy of its internal accounting controls. To assist
it in carrying out its responsibilities, the Committee is authorized to retain
the services of independent advisors.
The Audit Committee met five times during 2003.
HUMAN RESOURCES AND COMPENSATION COMMITTEE
The members of the Human Resources and Compensation Committee are Shirley
A. Dawe, Chair, Robert B. Bank and Philip M. Browne. The Committee is composed
entirely of "independent" directors, as defined by the listing standards of the
Nasdaq Stock Market, and operates under a Charter which was adopted by the Board
of Directors. This Charter is posted in the Investor Relations section of the
Company's website at www.bonton.com.
The Human Resources and Compensation Committee advises and assists
management in developing the Company's overall compensation strategy to assure
that it promotes shareholder
8
interests, supports the Company's strategic and tactical objectives, and
provides for appropriate rewards and incentives for the Company's management and
employees. As part of that responsibility, the Committee reviews and approves
the structure of the Company's bonus plans and administers the Company's stock
option plans. To assist it in carrying out its responsibilities, the Committee
is authorized to retain the services of independent advisors.
At the end of each year, the Human Resources and Compensation Committee
evaluates the performance of the Chairman and Chief Executive Officer, the
President and Chief Operating Officer, and the two Vice Chairmen, and
establishes their compensation for the next year. The Committee -also reviews
with the Chief Executive Officer the performance of the other executive officers
and approves their compensation for the next year. Finally, the Committee
establishes the corporate goals under the bonus plan and, on occasion,
determines whether there are reasons to waive aspects of those goals that were
not achieved.
The Human Resources and Compensation Committee met seven times during
2003.
GOVERNANCE AND NOMINATING COMMITTEE
The members of the Governance and Nominating Committee are Michael L.
Gleim, Chair, Marsha M. Everton and Leon D. Starr. Messrs. Gleim and Starr are
not "independent" directors as set forth under the Nasdaq Stock Market listing
standards. As discussed above, the Company is a "controlled company" under
Nasdaq Stock Market listing standards. As a controlled company, the Company may
elect and has elected not to have a nominating committee comprised solely of
independent directors. Although Mr. Gleim is not an independent director, he has
provided the authorityBoard with valuable insight with respect to actboth the governance of
the Company and the nominations process, and, therefore, the Board believes that
he should continue as a member of the Governance and Nominating Committee. Mr.
Starr is not standing for reelection to the Board at the annual meeting and will
thus not be a continuing member of the Committee.
The Committee reviews, develops and makes recommendations to the Board of
Directors regarding various aspects of the Company's governance processes and
procedures. It also recommends candidates for election to fill vacancies on the
Board, including renominations of members whose terms are due to expire. The
Committee is also responsible for making recommendations to the Board regarding
the compensation of its non-employee members. The Committee operates under a
Charter which was adopted by the Board of Directors. This Charter is posted in
placethe Investor Relations section of the Company's website at www.bonton.com.
The Committee will consider shareholder recommendations for candidates
for the Board from any shareholder who has been a continuous record owner of at
least 3% of the common stock of the Company for at least one year prior to
submission of the recommendation and who provides a written statement that the
shareholder intends to continue share ownership through the date of the meeting
at which directors are to be elected. Any such shareholder recommendation should
be sent to the Governance and Nominating Committee, c/o Office of General
Counsel, The Bon-Ton Stores, Inc., P. O. Box 2821, York, PA 17405. Any candidate
recommended by a shareholder shall, at a minimum, possess a background that
includes a solid education, sufficient business, professional or academic
experience and the requisite reputation, character, integrity, skills, judgment
and temperament and such other relevant characteristics, which, in the
Committee's view, have prepared him or her for dealing with the multi-faceted
financial, business and other issues that confront a Board of Directors of a
corporation with the size, complexity, reputation and success of the Company.
The Committee also considers potential candidates recommended by current
directors, Company officers, employees and others. The Committee screens all
potential candidates in the same manner regardless of the source of the
recommendation.
9
In nominating candidates to fill vacancies created by the expiration of
the term of a member of the Board, on
certain specified matters.
-the Committee determines whether the
incumbent director is willing to stand for re-election. If so, the Committee
evaluates his or her performance in office to determine suitability for
continued service, taking into consideration the value of continuity and
familiarity with the Company's business. When appropriate, the Committee may
retain executive recruitment firms to assist in identifying suitable candidates.
The Governance and Nominating Committee met six times during 2003.
EXECUTIVE COMMITTEE
The members of the Executive Committee are Thomas W. Wolf, Chair, Michael
L. Gleim, Tim Grumbacher and Leon D. Starr. - held twelve meetings during 2002.
Audit Committee - responsibleMr. Starr is not standing for
the appointment, compensation and
oversight of the Company's independent auditor.
- monitors the integrity of the Company's financial
statements, the auditor's qualifications and
independence, and performance of the independent
auditor.
- members are Philip M. Browne, Chair, Robert B. Bank
and Robert E. Salerno.
- held three meetings during 2002.
7
Human Resources and
Compensation
Committee - determines the compensation of the Chairman of the
Board and Chief Executive Officer, the President and
Chief Operating Officer, and the Vice Chairman and
Chief Administrative Officer, and oversees the
compensation of all other employees.
- assists in planning senior executive development and
succession.
- administers our stock option and compensation plans.
- members are Robert C. Siegel, Chair, Robert B. Bank
and Shirley A. Dawe.
- held two meetings during 2002.
Governance and
Nominating Committee - evaluates and recommends candidates for electionreelection to the Board and the committeeswill thus not be a continuing member of the
Board.
- determinesExecutive Committee.
The Executive Committee has the compensationauthority to act in place of directors.
- evaluates the Company's compliance with corporate
governance requirements.
- has not adopted any procedures whereby the committee
will consider nominees recommended by shareholders.
- members are Michael L. Gleim, Chair, Marsha M.
Everton, Samuel J. Gerson and Leon D. Starr.
- held three meetings in 2002.Board of
Directors on certain specified matters.
The Executive Committee met eleven times during 2003.
ATTENDANCE AT MEETINGS
No director other than Samuel J. Gerson attended fewer than 75% of the total number of meetings of
the Board and committees on which he or she served while in office.
The Company has adopted a policy which encourages Board members to attend
the annual shareholders meeting. Six members of the Board attended the 2003
Annual Meeting of Shareholders.
COMMUNICATION WITH THE BOARD OF DIRECTORS
Any shareholder who wishes to communicate with the Board of Directors, or
any individual director, may do so by directing correspondence which prominently
displays the fact that it is a shareholder-board communication, to such director
or directors in care of the Office of General Counsel, The Bon-Ton Stores, Inc.,
2801 East Market Street, York, PA 17402. Until and unless a procedure is adopted
whereby it may be deemed unnecessary or inappropriate to relay shareholder
communications to the appropriate parties, all shareholder communications will
be relayed to the intended director or directors.
COMPENSATION OF DIRECTORS
We doMr. Grumbacher is an employee of the Company and is not pay employee directorspaid any separate
compensation for serving as directors.
During 2002, we paid eacha director. He is the only employee who serves as a
director.
Each non-employee director anreceives both cash compensation and stock
compensation, which includes:
- - a $90,000 annual fee, $40,000 of $20,000which is paid in cash and each non-employee director sitting$50,000 of which
is paid in restricted stock units (RSU's) which vest 12 months following
termination of Board service;
- - a $15,000 annual fee for serving on the Executive Committee an additionalCommittee;
- - a $5,000 annual fee of $22,000. Non-employee directors also received $2,000 for
attendance at each Board meeting and $500 for attendance at each committee
meeting other than Executive Committee meetings.
Each non-employee director is eligible for an annual grant of options to
purchase shares of common stock, the amount of shares to be determined each year
by the Governance and Nominating Committee. We reimburse all directors for any
expenses related to their Board service.
In 2003, the Governance and Nominating Committee proposed, and the Board
adopted, a revised compensation program for non-employee directors. We will pay
each non-employee director an annual fee of $30,000, an additional annual fee of
$20,000 for each non-employee director who is a member of the Executive
Committee, and an annual fee of $5,000 for serving on each committee other than the Executive
Committee;
- - a $10,000 supplemental fee for each Committee chair.
Directors may defer all or any part of their cash compensation into
additional RSU's.
10
PROPOSAL TWO
RATIFICATION OF THE APPOINTMENT
OF THE INDEPENDENT AUDITOR
Subject to shareholder ratification, the Audit Committee has reappointed
KPMG LLP, which served as our independent auditor in 2003, to serve as our
independent auditor for 2004. If the shareholders do not ratify this
appointment, another independent auditor will be considered by the Audit
Committee.
Mr. Starr,A representative of KPMG LLP is expected to be present at the meeting,
will have the opportunity to make a non-employee director, rendered consulting servicesstatement if he or she so desires, and will
be available to respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS
VOTING "FOR" RATIFICATION OF THE APPOINTMENT
OF THE INDEPENDENT AUDITOR
PROPOSAL THREE
APPROVAL OF
THE BON-TON STORES, INC. CASH BONUS PLAN
The Bon-Ton from 1984Stores, Inc. Cash Bonus Plan (the "Cash Bonus Plan") is a
performance-based plan that is intended to March 2002. Upon the conclusion of Mr. Starr's consulting
agreement, the Company commenced payments to Mr. Starrprovide a means by which those key
employees who are designated as participants may be compensated for their roles
in the amountperformance of $65,000
per year in considerationthe Company. The Cash Bonus Plan has been adopted by the
Board of his agreement notDirectors on the recommendation of its Human Resources and Compensation
Committee as a means to provide consulting servicesgreater flexibility in the establishment of
performance goals and setting of target bonuses while permitting such bonuses to
be fully deductible as "performance-based compensation" (as that term is used
under Section 162(m) of the Internal Revenue Code (the "Code")). No bonuses may
be paid under the Cash Bonus Plan unless and until it has been approved by the
Company's shareholders.
The design and administration of the Cash Bonus Plan are intended to
cause all taxable compensation attributable to the Cash Bonus Plan to be treated
as "performance-based compensation." As a consequence, the provisions of the
Code 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 Cash Bonus Plan. The Cash Bonus Plan is
administered by the Human Resources and Compensation Committee of the Board (or
such other committee consisting exclusively of two or more "outside directors"
as may be designated to act in that capacity by the Board from time to time).
This administrative committee for the Cash Bonus Plan is referred to in this
Proposal Three as the "Committee."
The provisions of the Cash Bonus Plan are generally described below.
Eligibility. Participants in the Cash Bonus Plan are those key
executives who are designated by the Committee to participate in the Plan from
time to time.
Shareholder approval and term of Cash Bonus Plan. The Cash Bonus Plan is
in effect as of February 1, 2004, provided it is approved by the shareholders,
and will continue until it is terminated by the Board. The Cash Bonus Plan may
be submitted for reapproval by the shareholders from time to time, and should be
so reapproved no later than the shareholders' meeting that occurs in the fifth
year following its last shareholder approval in order to remain qualified as a
"performance-based" compensation arrangement for purposes of the Code rules
regarding executive compensation referred to above.
Benefits under the Cash Bonus Plan. In general, the benefits under the
Cash Bonus Plan consist of a cash bonus payable to participants provided the
performance goals established by the
11
Committee are met (and if met, the extent to which they are met). The maximum
amount that can be paid to any one participant as a bonus under the Cash Bonus
Plan with respect to any one year is two times his or her base salary in effect
for the relevant year, and in no event may any such bonus exceed $1,500,000.
The bases for such performance goals may include any of the following
considerations, or combinations of such criteria: stock price, market share,
gross sales, gross revenues, net revenues, pretax income, operating income, cash
flow, earnings per share, return on equity, return on invested capital or
assets, cost reductions and savings, return on revenues or productivity, or any
variation or combination of these. In addition, the Committee may establish as
an additional performance measure the attainment by a participant in the Cash
Bonus Plan of one or more personal objectives and/or goals that the Committee
deems appropriate, including, but not limited to, implementation of Company
policies, negotiation of significant corporate transactions, development of
long-term business goals or strategic plans for the Company, or the exercise of
specific areas of managerial responsibility.
In all cases, measurement of the Company's competitors.
Mr. Gleim,or a non-employee director, rendered consulting servicesparticipant's achievement
of one or more performance goals must be objectively determinable and where
applicable, determined in accordance with generally accepted accounting
principles. In all cases, the performance goals for a year must be established
no later than 90 days after the beginning of the year. The achievement of
performance goals established under the Cash Bonus Plan must be certified by the
Committee before any bonus may be paid.
Administration of the Cash Bonus Plan. The Cash Bonus Plan is
administered by the Committee which, as noted above, 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 Cash Bonus Plan will be determined by the Committee, and all such
determinations are final and conclusive.
Amendment and termination of the Cash Bonus Plan. The Bon-Ton during 2002Board may
terminate or revoke the Cash Bonus Plan at any time and may amend the Cash Bonus
Plan from time to time, provided that neither the termination, revocation or
amendment of the Cash Bonus Plan may, without the written approval of the
participant, reduce the benefit to which the participant would otherwise be
entitled, and provided further that no changes that would increase the benefit
available will be effective without approval by the Committee and without
disclosure to and approval by the shareholders in a separate vote prior to the
date the participant would become entitled to such increased benefit. In
addition, the Cash Bonus Plan may be modified or amended by the 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 to the million dollar cap,
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.
Bonuses payable under the Cash Bonus Plan are intended to be provided
only on the attainment of the performance goals established by the Committee for
the year for which he was paid $73,850.
8the bonus is paid. Assuming the Cash Bonus 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
12
set forth therein, the taxable compensation payable under the Cash Bonus Plan
should qualify as "performance-based compensation" that is exempt from the
million dollar cap.
New Plan Benefits. The following table sets forth the maximum benefits
in the current fiscal year that may be received by participants under the Cash
Bonus Plan if it is approved.
NAME AND POSITION DOLLAR VALUE
- --------------------------------------------------------------------------
Tim Grumbacher
Chairman and Chief Executive Officer $975,000
Byron L. Bergren
Vice Chairman and President and Chief Executive Officer of
Elder-Beerman $825,000
James H. Baireuther
Vice Chairman, Chief Administrative Officer and Chief
Financial Officer $600,000
The Board of Directors adopted the Cash Bonus Plan, as described above,
on May 25, 2004. Approval of the Cash Bonus 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
VOTING "FOR" APPROVAL OF
THE BON-TON STORES, INC. CASH BONUS PLAN.
PROPOSAL TWOFOUR
APPROVAL OF THE AMENDMENT OFTO THE
BON-TON STORES, INC. 2000 STOCK INCENTIVE PLAN
The Bon-Ton Stores, Inc. 2000 Stock Inventive Plan (the "Plan""Stock Incentive
Plan") was adopted by the Board of Directors and approved by the Company's
shareholders in June 2000. The purpose of the Stock Incentive Plan is to
recognize the contributions made to the Company by its employees, consultants
and advisors, to provide these individuals with additional incentives to devote
themselves to the future success of the Company, and to improve the ability of
the Company to attract, retain and motivate individuals upon whom the sustained
growth and financial success of the Company depends.
The Stock Incentive Plan provides for the grant of options ("Options") to
purchase shares of common stock and awards ("Awards") of shares of common stock
subject to risk of forfeiture ("Restricted Shares"). Under the Stock Incentive
Plan, as amended to date, Options and Awards
presently can be granted for up to an
aggregate of 400,0001,900,000 shares (exclusive of shares granted and thereafter
cancelled). In addition, the Stock Incentive Plan limits the number of shares
for which options may be granted to any single optionee in any fiscal year. The
Stock Incentive Plan has been amended by the Board of Directors to increase this
annual limitation on option grants to any single optionee, at the recommendation
of the Human Resources and Compensation Committee, has amended
the Plan,from 200,000 shares to
400,000 shares, subject to shareholderthe approval to increaseof the amendment by 1,500,000 the number
of shares available to an aggregate of 1,900,000 shares (the "Plan Amendment").
As of April 4, 2003, an aggregate of 300,000 shares of common stock
remain reserved for issuance under the Plan.Company's
shareholders.
The Board believes that the
availability of an adequate number of sharesthis increase in the share reserve of the Plan ismaximum option grant may be
an important factor in attracting, motivating and retaining qualified employees
and advisors who are essential to the success of the Company.
The Board increased the share reserve under theNew Plan to a total of
1,900,000 shares in contemplation of using these shares to grant options over
the next few years. In light of historical usage and expected future grants, we
expect that the increase will be adequate to meet these foreseeable
requirements.Benefits. Future Options and Awards, if any, that will be made
to eligible participants in the Stock Incentive Plan are subject to the
discretion of the Human Resources and Compensation Committee and, therefore, are
not determinable at this time.
13
The key provisions of the Stock Incentive Plan, as proposed to be amended, are as
follows:
Number of Shares. The maximum number of shares that may be issued under
the Stock Incentive Plan is 1,900,000. The maximum number of shares will be
adjusted to reflect certain changes in the Company's capitalization. If any
shares subject to any Option or Award are forfeited, or an Option is terminated
without the issuance of shares, the shares subject to such Option or Award will
again be available pursuant to the Stock Incentive Plan. The closing sales price
for a share of common stock on May 2, 200326, 2004 was $4.35$11.90 as reported by the Nasdaq
Stock Market.
Administration. The Stock Incentive Plan is administered by the Board of
Directors, or, at the discretion of the Board of Directors, by a committee
composed of two or more members of the Board of Directors (for purposes of this
Proposal Two,Four, the "Committee"). To the extent possible, and to the extent the
Board of Directors deems it necessary or appropriate, each member of the
Committee shall be a "Non-Employee Director" (as such term is defined in Rule
16b-3 under the Securities Exchange Act) and an "Outside Director" (as such term
is defined in
Treasury Regulationsused for purposes of Code Section 1.162-27 under the Internal Revenue Code (the
"Code"162(m))); however, the. The Board also may choose to
designate two committeesmore than one committee to operate and administer the Plan in its stead.Stock Incentive
Plan. The Stock Incentive Plan presently is administered by the Human Resources
and Compensation Committee.
Eligibility. All employees (including all executive officers),
directors, consultants and advisors of the Company or its subsidiaries and
affiliates are eligible to receive Options or Awards under the Stock Incentive
Plan.
9
Term of the Stock Incentive Plan. The Stock Incentive Plan became
effective March 3, 2000 and provides that no Options or Awards may be granted
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, subject to the provisions of the
Stock Incentive Plan, determine the terms and conditions of each Option or
Award.
Options. Options granted under the Stock Incentive Plan 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 Code. Unless an Option is specifically designated at the time of
grant as an ISO, Options are non-qualified options. Options are not transferrabletransferable
by the optionee except by will or by the laws of descent and distribution.distribution,
except for certain transfers of nonqualified stock options that may be required
under the terms of a "qualified domestic relations order" (generally, a court
order relating to provision of spousal or dependent support or to division of
marital property that meets certain requirements set forth in the Code). No
Option granted under the Stock Incentive Plan may be exercised unless at least
six months has 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 must be at least 100% of the fair
market value of a share of common stock on the date the Option is granted, or at
least 110% of the fair market value if the recipient owns shares possessing more
than 10% of the total 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 time of grant, of the shares with respect to
which an ISO is exercisable for the first time by the recipient during any
calendar year (under all incentive stock option plans of the Company) may not
exceed $100,000.
Maximum Grants. The Stock Incentive Plan provides that the maximum
number of shares for which options may be granted to any single optionee in any
fiscal year is 200,000400,000 shares.
14
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 the date
of grant of an ISO if the recipient owns shares possessing more than
10% of the total combined voting power of all classes of stock of the
Company;
b. The expiration of 90 days from the date the optionee's employment or
service with the Company terminates for any reason other than
disability (as defined in the Code) or death or as otherwise
specified in subparagraphs d. or e. below;
c. The expiration of one year from the date the optionee's employment or
service with the Company terminates due to the optionee's death or
disability;
d. A finding by the Committee that the optionee has breached his or her
employment contract with the Company or has engaged in disloyalty to
the Company; or
e. Such time as the Committee may determine if there is a Change of
Control of the Company as defined in the Stock Incentive Plan.
Payment for Options. An optionee may pay for shares in cash, certified
check or such other mode of payment as the Committee may approve, including
payment in shares held by the optionee for at least six months.
Awards. The Committee will determine the period, which under the Stock
Incentive Plan must extend for at least six months from the date of grant,
during which the grantee may not sell, transfer, pledge or assign Restricted
Shares (the "Restrictions"). 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 grantees have with respect to Restricted Shares, including the right to
vote Restricted Shares and the right to receive dividends paid with respect to
Restricted Shares. In the event a grantee terminates employment with the 10
Company
for any reason other than death or disability, all Restricted Shares remaining
subject to Restrictions will be forfeited by the grantee and canceled by the
Company.
Provisions Relating to a Change of Control of the
Company. Notwithstanding any other provision of the Stock Incentive Plan, in
the event of a Change of Control of the Company, the Committee may take whatever
action with respect to Options and Awards outstanding as 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 outstanding Awards.
A "Change of Control" will occur if: (a) the Company is dissolved or
liquidated; (b) an agreement to sell or dispose of substantially all of the
assets of the Company is approved; (c) subject to certain exceptions, an
agreement to merge or consolidate the Company with or into another corporation
is approved; (d) any entity, person or group (within the meaning of certain
provisions of the Securities Exchange Act), other than Tim 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 of the Company
representing more than 50% of the voting power of the Company's outstanding
voting stock; or (e) directors constituting a majority of the Board of Directors
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 of Directors may amend the Stock
Incentive Plan at any time, provided the Board may not (a) change the class of
individuals eligible to receive an
15
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 optionee
or grantee.
Federal Income Tax Consequences. The following discussion is a summary
of certain federal income tax consequences of the issuance of Options and the
acquisition of shares of common stock by exercising Options or receiving Awards
of Restricted Shares under the Stock Incentive Plan and does not present a
complete analysis of all tax consequences which may be relevant to any
particular recipient. It does not purport to discuss state or local income tax
laws.
(a) Options.Options:
With respect to ISOs, for federal income tax purposes, an optionee will
not have taxable income upon grant or exercise. However, upon exercise of an
ISO, an optionee will generally recognize income for alternative minimum tax
purposes in an amount equal to the difference between the exercise price of the
ISO and the fair market value of the shares received. Any gain realized on sale
of the shares acquired upon exercise of an ISO will be treated as long-term
capital gain, provided the optionee does not dispose of the shares for at least
two years after the date of grant or within one year after the date of exercise.
No gain or loss will generally be recognized by an optionee upon, nor will any
deduction be allowed to the Company as a result of, the grant or exercise of
ISOs.
In general, in the case of non-qualified stock options or ISOs as to
which the foregoing holding period limitations have not been satisfied, an
optionee will have taxable income at ordinary income rates upon exercise (or at
the time of a sale of ISO stock which does not satisfy the holding periods) for
the difference between the exercise price and the fair market value at the date
of exercise or, if the optionee is subject to certain restrictions imposed by
federal securities laws, upon the lapse of those restrictions, unless the
optionee 11
elects under Section 83(b) of the Code within 30 days after exercise to
be taxed upon exercise).exercise. The amount of that difference will generally be a
deductible expense to the Company.
The ability of the Company to deduct compensation expense is generally
subject to limitations under Section 162(m) of the Code (applicable to
compensation in excess of $1,000,000 paid to certain "covered" employees). Any
income recognized as ordinary compensation income on the exercise of a
non-qualified stock option should, however, be exempt from these Code
limitations as "performance-based" compensation provided the option grant meets
certain requirements. It is the Company's intention to administer the Stock
Incentive Plan in accordance with all applicable "performance-based"
compensation requirements, including administration of the Stock Incentive Plan
with respect to "covered" employees by a committee of two or more "outside"
directors (as that term is used in applicable IRS regulations) and to make
Option grants to such employees with an exercise price that is at least equal to
the fair market value of the shares on the date of grant. Under these
circumstances, such Options should, on exercise, result in a deductible
compensation expense that is exempt from Section 162(m) of the Code as
"performance-based" compensation.
(b) Restricted Shares.Shares:
For federal income tax purposes, 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 risk of forfeiture and
are not transferable. When the risk of forfeiture and non-transferability
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
16
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 this election is made, any appreciation in value
recognized by the Award recipient on a subsequent disposition of the Restricted
Shares will in general be taxed at capital gains rates and not as ordinary
income. If, however, an Award recipient who makes a Section 83(b) election
forfeits the Restricted Shares back 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 Board of Directors approved the above described amendment to the
Stock Incentive Plan Amendment on March 18, 2003.May 25, 2004. Approval of the amendment to the Stock
Incentive Plan Amendment 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
VOTING "FOR" APPROVAL OF THE AMENDMENT OFTO
THE BON-TON STORES, INC. 2000 STOCK INCENTIVE PLAN
12
PROPOSAL THREE
RATIFICATION OF THE APPOINTMENT
OF THE INDEPENDENT AUDITOR
Subject to shareholder ratification, the Audit Committee has reappointed
KPMG LLP, which served as our independent auditor in 2002, to serve as our
independent auditor for 2003. If the shareholders do not ratify this
appointment, another independent auditor will be considered by the Audit
Committee.
A representative of KPMG LLP is expected to be present at the meeting,
will have the opportunity to make a statement if he or she so desires, and be
available to respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS
VOTING "FOR" RATIFICATION OF THE APPOINTMENT
OF THE INDEPENDENT AUDITOR
13PLAN.
17
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
This table sets forth, for the last three years, certain information
regarding the compensation paid or accrued to each offor our Chief Executive Officer and
for the named executives:
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------------------- -------------------------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($)(1) OPTIONS(#) COMPENSATION($)(2)
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Tim Grumbacher 2003 625,000 817,500 -- -- 11,425
Chairman of the 2002 558,654 270,000 -- -- -- 11,068
ChairmanBoard of theDirectors and 2001 241,346 75,000 -- -- 8,258
Chief Executive Officer
Frank Tworecke(3) 2003 532,644 300,000 121,589 -- 8,258
Board of Directors24,163
President and 2000 278,8462002 471,021 175,000 -- -- 108,089
Chief Operating Officer 2001 461,095 60,000 75,000 -- 133,209
Byron L. Bergren(4) 2003 148,741 878,750 -- -- 1,413
Vice Chairman and 2002 -- -- -- -- 9,302--
President and Chief Executive Officer
Frank Tworecke 2002 471,021 175,000 10,0002001 -- -- 108,089(3)
President and 2001 461,095 60,000 19,046 75,000 -- 133,209
Chief Operating Officer 2000 484,754 75,000 10,000 -- -- 134,595--
Officer of Elder-Beerman
James H. Baireuther 2003 402,300 210,000 -- -- 13,927
Vice Chairman, Chief 2002 410,737 147,000 9,500 -- -- 13,378
Vice Chairman, ChiefAdministrative Officer 2001 315,113 50,000 6,200 127,500 100,000 9,922
Administrative Officer 2000 319,115 30,000 -- -- -- 9,724
and Chief Financial Officer
John S. Farrell 2002 244,650 61,000William T. Harmon 2003 271,663 53,200 -- -- -- 10,83511,427
Senior Vice President -- 2001 231,843 15,951 -- 65,000 -- 9,201
Stores 2000 213,694 11,482 -- -- -- 8,260
William T. Harmon 2002 249,853 43,000 6,200 -- -- 11,028
Senior Vice President --Marketing, Planning 2001 241,185 10,000 6,200 -- -- 8,469
Marketing, Planning 2000 244,069 10,000 6,200 -- -- 9,245
and Allocation
(1) The total number of restricted stock awards held by the named executives at
the end of 20022003 was 97,66688,814 shares. The closing price of the common stock on
February 1, 2003January 31, 2004 was $4.14$12.34 per share, giving the named executives
restricted stock holdings a value of $404,337$1,095,965 at year end. RestrictedOne-third of
the restricted stock awarded to Mr. Tworecke in 2003 vested on March 17,
2004; the named executives vests in equal installments onremainder of these shares were cancelled as a result of his
resignation from the third, fourth and
fifth anniversary of the date of award.Company. Holders of restricted stock are entitled to
the same dividend that the Company pays on common stock.
(2) The amounts disclosed in this column for 2002 include2003 consist of life insurance
premiums, or reimbursement for life insurance premiums, and Company
contributions under the Company's Profit Sharing/Retirement Savings Plan in
the amount of $10,474$10,831 for each of Messrs. Grumbacher, Tworecke, Baireuther
and Harmon and
$9,545 for Mr. Farrell, and life insurance premiums in the amounts of $594
for Mr. Grumbacher, $2,903 for Mr. Baireuther, $2,815 forHarmon.
(3) Mr. Tworecke $1,290 for Mr. Farrell and $554 for Mr. Harmon.
(3) Includes $84,800 of payments made byresigned from the Company toeffective May 7, 2004.
(4) Mr. Tworecke pursuant toBergren became an executive officer of the loan repayment provisions of his employment contract and $10,000 to
reimburse Mr. Tworecke for life insurance premiums.Company in November 2003.
STOCK OPTION GRANTS
None of the named executives received a stock option grant during 2002.2003.
We do not have any plan pursuant to which stock appreciation rights may be
granted.
1418
STOCK OPTION EXERCISES AND HOLDINGS
None of the named executives exercised any stock options during 2002.2003.
The following table shows the number and value of unexercised stock
options for the named executives at the end of 2002:2003:
OPTION VALUES AT FEBRUARY 1, 2003JANUARY 31, 2004
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FEBRUARY 1, 2003JANUARY 31, 2004 AT FEBRUARY 1, 2003(1)JANUARY 31, 2004(1)
--------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Tim Grumbacher 44,550 -- --$ 252,522 --
Frank Tworecke 200,000 -- 1,324,240 --
Byron L. Bergren -- -- -- --
James H. Baireuther 63,334 66,666 $58,335 $116,666
John S. Farrell 3,000 -- -- --96,667 33,333 782,637 $331,663
William T. Harmon 25,000 -- --116,800 --
(1) In-the-money options are options having an exercise price below $4.14, the year-end
share price.price of $12.34. Value is calculated by multiplying the difference
between the option exercise price and $4.14$12.34 by the number of shares
underlying the option.
EMPLOYMENT AGREEMENTS
Tim Grumbacher
The Human Resources and Compensation Committee (the "Compensation
Committee""Committee") and Tim
Grumbacher reachedagreed to an understandingarrangement pursuant to which Mr. Grumbacher's base
salary for 20022003 was fixed at $550,000.$650,000. In addition, he was eligible for an
annual bonus of up to 100% of his base salary. During 2003, Mr.
Grumbacher's base salary has been fixed at $650,000, and his bonus maximum at
150% of his base salary.salary and was awarded a special bonus in
the amount of $330,000 as a result of his leadership in connection with the
acquisition of Elder-Beerman. The total bonus paid to Mr. Grumbacher is
reflected in the Summary Compensation Table.
Frank Tworecke
Mr. Tworecke's employment agreement commenced November 11, 1999 and
continuescontinued to January 29, 2005. During 2002, itIt provided for a minimum annual base salary of
$475,000$500,000 during 2003, and a bonus in accordance with criteria established by the
Compensation Committee up to a maximum bonus of 75% of his base salary.
During 2003, Mr. Tworecke's minimum annual base salary is $500,000, and his
bonus maximum is 100% 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.
Pursuant to the terms of his employment agreement, the Company made a
$160,000 loanThe bonus paid to
Mr. Tworecke for 2003 is reflected in 1999. This loan bore interest at 5.57% per
annum and was repayable in 36 equal installments.the Summary Compensation Table. Mr.
Tworecke receivedresigned from the Company effective May 7, 2004.
Byron L. Bergren
Mr. Bergren's employment agreement with the Company was entered into
November 25, 2003 and continued until April 15, 2004. He is continuing his
employment with the Company in accordance with the terms and provisions of this
expired employment agreement. During 2003, the employment agreement provided for
a monthly payment during the termminimum annual base salary of the loan that, in net amount after tax, was
equivalent$550,000, a bonus pursuant to the monthly loan balance due. This loan wasElder-Beerman
2003 Performance Incentive Plan, and an additional integration bonus if
Elder-Beerman achieved a certain operating profit for 2003. The bonus paid Mr.
Bergren is reflected in full in 2002.the Summary Compensation Table.
James H. Baireuther
Mr. Baireuther's employment agreement commenced February 3, 2002 and
continues to January 31, 2004.2006. During 2002,2003, it provided for a minimum base
salary of $400,000 and a bonus in accordance with criteria established by the
Compensation Committee up to a maximum bonus of 75% of his base
19
salary. During
2003,The bonus paid to Mr. Baireuther's minimum base salaryBaireuther is $400,000, and his bonus maximum is
80% of his base salary.reflected in the Summary
Compensation Table. If Mr. Baireuther is discharged without cause or resigns for
good reason (each as defined in the employment agreement), he will continue to
receive his
15
base salary and other benefits for the greater of one year or the
remaining term of the employment agreement.
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 an annual retirement benefit if he remains employed by the Company
for a stated period, and, in certain instances, with an increase in this annual
benefit for each full year thereafter that the participant remains so employed,
subject to a maximum annual benefit.
The table below reflects the benefits available underperiod.
Under this plan, for the
named executives who are participants in this plan:
ANNUAL ANNUAL INCREASE MAXIMUM ANNUAL
PARTICIPANT BENEFIT IF EMPLOYED THROUGH THEREAFTER BENEFIT
- ----------------------------------------------------------------------------------------------
James H. Baireuther $50,000 February 1, 2005 -- --
John S. Farrell 10,000 March 4, 2006 -- --
Frank Tworecke 50,000 November 10, 2004 $15,000 $125,000
James H. Baireuther is entitled to an annual retirement
benefit of $50,000.
EXECUTIVE SEVERANCE
We have entered into severance agreements with Mr. Harmon and certain of
our other executive officers other than Messrs. Grumbacher, Baireuther and Tworecke,Bergren,
which generally provide for payment of one year's base salary if the executive
officer is terminated without cause (as defined in such agreement).
EQUITY COMPENSATION PLAN INFORMATION
At February 1, 2003,January 31, 2004, the Amended and Restated 1991 Stock Option and
Restricted Stock Plan, The Bon-Ton Stores, Inc. 2000 Stock Incentive Plan and
the Company's Phantom Equity Replacement Plan were in effect. Each of these
plans has been approved by the shareholders. There were no other equity
compensation plans in effect. The following information concerning these plans
is as of February 1, 2003:January 31, 2004:
NUMBER OF SECURITIESSHARES NUMBER OF SECURITIESSHARES
OF COMMON STOCK OF COMMON STOCK
TO BE ISSUED UPON WEIGHTED-AVERAGE REMAINING AVAILABLE FOR FUTURE
EXERCISE OF EXERCISE PRICE OF ISSUANCE (EXCLUDING SECURITIES
PLAN CATEGORY OUTSTANDING OPTIONS OUTSTANDING OPTIONS REFLECTED IN THE FIRST COLUMN)
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans 849,542 shares $5.71 1,755,186 shares
approved by security
holders
941,446 $5.82 300,000
Equity compensation plans not approved by security
holdersNot applicable Not applicable Not applicable
Not applicablenot approved by security
holders
1620
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
cumulative total shareholder return on common stock from February 1, 1998January 31, 1999
through February 1, 2003,January 31, 2004, 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
February 1, 1998January 31, 1999, in the Company's common stock and in each of the foregoing
indices and assumes the reinvestment of any dividends.
[STOCK PERFORMANCE GRAPH]
- -------------------------------------------------------------------------------------------------------------------------
NASDAQ
DATE NASDAQ RETAIL BON-TON
- -------------------------------------------------------------------------------------------------------------------------
1/31/9830/99 100.00 100.00 100.00
1/30/99 155.84 121.79 56.25
1/29/00 235.28 99.88 25.89150.97 82.01 46.03
2/3/01 163.88 74.89 22.32105.16 61.49 39.68
2/2/02 118.53 89.91 17.8676.06 73.83 31.75
2/1/01/03 82.80 73.27 29.5753.13 60.16 52.57
1/31/04 82.60 88.20 157.96
- -------------------------------------------------------------------------------------------------------------------------
REPORT ON EXECUTIVE COMPENSATION
The Human Resources and Compensation Committee (the "Compensation
Committee""Committee"), which
consistsis composed entirely of only non-employeeindependent directors, approves all general policies
affecting the compensation of The Bon-Ton's executive officers. The Compensation Committee
determinesdetermined, within limits established by applicable employment agreements, the
compensation of Tim Grumbacher, Chairman of the Board and Chief Executive
Officer, Frank Tworecke, President and Chief Operating Officer, Byron L.
Bergren, Vice Chairman and President and Chief Executive Officer of
Elder-Beerman, and James H. Baireuther, Vice Chairman, Chief Administrative
Officer and Chief Financial 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.
17
Officer.
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, restricted stock and
restricted stock.21
supplemental retirement benefits. The Compensation Committee seeks to achieve a mix of these
to properly compensatebe competitive in the marketplace and to attract, retain 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.
ANNUAL COMPENSATION -- SALARY AND BONUS
Annual compensation is comprised of a base salary and a possible bonus.cash bonus based
on the achievement of predetermined goals and objectives. The base salaries of
James H. Baireuther, Byron L. Bergren and Frank Tworecke for 20022003 were
established pursuant to employment agreements executed in prior years which had
been approved by the Compensation Committee. The
base salaries for these executives were 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 an evaluation of the importance of the executiveeach executive's
capacity to The Bon-Ton. The base salaries of the remainder ofaffect 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 believes it appropriate that a portion 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. The bonus for 20022003 earned
by each of the named executives is indicated in the Summary Compensation Table.Table
and was determined based upon predetermined performance targets for the Company.
The Committee utilizes comparative data developed by independent external
compensation specialists to assure the competitiveness of compensation for the
named executives.
A cash bonus award or option grant to a named executive may, in addition,
be made at the discretion of the Compensation Committee without regard to whether any specified
criteria are met.for extraordinary achievement by the
named executive.
LONG-TERM INCENTIVES -- STOCK OPTIONS AND RESTRICTED SHARE AWARDS
The Compensation Committee administers The Bon-Ton Stores, Inc. 2000 Stock Incentive
Plan (the "Plan"), which provides for the grant of stock options and restricted
share 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 share awards generally vest over a number of
years. Any vested options are usually forfeited 90 days after termination of the
recipient's employment, and any unvested restricted share awards lapseare usually
forfeited upon termination of employment. Such options and awards, therefore,
are also intended to encourage recipients to remain in the employ of The Bon-Ton
over a substantial period of time.
ThereDuring 2003, there were no stockgrants of options orwith respect to 20,000 shares
and awards of 24,814 restricted shares made under the Plan. No option grants
were made to a named executive. The restricted share awards granted in 2002.award was to Frank
Tworecke.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Compensation Committee set the annual base salary at $550,000$650,000 for Tim Grumbacher
in 2002,2003, 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 thean evaluation of the importance of Mr. Grumbacher's services to
The Bon-Ton. Mr. Grumbacher also received a bonus of $270,000$487,500 based upon the Company's
performance in 2002.2003. Mr. Grumbacher was also awarded a special bonus in the
amount of $825,000 attributable to Mr. Grumbacher's leadership role in effecting
the accretive acquisition of The Elder-Beerman Stores Corp. This special bonus
is payable in two tranches, the first, in the amount of $330,000, is included in
the Summary Compensation Table, and the second in the amount of $495,000, will
be paid based upon the Company achieving certain specified integration synergies
during 2004. Mr. Grumbacher did not receive any stock options or restricted
share awards in 2002.
NO INSIDER PARTICIPATION2003.
22
INDEPENDENT COMMITTEE MEMBERS
No member of the Compensation Committee during 2002 was a former or current officer or employee of
the Company or any affiliate of the Company or received compensation from the
Company in any capacity other than as a director of the Company or as a member
of a Board committee. 18
Each member of the Committee is "independent" pursuant to
the listing standards of the Nasdaq Stock Market.
QUALIFYING EXECUTIVE COMPENSATION FOR DEDUCTIBILITY UNDER PROVISIONS OF THE
INTERNAL REVENUE CODE
TheSection 162(m) of 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. If any executive'sThe Committee currently intends to recommend
compensation exceeds that threshold,amounts and plans which meet the Compensation Committee will take such actions as are appropriate to qualify, to
the extent it determines such actions are in the best interests of the Company,
compensation paid to executivesrequirements for deductibility,
underand the Code. Nevertheless,Committee expects that Section 162(m) will not limit the Compensation Committee hasdeductibility
of any compensation expense 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.fiscal 2003.
Members of the Human Resources and Compensation Committee:
Robert C. Siegel,Shirley A. Dawe, Chair
Robert B. Bank
Shirley A. DawePhilip M. Browne (appointed March 2004)
Robert C. Siegel (served until March 2004)
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is comprised solely of independent directors, as
defined in the Marketplace Rules of the NASDAQ Stock Market, and it operates
under a written charter adopted by the Board of Directors, a copy of which is
attached to this proxy statement as Exhibit A. The Committee reviews and
assesses the adequacy of its charter on an annual basis.
The role of the Audit Committee is to assist the Board of Directors in
its general oversight of (i) the integrity of the Company's financial
statements, (ii) the Company's compliance with legal and regulatory
requirements, (iii) the qualifications and independence of the Company's
independent auditor, (iv) the performance of the independent auditor, and (v)
the Company's management of credit, liquidity and other financial and
operational risks; and to prepare this report. Management is responsible for the
preparation, presentation and integrity of the Company's financial statements,
accounting and financial reporting principles, and internal controls and
procedures designed to ensure compliance with accounting standards, applicable
laws and regulations. KPMG LLP, the company'sCompany's independent auditing firm, is
responsible for performing an independent audit of the consolidated financial
statements in accordance with generally accepted auditing standards. The
independent auditor has free access to the Audit Committee to discuss any matter
it deems appropriate.
The Audit Committee serves a board-level oversight role in which it
provides advice, counsel and direction to management and the independent auditor
on the basis of the information it receives, discussions with management and the
auditors and the experience of the Committee's members in business, financial
and accounting matters.
Among other matters, the Audit Committee monitors the activities and
performance of the Company's independent auditor, including the audit scope,
audit fees, auditor independence matters and the extent to which the independent
auditor may be retained to perform non-audit services. The Audit Committee has
ultimate authority and responsibility to select, evaluate and, when appropriate,
replace the Company's independent auditor. The Audit Committee also reviews the
results of the external audit work with regard to the adequacy and
appropriateness of the Company's financial, accounting and internal controls.
Management and independent auditor presentations to and discussions with the
Audit Committee also cover various topics and events that may have significant
financial impact or are the subject of discussions between management and the
independent auditor.
1923
The Committee has reviewed and discussed the audited consolidated
financial statements with management and the independent auditor; management
represented to the Committee that the Company's audited consolidated financial
statements were prepared in accordance with generally accepted accounting
principles; and the independent auditor represented that its presentations
included the matters required to be discussed with the independent auditorAudit Committee by
Statement on Auditing Standards No. 61, as amended, "Communication with Audit
Committees."
The Company's independent auditor also provided the Committee with the
written disclosures required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," and the Committee discussed
with the independent auditor that firm's independence.
Following the Committee's discussions with management and the independent
auditor, the Committee recommended that the Board of Directors include the
audited consolidated financial statements in the Annual Report on Form 10-K for
the fiscal year ended February 1, 2003.January 31, 2004.
Members of the Audit Committee:
Philip M. Browne, Chair
Robert B. Bank
Robert E. Salerno
INDEPENDENT AUDITOR'S FEES
During 2002 we retainedSubject to shareholder ratification, the Audit Committee has selected
KPMG LLP as the Company's independent auditor for 2004. KPMG served as the
Company's independent auditor in 2003. Representatives of KPMG are expected to
be present at the 2004 Annual Shareholders Meeting and during 2001 we retained Arthur
Andersen LLP,will have an opportunity
to providemake a statement if they desire to do so, and are expected to be available to
respond to appropriate questions.
In making its selection of KPMG, the Audit Committee considered whether
the non-audit services provided by KPMG are compatible with maintaining KPMG's
independence.
The following table shows the fees billed by KPMG for professional
services rendered to the Company in the following categories2003 and amounts:2002.
2003 2002 2001
- ---------------------------------------------------------------------------------
Audit Fees $642,000 $307,000 $243,400
Audit-Related Fees -- 129,600(1)--
Tax Fees 338,000(2) 62,000118,700 338,000
All Other Fees 23,000(3) 85,000(4)432,800(1) 23,000
(1) ServicesFees related to acquisition of Elder-Beerman.
The charter of the Audit Committee provides that the Audit Committee is
responsible for contract internalthe pre-approval of all audit pension benefit analysisservices and financing
analysis.
(2) Includes $250,000non-audit services to
be performed for cost segregation services with respectthe Company by its independent auditor. Subject to tax
treatmentthe
transition provisions of fixed assets.
(3) Consulting servicesapplicable law, the fees paid to the independent
auditor that are shown in connection with an information technology project.
(4) Services in connection with study of changes to corporate structure.the chart above for 2003 were pre-approved by the
Audit Committee. The Audit Committee also considered whethermay delegate to one of its members the
provisionauthority to grant such pre-approvals. The decisions of non-audit
services by KPMG LLP, our independent auditor, is compatible with maintaining
auditor independence.such member regarding
approvals shall be presented to the full Audit Committee at its next scheduled
meeting.
24
RELATIONSHIP WITH INDEPENDENT AUDITOR
Arthur Andersen LLP ("Andersen") was the Company's independent auditor at
the beginning of 2002. Effective June 13, 2002, the Company, upon recommendation
of the Audit Committee, dismissed Andersen and retained KPMG LLP as the
Company's independent auditor. Andersen's reports on the Company's financial
statements during the last two fiscal years ended February 2, 2002, did not contain
an adverse opinion or a disclaimer of opinion, and was not qualified or modified
as to uncertainty, audit scope, or accounting principles. Further, during the
Company's two most
recent fiscal years ended February 2, 2002, there were no disagreements with
Andersen on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Andersen, would have caused it to make a
reference to the subject matter of the disagreement in connection with its
report.
20
KPMG LLP audited our 2002 financial statements.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Executive officers, directors and persons who own more than 10% of the
Company's common stock are required to file reports of their holdings and
transactions in Company stock with the Securities and Exchange Commission. Based
on our records and on written representations from those who are subject to
these requirements, we believe that all 20022003 filing requirements were timely
made except that William T. Harmon(i) Frank Tworecke filed a Form 4 nine days late with respect
to a restricted stock grant, and (ii) Tim Grumbacher filed a Form 4 twelve days
late with respect to the purchasesale of 1,4403,050 shares of common stock 30 days late.by certain trusts
of which Mr. Grumbacher's wife is a trustee.
CERTAIN TRANSACTIONS
The Company leases its Oil City, Pennsylvania store from Nancy T.
Grumbacher, Trustee of the 2002 Indenture of Trust of M. Thomas Grumbacher,
pursuant to a lease entered into on January 1, 1981. The rental payments during
20022003 under this lease were $223,500. The Oil City lease terminates on July 31,
2006 and the Company has five five-year renewal options.
In connection with the acquisition of Elder-Beerman, the Company obtained
equity financing in an aggregate amount of $6.5 million from Tim Grumbacher, the
Chairman and Chief Executive Officer of the Company, pursuant to a Stock
Purchase Agreement dated as of October 23, 2003 between the Company and Mr.
Grumbacher. Under the terms of the Stock Purchase Agreement, Mr. Grumbacher
purchased 476,890 newly issued shares of common stock. In connection with Mr.
Grumbacher's purchase of common stock pursuant to the Stock Purchase Agreement,
on October 31, 2003, the Company and Mr. Grumbacher also entered into a
Registration Rights Agreement with respect to such shares of common stock.
During fiscal 2002,2003, the Company purchased approximately $2,193,000$1,424,000 of
merchandise from OshKosh B'Gosh, Inc., and approximately $811,000$540,000 of merchandise
from The Pfaltzgraff Co., and The Elder-Beerman Stores Corp., which was acquired
by the Company in October 2003, purchased approximately $4,128,000$310,000 of merchandise
from Nautica Enterprises, Inc. Robert C. SiegelOshKosh and approximately $976,000 of merchandise from Pfaltzgraff. Shirley
A. Dawe, directorsa director of the Company, areis also directorsa director of OshKosh B'Gosh, Inc.,
and Marsha M. Everton, a director of the Company, is President and CEO of The
Pfaltzgraff Co., and Robert
B. Bank, a director of the Company, is a director of Nautica Enterprises, Inc. The transactions noted above were on substantially the same
terms as comparable transactions with other vendors of merchandise to the
Company.
Mr. Starr, a non-employee director, rendered consulting services to
Bon-Ton from 1984 to March 2002. Upon the conclusion of Mr. Starr's consulting
agreement, the Company commenced payments to Mr. Starr in the amount of $65,000
per year in consideration of his agreement not to provide consulting services to
any of the Company's competitors.
Mr. Gleim, a non-employee director, rendered consulting services to
Bon-Ton during 2003 for which he was paid $201,767. In addition, Mr. Gleim
received a $50,000 supplemental retire-
25
ment benefit during 2003 from the Company pursuant to the terms of Mr. Gleim's
employment agreement which were in effect when he served as Vice Chairman of the
Company.
SHAREHOLDER PROPOSALS
Shareholder proposals for the 20042005 Annual Meeting of Shareholders must be
received by the Company by January 10, 2004February 17, 2005 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 20042005 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 25, 2004,May 3, 2005, such proposal shall be deemed "untimely" for
purposes of Rule 14a-4(c) under the Securities Exchange Act and, therefore, the
Company will have the right to exercise discretionary voting authority with
respect to such proposal.
2126
EXHIBITANNEX A
THE BON-TON STORES, INC.
AUDIT COMMITTEE CHARTER
This Charter has been adopted by the Board of Directors (the "Board") of
The Bon-Ton Stores, Inc. (the "Company") to govern its Audit Committee (the
"Committee"), which shall have the authority, responsibility and specific powers
described below.
PURPOSES
The Committee shall be directly responsible for the appointment,
compensation and oversight over the Company's independent auditors (the
"Auditors").
The Committee shall monitor (1) the integrity of the financial statements
of the Company, (2) the Company's compliance with legal and regulatory
requirements, (3) the Auditors' qualifications and independence, (4) the
performance of the Company's internal audit function and (5) the performance of
the Auditors.
The Committee shall prepare the report required by the rules of the
Securities and Exchange Commission to be included in the Company's annual proxy
statement.
The Committee shall oversee the financial reporting processes of the
Company and the audits of the Company's financial statements.
ORGANIZATION
The Committee shall be composed of three or more directors who shallshall: (i)
meet the independence and experience requirements of the Nasdaq National Market
("Nasdaq"). and Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as
amended; (ii) not have participated in the preparation of the financial
statements of the Company or any current subsidiary of the Company at any time
during the past three years; and (iii) be able to read and understand
fundamental financial statements, including a company's balance sheet, income
statement and cash flow statement. At least one member of the Committee shall be
a "financialan "audit committee financial expert," as such term is defined by the applicable
regulations of the Securities and Exchange Commission ("SEC") and Nasdaq.shall meet any
applicable standards promulgated by Nasdaq related to enhanced financial
expertise applicable to at least one member of the Committee.
The members of the Committee shall be appointed and removed by the Board.
A member of the Committee shall be selected by the Board to serve as the
Committee's chairperson.
MEETINGS
The Committee shall meet at least quarterly, or more frequently as
circumstances dictate. The Committee shall meet at least annually with
management and the Auditors in separate executive sessions to discuss any
matters that the Committee or either of these groups believebelieves should be
discussed privately. In addition, the Committee will meet with the Auditors and
management to review the Company's financial statements as provided under the
sub-heading "Document Review" below. Minutes or other records of meetings and
activities of the Committee shall be maintained.
RESPONSIBILITIES
The Committee shall have the sole authority to appoint or replace determine funding for, and
oversee the Auditors, including the authority to resolve disagreements between
management and the Auditors regarding financial reporting. The Auditors shall
report directly to the Committee.
A-1
The Committee shall pre-approve (i)(1) all audit engagement fees and terms
and (ii)(2) all non-audit services provided by the Auditors which are not proscribed
by applicable law. The Committee may delegate pre-approval responsibilities to a
member of the Committee, and the decisions of any Committee member to whom
pre-approval authority is delegated must be presented to the full Committee at
each of its scheduled meetings.
The Committee shall, at least annually, obtain and review a report by the
Auditors describing the following: (1) the Auditors'Auditor's internal quality-control
procedures; (2) any material issues raised by the most recent internal
quality-control review, or peer review, of the Auditors, or by any
A-1
inquiry or
investigation by governmental or professional authorities, within the preceding
five years, respecting one or more independent audits carried out by the
Auditors, and any steps taken to deal with any such issues; and (3) in order to
assess the Auditors' independence, all relationships between the Auditors and
the Company.
The Committee shall have the authority to engage and determine funding
for outside legal, accounting or other consultants to advise the Committee and
shall, as appropriate, obtain advice and assistance from such advisors. The
Committee may request any officer or employee of the Company or the Company's
outside counsel or the Auditor to attend a meeting of the Committee or to meet
with any members of, or consultants to, the Committee.
The Committee shall have the authority to determine, and the Company
shall provide, appropriate funding for, (1) compensation to any registered
public accounting firm engaged for the purpose of preparing or issuing an audit
report or performing other audit, review or attest services for the Company and
(2) payment for the ordinary administrative expenses of the Audit Committee that
are necessary or appropriate for carrying out its duties.
The Committee shall make regular reports to the Board. The Committee
shall review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval. The Committee shall annually
review the Committee's own performance.
The Committee shall (1) discuss the annual audited financial statements
and quarterly financial statements with management and the Auditors, including
the Company's disclosures under "Management's Discussion and Analysis of
Financial Condition and Results of Operations;"Operations" included in reports filed with
the SEC; (2) discuss earnings press releases, as well as financial information
and earnings guidance provided to analysts and rating agencies; (3) discuss
policies with respect to risk assessment and risk management; (4) review with
the Auditors any audit problems or difficulties and management's response; and
(5) set clear hiring policies for the Company concerning employees or former
employees of the Auditors.
In carrying out its duties and responsibilities, the Committee, to the
extent it deems necessary or appropriate, will:
Document Review
1. Review with management and the Auditors the financial statements and
disclosures under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" to be included in the Company's Annual Report on Form
10-K (or the annual report to shareholders if distributed prior to the filing of
Form 10-K), including their judgment about the quality, not just the
acceptability, of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements. Also,
the Committee shall discuss the results of the annual audit and any other
matters required to be communicated to the Committee by the Auditors under
generally accepted auditing standards.
2. Review the interim financial statements and disclosures under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" with management and the Auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. Also, the Committee
A-2
shall discuss the results of the quarterly review and any other matters required
to be communicated to the Committee by the Auditors under generally accepted
auditing standards.
Auditors
3. Review the proposed scope of the audit, the proposed staffing of the
audit to ensure adequate coverage, as well as appropriate coverage consistent
with Sections 203 and 206 of the Sarbanes-Oxley Act of 2002, and the fees
proposed to be charged for such audit.
4. Select the Auditors, considering independence and effectiveness, and
approve the fees and other compensation to be paid the Auditors. On an annual
basis, the Committee should ensure receipt from the Auditors, and review, the
Auditors' formal written statement regardingdelineating all significant relationships between the
Auditors have withand the Company, to
determine the Auditors' independence.consistent with Independence Standards Board Standard
1. In addition, the Committee shall discussactively engage in dialogue with the
Auditors theirwith respect to any disclosed relationships or services that may impact
the objectivity and independence from managementof the Auditors and the Company andCommittee shall take,
or recommend that the matters included infull Board take, appropriate action to oversee the
written disclosures required byindependence of the Independence
Standards Board.
A-2
Auditors.
5. Review the performance of the Auditors and approve any proposed
discharge of the Auditors when circumstances warrant.
6. Discuss with the Auditors any communications with the Auditors'
national office respecting auditing or accounting issues presented by the
engagement.
7. Review and evaluate the lead partner on the audit team. Ensure the
rotation of the lead partner having primary responsibility for the audit and the
partner responsible for reviewing the audit.
8. Periodically consult with the Auditors, without management present,
regarding the Company's internal controls and the fullness and accuracy of the
Company's financial statements.
9. Receive and review regular reports from the Auditors with respect to:
- - the critical accounting policies and practices of the Company,
- - all alternative treatments of financial information within generally accepted
accounting principles that have been discussed with management, ramifications
of the use of such alternative disclosures and treatments, and the treatment
preferred by the Auditors, and
- - other material written communications between the Auditors and management,
such as any management letter or schedule of unadjusted differences.
Financial Reporting Processes
10. Review with the Auditors (i) the Company's financial and accounting
personnel, (ii) the adequacy and effectiveness of the accounting and financial
controls of the Company, and (iii) elicit any recommendations for the
improvement of such internal controls or particular areas where new or more
detailed controls or procedures are desirable.
11. Review management's assertion on its assessment of the effectiveness
of internal controls as of the end of the most recent fiscal year and the
Auditors' report on management's assertions.
12. Review reports from management on material weaknesses or
deficiencies in the design or operation of internal controls and on any fraud
that involves personnel having a significant role in the internal controls.
13. In consultation with the Auditors, review the integrity of the
financial reporting processes, both internal and external.
A-3
14. Consider the Auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
15. Inquire of management and the Auditors about significant risks or
exposures and assess the steps management has taken to minimize such risks to
the Company.
16. Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the Auditors or
management.
Process Improvement
17. Following completion of the annual audit, review separately with
management and with the Auditors any significant difficulties encountered during
the course of the audit, including any restrictions on the scope of the work or
access to required information.
18. Review any significant disagreement between management and the
Auditors in connection with the preparation of the financial statements.
A-3
19. Review with the Auditors 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
20. Review and approve all related-party transactions.
21. Review and update periodically the Company's Code of Ethical
Standards and Business Practices and the Company's Code of Conduct for Financial
Executives and ensure that management has established a
system to enforce such codes.code.
22. Review management's monitoring of the Company's compliance with such
codescode 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.
23. Review legal compliance matters, including corporate securities
trading policies, with Company counsel.
24. Review with Company counsel any legal matter that could have a
significant impact on the financial statements.
25. Review and update periodically the Company's procedures for the
receipt, retention, and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing matters, and the
confidential, anonymous submission by employees of the Company of concerns
regarding questionable accounting or audit matters.
26. Review annually the travel and entertainment expenses of the
Company's Chief Executive Officer and a summary of all other executive officers'
travel and entertainment expenses.
27. 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.
LIMITATION OF COMMITTEE'S ROLE
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statements and disclosures are complete
and accurate and are in accordance with generally accepted accounting principles
and applicable rules and regulations. These activities are the responsibility of
management and the Auditors.
A-4
ANNUAL MEETING OF STOCKHOLDERSSHAREHOLDERS OF
THE BON-TON STORES, INC.
JUNE 17, 2003JULY 21, 2004
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
--- Please detach along perforated line and mail in the envelope provided. --
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSALS 2 AND 3.THROUGH 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
1. Election of Directors:
NOMINEES:
[ ] FOR ALL NOMINEES [ ] Robert B. Bank
[ ] Philip M. Browne
[ ] WITHHOLD AUTHORITY [ ] Shirley A. Dawe
FOR ALL NOMINEES [ ] Marsha M. Everton
[ ] Michael L. Gleim
[ ] FOR ALL EXCEPT [ ] Tim Grumbacher
(See instructions below) [ ] Robert E. Salerno
[ ] FOR ALL NOMINEES O Tim Grumbacher
O Robert B. Bank
[ ] WITHHOLD AUTHORITY O Philip M. Browne
FOR ALL NOMINEES O Shirley A. Dawe
O Marsha M. Everton
[ ] FOR ALL EXCEPT O Samuel J. Gerson
(See instructions below) O Michael L. Gleim
O Robert E. Salerno
O Robert C. Siegel
O Leon D. Starr
O Thomas W. Wolf
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold, as shown here: (X)[X]
FOR AGAINST ABSTAIN
2. Ratification of appointment of KPMG LLP [ ] [ ] [ ]
as the Company's independent auditor.
3. Approval of The Bon-Ton Stores, Inc. [ ] [ ] [ ]
Cash Bonus Plan.
4. Approval of the Amendment to The [ ] [ ] [ ]
Bon-Ton Stores, Inc. 2000 Stock
Incentive Plan.
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that [ ]
changes to the registered name(s) on the account may not be submitted via
this method.
FOR AGAINST ABSTAIN
2. Amendment of The Bon-Ton Stores, Inc. 2000 Stock [ ] [ ] [ ]
Incentive Plan.
3. Ratification of appointment of KPMG LLP as the [ ] [ ] [ ]
Company's independent auditor.
Signature of StockholderShareholder Date:
---------------------------------- ----------------------------------------------- ---------------
Signature of StockholderShareholder Date:
---------------------------------- ----------------------------------------------- ---------------
NOTE: This proxy must be signedPlease sign exactly as theyour name appears hereon.or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate
name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
THE BON-TON STORES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of THE BON-TON-STORES, INC. (the "Company")
hereby appoints Tim Grumbacher and James H. Baireuther, 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 Heritage Hills Conference Center, 2700 Mount Rose Avenue,Bon-Ton's corporate office, 2801 E. Market Street, York,
PA 17402 on June 17, 2003,July 21, 2004, at 9:00 a.m., provided that said proxies are
authorized and directed to vote as indicated with respect to matters set forth
on the opposite side of this proxy.
UNLESS OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED "FOR" THE ELECTION OF ALL
NOMINATED DIRECTORS, "FOR" AMENDMENTRATIFICATION OF THE BON-TON STORES, INC. 2000 STOCK
INCENTIVE PLAN AND "FOR" RATIFICATION OF APPOINTMENT OF KPMG LLP AS THE
COMPANY'S INDEPENDENT AUDITOR.AUDITOR, "FOR" THE APPROVAL OF THE BON-TON STORES, INC.
CASH BONUS PLAN AND "FOR" APPROVAL OF THE AMENDMENT TO THE BON-TON STORES, INC.
2000 STOCK INCENTIVE PLAN. 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)
14475
ANNUAL MEETING OF STOCKHOLDERSSHAREHOLDERS OF
THE BON-TON STORES, INC.
JUNE 17, 2003JULY 21, 2004
PROXY VOTING INSTRUCTIONS
MAIL - Date, sign and mail your proxy card in the envelope provided as soon as
possible.
- OR -
TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) from any touch-tone
telephone and follow the instructions. Have your control number and proxy card available when you
call.
- OR -
INTERNET - Access "WWW.VOTEPROXY.COM" and follow the on-screen instructions.
Have your control numberproxy card available when you access the web page.
COMPANY NUMBER
--------------------------------------------
ACCOUNT NUMBER
--------------------------
CONTROL NUMBER
--------------------------
--------------------
------------------
YOU MAY ENTER YOUR VOTING INSTRUCTIONS AT 1-800-PROXIES OR WWW.VOTEPROXY.COM UP
UNTIL 11:59 PM EASTERN TIME THE DAY BEFORE THE CUT-OFF OR MEETING DATE.
- Please detach along perforated line and mail in the envelope provided -
IF you are not voting via telephone or the Internet. --
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSALS 2 AND 3.THROUGH 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE (x)
1. Election of Directors:[X]
NOMINEES:
Election of Directors
[ ] FOR ALL NOMINEES [ ] Robert B. Bank
[ ] Philip M. Browne
[ ] WITHHOLD AUTHORITY [ ] Shirley A. Dawe
FOR ALL NOMINEES [ ] Marsha M. Everton
[ ] Michael L. Gleim
[ ] FOR ALL EXCEPT [ ] Tim Grumbacher
(See instructions below) [ ] Robert E. Salerno
[ ] FOR ALL NOMINEES O Tim Grumbacher
O Robert B. Bank
[ ] WITHHOLD AUTHORITY O Philip M. Browne
FOR ALL NOMINEES O Shirley A. Dawe
O Marsha M. Everton
[ ] FOR ALL EXCEPT O Samuel J. Gerson
(See instructions below) O Michael L. Gleim
O Robert E. Salerno
O Robert C. Siegel
O Leon D. Starr
O Thomas W. Wolf
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold, as shown here: (X)[X]
FOR AGAINST ABSTAIN
2. Ratification of appointment of KPMG LLP [ ] [ ] [ ]
as the Company's independent auditor.
3. Approval of The Bon-Ton Stores, Inc. [ ] [ ] [ ]
Cash Bonus Plan.
4. Approval of the Amendment to The [ ] [ ] [ ]
Bon-Ton Stores, Inc. 2000 Stock
Incentive Plan.
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that [ ]
changes to the registered name(s) on the account may not be submitted via
this method.
[ ]
FOR AGAINST ABSTAIN
2. Amendment of The Bon-Ton Stores, Inc. 2000 Stock [ ] [ ] [ ]
Incentive Plan.
3. Ratification of appointment of KPMG LLP as the [ ] [ ] [ ]
Company's independent auditor.
Signature of StockholderShareholder Date:
---------------------------------- ----------------------------------------------- ---------------
Signature of StockholderShareholder Date:
---------------------------------- ----------------------------------------------- ---------------
NOTE: This proxy must be signedPlease sign exactly as theyour name appears hereon.or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate
name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.