SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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[X] Definitive Proxy Statement
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[_] Soliciting Material Pursuant to Section(S) 240.14a-11(c) or Section(S) 240.14a-12
The Bon-Ton Stores, Inc.
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SEC 1913 (3-99)
LOGO
THE BON-TON
YOUR FASHION STORE2801 East Market Street
York, PA 17402
May 15, 199814, 1999
Dear Shareholders:Shareholder:
You are cordially invited to attend theour Annual Meeting of Shareholders of
The Bon-Ton Stores, Inc., to be
held on Monday, June 15, 1998, at 9:00 a.m., on Tuesday, June 15, 1999, at the HolidayRamada Inn, 2600 East
Market Street, York, Pennsylvania. TheEnclosed is the official Noticenotice of Meeting, Proxy Statementmeeting,
the proxy statement, the proxy card and form of proxy are enclosed with this
letter. The matters listed in the Notice of Meeting are described in the
attached Proxy Statement.
Theour 1998 Annual Report.
Your vote of every shareholder is important. Even if you plan to attend the meeting, I encourage
you to promptly sign, date and return your proxy in the enclosed postage-paid envelope.
WeI hope to see you at the Annual Meeting of Shareholders.Meeting.
Sincerely,
/s/ Heywood Wilansky
Heywood Wilansky
President and
Chief Executive Officer
WHETHER OR NOT YOU INTEND TO BE AT THE MEETING,
PLEASE COMPLETE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ACCOMPANYING ENVELOPE. THIS WILL NOT
PREVENT YOU FROM VOTING AT THE MEETING.
THE BON-TON STORES, INC.
2801 EAST MARKET STREET
YORK,East Market Street
York, PA 17402
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of The Bon-Ton Stores, Inc. (the
"Company") will be held
on Monday,Tuesday, June 15, 1998,1999, at 9:00 a.m., at the HolidayRamada Inn, 2600 East Market
Street, York, Pennsylvania, for the following purposes:
1. To elect sevennine directors to hold office until the 1999 Annual
Meeting of Shareholders.for a one-year term;
2. To approve The Bon-Ton Stores, Inc. Five Year Cash Bonus Plan for
Heywood Wilansky.
3. To approve The Bon-Ton Stores, Inc. Performance Based Stock
Incentive Plan for Heywood Wilansky.
4. To ratify the appointment of Arthur Andersen LLP as the Company's
independent public
accountants for the 1998 fiscal year.
5.To1999; and
3. To transact such other business as may properly come before the
meeting.
ShareholdersYOUR BOARD OF DIRECTORS RECOMMENDS YOU VOTE IN FAVOR OF THE ELECTION OF
DIRECTORS AND THE APPOINTMENT OF ARTHUR ANDERSEN.
Only shareholders of record at the close of business on May 1, 1998April 30, 1999 are
entitled to notice of, and to vote at, the Annual Meeting.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made toDirectors. Please review the
attached proxy statement for further information with
respect toconcerning the business to be transacted at the
meeting.
You are cordially invited to attend the meeting in person.Annual Meeting.
ROBERT E. STERN
Vice President and
Corporate Secretary
York, Pennsylvania
May 15, 199814, 1999
WHETHER OR NOT YOU INTEND TO BE ATATTEND THE MEETING, PLEASE COMPLETE THE ENCLOSED
PROXY CARD AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE. THIS WILL NOT
PREVENT YOU FROM VOTING AT THE MEETING.
THE BON-TON STORES, INC.
----------------
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of
proxies by theThe Board of Directors (the "Board") of The Bon-Ton Stores, Inc. (the "Company")is providing this proxy
statement to solicit your proxy for use at the Company's Annual Meeting of
Shareholders which
will be held on the date, at the time and place, and for the purposes set
forth in the foregoing notice.Shareholders. This proxy statement, the foregoing notice of annual meeting, and the
enclosed proxy card are first being sent to shareholders on or about May 15,
1998.14,
1999.
The BoardCompany does not intend to bringanticipate that any matter beforematters will be raised at the
meeting except as
specifically indicatedother than those described in the notice and does not know of anyone else who
intends to do so.notice. If any other matters
properly come before the meeting, however, the persons named in the enclosedas your proxy or their duly constituted
substitutes, will be
authorized to vote or otherwise act thereon in accordance with their judgment on such matters.judgment.
When your proxy card is returned properly signed, prior to voting at the
meeting, theyour shares represented thereby will be voted
in accordance with the
instructions marked thereon.your instructions. If your proxy card is signed and
returned without specifying choices, the shares will be voted "FOR" the nominees of"for" the Board
in the election ofnominees for directors "FOR" approval of The Bon-Ton Stores, Inc. Five
Year Cash Bonus Plan for Heywood Wilansky, "FOR" approval of The Bon-Ton
Stores, Inc. Performance Based Incentive Plan for Heywood Wilansky, and "FOR""for" ratification of the appointment of Arthur
Andersen LLP as the Company's
independent public accountants for the 1998 fiscal year.
Any1999.
You may revoke your proxy may be revoked at any time prior to its exercise by notifying the Secretary
of the Company in writing, by delivering a dulyproperly executed, later-dated
proxy bearing a later date,card, or by attending the meeting and voting in person.person at the meeting.
References in this proxy statement to a year refer to the Company's fiscal
year, which is the 52 or 53 week period ending on the Saturday nearer January
31 of the following calendar year (e.g. a reference to 1998 is a reference to
the fiscal year ending January 30, 1999).
VOTING SECURITIES AND SECURITY OWNERSHIP
OUTSTANDING SHARES AND VOTING RIGHTSOutstanding Shares and Voting Rights
At the close of business on May 1, 1998,April 30, 1999, the record date fixed for the
determination of shareholders entitled to notice of and to vote at the
meeting, there were 12,003,71312,274,506 shares of the Company's Common Stock (the
"Common Stock") and 2,989,853 shares of
the Company's Class A Common Stock (the "Class("Class A Stock") outstanding. On each matter to be voted on, theThe Common Stock and the
Class A Stock will vote together andon all matters, provided that holders of Common
Stock and Class A Stock will beare entitled to one vote per share and holders of Class A Stock are
entitled to ten votes per share, respectively.share. There are no other classes of voting
securities outstanding. In the election of directors, shareholders entitled to vote willdo not have
cumulative voting rights.
The presence at the meeting, in person or by proxy, of persons entitled to
cast a majority of the votes which shareholders of Common Stock and Class A
Stock, (collectively, the "Common Shares"), voting together, are entitled to cast on each matter will constitute a
quorum as to such matter.
Other than thequorum.
The election of directors which requires a plurality of the votes cast each(that is,
the nominees receiving the greatest number of votes will be elected). Each
other matter to be submitted to the shareholders requires the
affirmative vote of a majority of the votes cast. For purposes of
determining the number of votes cast with respect toon any voting matter, only those cast "for" or
"against" are included. Abstentions and broker non-votes are counted only for purposes of determiningto
determine whether a quorum is present at the meeting. A broker "non-vote"
occurs when a nominee for a beneficial owner does not vote on a particular
matter because the nominee does not have discretionary voting power as to that
item and has not received voting instructions from the beneficial owner.
PRINCIPAL SHAREHOLDERS
The followingPrincipal Shareholders
This table sets forth, certain information as of May 1, 1998 (exceptApril 30, 1999, except as indicated below)otherwise noted,
information regarding holdings of each person known to the Company to be a beneficial owner of more than
5% of the Common Stock or Class A Stock. To the Company's knowledge, each
person named belowlisted has sole voting power and sole investment power with respect to
the shares indicated as beneficially owned
unless otherwise indicated.
CLASSClass A STOCK COMMON STOCK(1)Stock Common Stock(1)
-------------------- -----------------------------------------
Number of Number of
Name and Address Shares Percent Shares Percent
---------------- --------- ------- --------- -------
NAME AND ADDRESS NUMBER OF NUMBER OF
OF BENEFICIAL OWNER SHARES PERCENT SHARES PERCENT
------------------- --------- ------- --------- -------
M. Thomas Grumbacher................ 2,444,616(2) 81.8% 4,084,084(3) 34.0%2,951,490(2) 98.7% 4,894,447 (3) 32.1%
2801 East Market Street
York, PA 17402
David J. Kaufman.................... 545,237(4)T. Rowe Price Associates, Inc....... -- -- 1,571,400 (4) 12.8%
100 E. Pratt Street
Baltimore, MD 21202
Mellon Bank Corporation............. -- -- 1,096,300 (5) 8.9%
One Mellon Bank Center
Pittsburgh, PA 15258
Nancy T. Grumbacher................. 545,237(6) 18.2% 1,077,464(5) 9.0%1,077,464 (7) 8.4%
2801 E. Market Street
York, PA 17402
Henry F. Miller..................... 545,237(6) 18.2% 891,691 (8) 7.0%
111 South 15th Street
Philadelphia, PA 19102
Mary Jo Grumbacher.................. 545,237(4) 18.2% 966,741(6) 8.1%
174 11th Avenue
San Francisco, CA 94118
Brinson Holdings, Inc...............FMR Corp............................ -- -- 711,181(7) 5.9%
209 S. LaSalle862,500 (9) 7.0%
82 Devonshire Street
Chicago, IL 60604Boston, MA 02109
David R. Glyn....................... 545,237(6) 18.2% 866,741(10) 6.8%
111 South 15th Street
Philadelphia, PA 19102
The Prudential Insurance Company of
America............................ -- -- 805,600(11) 6.6%
751 Broad Street
Newark, NJ 07102-3777
Heywood Wilansky.................... -- -- 808,534(12) 6.5%
2801 East Market Street
York, PA 17402
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(1) Each share of Class A Stock is convertible at any time into one share of Common Stock.
Accordingly, the number of shares of Common Stock for anyeach person includes
the number of shares of Common Stock issuable upon conversion of all
shares of Class A Stock beneficially owned by such person. Also, in accordance with Rule 13d-3(d)(1) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), 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
Stock beneficially owned by such person.
(2) Includes 38,363 shares of Class A Stock held by a trust for the benefit of
a child of Mr. Grumbacher, of which Mr. Grumbacher is the sole trustee.
Does not include an aggregate of 545,237 shares of Class A Stock held by other trusts for the benefit of
Mr.M. Thomas Grumbacher's three children of which Nancy T. Grumbacher (Mr.
Grumbacher's wife), Henry F. Miller and David J. Kaufman and Mary Jo GrumbacherR. Glyn are the co-trustees.trustees.
Mr. Grumbacher disclaims beneficial ownership of all shares referred to in
this note.
(3) Includes 185,773 shares of Common Stock held by The Grumbacher Family
Foundation, a charitable foundation of which Mr.M. Thomas Grumbacher, Nancy
T. Grumbacher and David J. Kaufman are the directors. Also includes 40,915
shares of Common Stock held by a trust for the benefit of a child of Mr.
Grumbacher, of which Mr. Grumbacher is the sole trustee,directors, and 24,950 shares
of Common Stock held by trusts for the benefit of Mr. Grumbacher's three
children of which Mr. Grumbacher's spouse, Nancy T. Grumbacher, and David
J. Kaufman are the co-trustees. Does not include an aggregate of 545,237
shares of Class A Common Stock and 321,500 shares of Common Stock held by
other trusts for the benefit of Mr. Grumbacher's three children of which
David J. Kaufman and Mary Jo Grumbacher are the co-trustees. Mr.
Grumbacher disclaims beneficial ownership of all shares referred to in
this note.
(4) Consists of 545,237 shares
of Class A Stock held by trusts for the benefit of M. Thomas Grumbacher's
three children of which Nancy T. Grumbacher, Henry F. Miller and David J. Kaufman and
Mary Jo GrumbacherR. Glyn
are the co-trustees.trustees. Also includes 321,504 shares of Common Stock held by
trusts for the benefit of Mr. KaufmanGrumbacher's children of which
2
Nancy T. Grumbacher, Henry F. Miller and Mary JoDavid R. Glyn are the trustees,
and 24,950 shares of Common Stock held by other trusts for the benefit of
Mr. Grumbacher's children of which Nancy T. Grumbacher and Henry F. Miller
are the trustees. Mr. Grumbacher disclaims beneficial ownership of all
shares referred to above. Also includes options to purchase 22,900 shares.
(4) Based solely on a Schedule 13G dated February 12, 1999 filed with the SEC
by T. Rowe Price Associates, Inc. ("TRPA") and its affiliate. The Schedule
13G indicates that TRPA is the beneficial owner of, and has sole
dispositive power as to, all such shares, and has sole voting power as to
407,300 shares. TRPA's affiliate is the beneficial owner of, and has sole
voting power as to, 740,700 shares.
(5) Based solely on a Schedule 13G dated January 29, 1999 filed with the SEC
by Mellon Bank Corporation, the trustee of the Company's employee benefit
plan ("Mellon"), and two of its subsidiaries. The Schedule 13G indicates
that Mellon is the beneficial owner of all such shares, has sole voting
power as to 920,800 shares and has sole dispositive power as to 987,400
shares. Mellon shares dispositive power with such subsidiaries as to
108,900 shares. Each of such subsidiaries is the beneficial owner of
801,900 shares, has sole voting power as to 686,400 shares and has sole
dispositive power as to 693,000 shares.
(6) Consists of Class A Stock held by trusts for the benefit of M. Thomas
Grumbacher's children, of which Nancy T. Grumbacher, Henry F. Miller and
David R. Glyn are the trustees. Ms. Grumbacher, Mr. Miller and Mr. Glyn
each disclaim beneficial ownership of these shares.
(5) Includesall shares referred to in this note.
(7) Consists of 185,773 shares of Common Stock held by The Grumbacher Family
Foundation, a charitable foundation of which Nancy T. Grumbacher, M.
Thomas Grumbacher, Nancy
T. Grumbacher and David J. Kaufman are the
2
directors, and an aggregate
of 545,237 shares of Class A Common Stock and 321,500321,504 shares of Common Stock held
by trusts for the benefit of M. Thomas Grumbacher's three children, of which
Mr. KaufmanNancy T. Grumbacher, Henry F. Miller and Mary Jo GrumbacherDavid R. Glyn are the co-trustees,trustees,
and 24,950 shares of Common Stock held by trusts for the benefit of M.
Thomas Grumbacher's three children of which Ms. Grumbacher and Mr. Kaufman
and Nancy T. GrumbacherMiller are
the co-trustees. Mr. Kaufmantrustees. Ms. Grumbacher disclaims beneficial ownership of all shares
referred to in this note.
(6) Includes an aggregate(8) Consists of 545,237 shares of Class A Common Stock and
321,50024,950 shares of Common Stock held by trusts for the benefit
of M. Thomas Grumbacher's three children, of which Mary JoNancy T. Grumbacher and David J.
KaufmanHenry
F. Miller are the soletrustees, and 545,237 shares of Class A Stock and
321,504 shares of Common Stock held by other trusts for the benefit of Mr.
Grumbacher's children of which Ms. Grumbacher, Mr. Miller and David R.
Glyn are the trustees. Mary Jo GrumbacherMr. Miller disclaims beneficial ownership of all
shares referred to in this note.
(7)(9) Based solely on a review of a Schedule 13G dated February 10, 19981, 1999 filed with the SecuritiesSEC
by FMR Corp. ("FMR") and Exchange Commission. Suchits two controlling shareholders. The Schedule
13G indicates that each of FMR and such shareholders is the beneficial
owner of, and has sole dispositive power as to, all such shares. A wholly-
owned subsidiary of FMR is the beneficial owner of 646,000 shares areby
reason of acting as an investment adviser to various investment companies.
Each of FMR, a controlling shareholder thereof, and funds of which a
subsidiary of FMR is the investment adviser, has sole dispositive power as
to 646,000 shares. Neither FMR nor its controlling shareholders has sole
voting power of any of these shares. Another wholly-owned subsidiary of
FMR is the beneficial owner of 216,500 shares by reason of acting as
investment manager of certain institutional accounts. Each of FMR, through
its control of such subsidiary, and one of the controlling shareholders of
FMR, has sole dispositive and voting power as to these 216,500 shares.
(10) Consists of 545,237 shares of Class A Stock and 321,504 shares of Common
Stock held by Brinson Partners,trusts for the benefit of M. Thomas Grumbacher's children,
of which Nancy T. Grumbacher, Henry F. Miller and David R. Glyn are the
trustees. Mr. Glyn disclaims beneficial ownership of all shares referred
to in this note.
(11) Based solely on a Schedule 13G dated February 1, 1999 filed with the SEC
by The Prudential Insurance Company of America ("Prudential"). The
Schedule 13G indicates that Prudential is the beneficial owner of all
such shares. Prudential has sole voting and dispositive power as to
204,100 shares and shared voting and dispositive power as to 601,500
shares.
(12) Includes 166,666 shares issued pursuant to the Company's Amended and
Restated Stock Option and Restricted Stock Plan (the "Option Plan") that
are subject to forfeiture as provided in the Option Plan ( the
"Restricted Shares"), 250,000 shares awarded pursuant to The Bon-Ton
Stores, Inc. Performance Based Stock Incentive Plan for Heywood Wilansky
(the "Performance Based Plan") that are subject to forfeiture as provided
in the Performance Based Plan, and Brinson Trust Company, which are subsidiaries
of Brinson Holdings, Inc.options to purchase 219,067 shares.
3
The holders of the Class A Stock have entered into a shareholders' agreement
pursuant to which M. Thomas Grumbacher (or, if applicable, his personal
representative) has a right of first refusal to acquire any shares of Class A
Stock proposed to be transferred.
SECURITY OWNERSHIP OF MANAGEMENT
The followingSecurity Ownership of Management
This table shows as of May 1, 1998,April 30, 1999, the holdings of each director,
and of Heywood Wilansky, the
Company's Chief Executive Officer and the four other most highly compensated
executive officers during fiscal 19971998 (the "Named Executive Officers"Executives"), and of all directors and
executive officers of the Company as a group. Each such person listed has sole
voting power and sole investment power with respect to the shares indicated,
as beneficially owned,
unless otherwise indicated.noted.
CLASSClass A STOCK COMMON STOCK(1)
-------------------- --------------------
NUMBER OF NUMBER OF
NAME OF BENEFICIAL OWNER SHARES PERCENT SHARES PERCENT
------------------------ ---------Stock Common Stock(1)
---------------------- ----------------------
Shares Shares
Beneficially Beneficially
Name Owned Percent Owned Percent
---- ------------ ------- --------------------- -------
M. Thomas Grumbacher................. 2,444,616(2) 81.8% 4,084,084(3) 34.0%Grumbacher............... 2,951,490(2) 98.7% 4,894,447(3) 32.1%
Heywood Wilansky.....................Wilansky................... -- -- 364,467(4) 3.0%808,534(4) 6.5%
Michael L. Gleim.....................Gleim................... -- -- 198,152(5) 1.6%238,928(5) 1.9%
James H. Baireuther................ -- -- 28,334(6) *
Samuel J. Gerson................... -- -- 3,000(6) *
Douglas G. Lamm......................Lamm.................... -- -- 49,691(6)62,123(7) *
Lawrence J. Ring................... -- -- 5,000(6) *
Robert C. Siegel................... -- -- 2,000 *
Leon D. Starr........................Starr...................... -- -- 48,080 *
James H. Baireuther.................. -- -- 15,800(7) *
Lawrence J. Ring..................... -- -- 2,000(8) *
Roger S. Hillas...................... -- -- 4,000(8) *
Samuel J. Gerson..................... -- -- 2,000(8)14,580(6) *
Leon F. Winbigler....................Winbigler.................. -- -- 3,000(8)15,000(6) *
Thomas W. Wolf..................... -- -- 5,000 *
All directors and executive
officers as a group
(22(23 persons)............. 2,444,616 81.8% 4,969,075(9) 40.5%...................... 2,951,490 98.7% 6,296,965(8) 39.8%
- --------
* 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) See note (12) to Principal Shareholders table.
(5) Includes 250,000 shares issued pursuant to the Company's 1991 Amended and
Restated Stock Option and Restricted Stock Plan ("Option Plan") that are
subject to forfeiture as provided in such Option Plan (the "Restricted
Shares") but excludes 250,0005,000 Restricted Shares and options to be awarded subject to
shareholder approval.
(5)purchase 153,283 shares.
(6) Includes options to purchase 126,416the number of shares indicated: Mr.
Bairuether--18,334 shares; Mr. Gerson--2,000 shares; Mr. Ring--2,000
shares; Mr. Starr--500 shares; and 6,666 Restricted Shares.
3
(6)Mr. Winbigler--1,000 shares.
(7) Includes 10,2769,375 shares issued pursuant to the Company's Management
Incentive Plan ("MIP") and, 25,000 Restricted Shares.
(7) IncludesShares and options to purchase
5,00013,333 shares.
(8) Includes options to purchase 1,000 shares.
(9) Includes 281,666451,666 Restricted Shares, options to purchase 272,541 shares and
37,35926,732 shares issued pursuant to the
MIP.MIP and options to purchase 598,353 shares.
4
PROPOSAL ONE
ELECTION OF DIRECTORS
AtThe Board has proposed the meeting, the shareholders will elect sevenfollowing nominees for election as directors to
hold office until the 19992000 Annual Meeting of Shareholders and until their
respective successors have been duly elected and qualified. The Board has nominated M.
Thomas Grumbacher, Heywood Wilansky, Samuel J. Gerson, Michael L. Gleim,
Lawrence J. Ring, Leon D. Starr and Leon F. Winbigler to serve as such
directors.elected. Each of the nominees is currently serving as a director. Should
a nominee become unavailable to accept election, the persons named as proxies
will vote for such other person as the Board may recommend unless the Board
reduces the number of directors.
The nominees for directors are:
DIRECTOR POSITIONS WITH
NAME AGE SINCE THE COMPANY
---- --- -------- --------------
M. Thomas Grumbacher(1). 58M. Thomas Grumbacher--Director since 1967 Chairman of the Board of Directors
Heywood Wilansky(1)..... 50 1995 President, Chief Executive Officer and Director
Samuel J. Gerson(2)..... 56 1996 Director
Michael L. Gleim(1)..... 55 1991 Vice Chairman, Chief Operating Officer and Director
Lawrence J. Ring(3)..... 49 1997 Director
Leon D. Starr........... 79 1991 Director
Leon F. Winbigler(2)(3). 72 1991 Director
- --------
(1) On Executive Committee
(2) On Compensation and Stock Option Committee
(3) On Audit Committee
Mr. Grumbacher, age 59, joined the Company in 1961 and has been Chairman of
the Board since August 1991. From 1977 to 1989 he was President and from 1985
to 1995 he was Chief Executive Officer of the Company.
Heywood Wilansky--Director since 1995
Mr. Wilansky, age 51, joined the Company in August 1995 as President and
Chief Executive Officer. Prior to joining the Company, Mr. Wilansky was
employed by The May Department Stores Company for more than 19 years, last
serving as President and Chief Executive Officer of the Foley's division from
1992 to 1995. Mr. Wilansky is a director of First Washington Realty Trust.
Samuel J. Gerson--Director since 1996
Mr. Gerson, age 57, has been Chairman and Chief Executive Officer of
Filene's Basement since 1984. Prior to that, he was President and Chief Operating
Officer of The Gap and President and Chief Executive Officer of The Denver, a
division of Associated Dry Goods Co. Mr. Gerson is a director of Filene's Basement
Corp., Allmerica Financial Corp., and of ASAHI America, Inc., and is a trustee
associate of Boston College and chairmanVice-Chairman of the Urban League of Eastern
Massachusetts.
Michael L. Gleim--Director since 1991
Mr. Gleim, age 56, joined the Company in 1989 as Executive Vice President
and Chief Administrative Officer. He became Senior Executive Vice President in
June 1991, and Vice Chairman and Chief Operating Officer in December 1995.
Prior to joining the Company, Mr. Gleim was employed by Federated Department
Stores, Inc. for more than 25 years.
4
Lawrence J. Ring--Director since 1997
Dr. Ring, age 50, has been a Professor of Business Administration at the
College of William and Mary's Graduate School of Business Administration in
Williamsburg, Virginia for more than five years, and conducts an international
consulting and executive education practice. Dr. Ring is a director of
Sportmart, Inc.
Robert C. Siegel--Director since 1998
Mr. Siegel, age 62, has been a consultant to the apparel and footwear
industry since December 1998. From December 1993 to December 1998, he was
Chairman and Chief Executive Officer of The Stride Rite Corp. Mr. Siegel is a
director of McNaughton Apparel Group, Inc.
Leon D. Starr--Director since 1991
Mr. Starr, age 80, has been a management consultant to department and
specialty stores since 1984. Prior thereto, he held various positions with
Allied Stores Corporation for over 35 years.
Leon F. Winbigler--Director since 1991
Mr. Winbigler, age 73, served as Chairman and Chief Executive Officer of
Mercantile Stores Company, Inc. for 15 years before retiring in 1989.
5
Thomas W. Wolf--Director since 1998
Mr. Wolf, age 50, has been President of the Wolf Organization, Inc., a
building materials manufacturer and distributor, since 1985. He is Chairman of
York Financial Corporation, a memberdirector of Manis Lumber Co., Vice Chairman of
the advisory boardBoard of Liberty Mutual Insurance Company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORSYork College of Pennsylvania and President of Better York, Inc.
Meetings and Committees of the Board of Directors
During fiscal 1997,1998, the Board held fourfive meetings and took action by unanimous
consent without a meeting on twothree occasions. The Board has an Executive
Committee, an Audit Committee and a Compensation and Stock Option Committee
(the "Compensation Committee"), but does not have a Nominating Committee. The
Executive Committee, which did not hold anyconsists of M. Thomas Grumbacher, Heywood Wilansky
and Michael L. Gleim, held two meetings and took action by unanimous consent
without a meeting on two occasions during fiscal 1997,1998. It has the authority to act in
place of the Board on certain specified matters. The Audit Committee, which
held two meetings during fiscal
1997,1998, reviews the Company's internal controls and
handles matters relating to the Company's independent auditors. The Audit
Committee consists of Samuel J. Gerson, Lawrence J. Ring and Leon F.
Winbigler. The Compensation Committee, which held onetwo meetings and took action
by unanimous consent without a meeting once during fiscal 1997,1998, considers and
determines compensation issues involving the Company's Chairman of the Board, the
President and Chief Executive Officer, and the Vice Chairman and Chief
Operating Officer, and oversees the compensation of other employees of the Company.employees. The
Compensation Committee also administers the Company's Option Plan, the MIP and the
MIP.Performance Based Plan. Samuel J. Gerson, Lawrence J. Ring and Leon F.
Winbigler sit on the Compensation Committee.
No director attended fewer than 75% of the total number of meetings of the
Board and Board Committees on which he served.
COMPENSATION OF DIRECTORS
The Company compensates eachCompensation of its directors who is neither an employee or
consultant to the Company atDirectors
Each non-employee director receives an annual ratefee of $20,000, plus $2,000 for
attendance at each Board meeting ($400 for participation in a meeting held via
teleconference) and, $1,000 for attendance at each Board Committee meeting ($400
for participation in a meeting held via teleconference). In addition,
each such director shall receive, and an annual grant
of options to purchase 1,000 shares of Common Stock. The Company compensatesStock, provided that each non-employeenon-
employee director who is a consultant to the Company atreceives one-half of the compensation of a non-
employee director who is not serving as a consultant, and each such
director
shall receive an annual grant of options to purchase 500 shares of Common
Stock.compensation. Mr. Starr is athe only non-employee director who provides
consulting services to the Company.
Mr. Starr has rendered consulting services to the Company since 1984 and
received approximately $65,000 in consulting fees from the Company in fiscal
1997.1998.
The Company anticipates it will pay Mr. Starr approximately $65,000 in
consulting fees in 1998.
5
1999.
PROPOSAL TWO
APPROVAL OF THE BON-TON STORES, INC. FIVE YEAR CASH BONUS PLAN
FOR HEYWOOD WILANSKY
The Bon-Ton Stores, Inc. Five Year Cash Bonus Plan for Heywood Wilansky (the
"Cash Bonus Plan") is a performance-based compensation plan adopted by the
Board in connection with a new employment agreement that was entered into by
the Company with Heywood Wilansky to continue as the Company's President and
Chief Executive Officer for a five year term. The Cash Bonus Plan was adopted
by the Board on the recommendation of the Compensation Committee and is
subject to the approval of the Company's shareholders. The Cash Bonus Plan is
a part of the Company's integrated compensation program which is intended to
assist the Company in motivating and retaining employees of superior ability,
industry and loyalty. Under the Cash Bonus Plan, performance-based bonus
compensation may be paid to Heywood Wilansky only if certain performance
standards are met, as explained in more detail below. The Cash Bonus Plan is
administered by the Compensation Committee. The Compensation Committee has set
certain performance goals that are applicable under the Cash Bonus Plan for
the current fiscal year of the Company, and will set performance goals for
each subsequent fiscal year for a total of five years. The Compensation
Committee also has responsibility under the Cash Bonus Plan for certifying, in
writing, that the performance goals for a particular fiscal year have been
met. Unless and until the Compensation Committee provides such written
certification that the performance goals have been met, the bonus attributable
to those goals is not payable. In addition, no amounts are payable under the
terms of the Cash Bonus Plan if the Cash Bonus Plan is not first disclosed to
and approved by the Company's shareholders.
The design and administration of the Cash Bonus Plan are intended to cause
all amounts that may become payable under the Cash Bonus Plan to be treated as
"performance-based compensation" as that term is used for purposes of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). As a
consequence, the provisions of the Code which would otherwise limit the
deductibility by the Company of certain executive compensation in excess of
$1,000,000 should not be applicable to any amounts paid under the terms of the
Cash Bonus Plan.
The provisions of the Cash Bonus Plan are generally described below.
Eligibility:
Heywood Wilansky is the only participant in the Cash Bonus Plan.
Shareholder Approval and Term of Cash Bonus Plan:
The Cash Bonus Plan goes into effect, subject to shareholder approval, as of
February 1, 1998, and will continue for five Plan Years (which correspond to
the fiscal years of the Company).
Bonus Entitlement:
The participant will be paid a bonus for each year provided the applicable
performance goals established by the Compensation Committee under the Cash
Bonus Plan have been met. The bonus payment for each year will be paid on or
about April 15 of the next year unless the participant elects to defer all or
a part of the bonus under the terms of the Company's deferred compensation
plan. No bonus will be paid unless the Compensation Committee certifies in
writing that the performance goals for the year have been met.
Amount of Bonus and Establishment of Performance Goals:
The amount of the annual bonus payable if all performance goals established
under the Cash Bonus Plan have been met will be equal to the participant's
base compensation for the Plan Year. The participant's base compensation taken
into account under the terms of the Cash Bonus Plan, however, can never exceed
$1,000,000, even if his actual base compensation is increased to an amount in
excess of $1,000,000. Under the Cash Bonus Plan, the Compensation Committee
sets both an initial performance goal, which is a specified level of net after
tax earnings, as determined by the Company's regular accountants for the first
Plan Year, and also sets or will set separate performance goals (at higher
levels of net after tax earnings) for each Plan Year (including the first Plan
Year).
6
If the initial performance goal is satisfied, the participant will receive
an annual bonus equal to 40% of his base compensation for each Plan Year as
long as he continues to be employed by the Company. If the separate, higher
performance goal is satisfied in any Plan Year, the participant's annual bonus
will be increased by an amount that is determined by the extent to which the
Company's performance for the fiscal year exceeds the higher performance goal.
As noted above, the total bonus for any Plan Year can not exceed 100% of the
participant's base compensation (so that the maximum possible annual bonus is
always limited to $1,000,000 in light of the limitation on base compensation
taken into account for these purposes).
If the participant terminates his employment with the Company during a Plan
Year, he will receive a pro-rated bonus determined on the basis of the portion
of the Plan Year he was employed.
The performance goals for each Plan Year, as described above, and the
formula pursuant to which the additional bonus is calculated, will be
established by the Compensation Committee no later than 90 days after the
beginning of the Plan Year. In no case will the performance goal be
established at a time when the achievement of the goal is not substantially
uncertain. If the Compensation Committee does not establish a performance goal
for a year, the performance goal that was in effect for the prior year will be
continued in effect.
Administration of the Cash Bonus Plan:
The Cash Bonus Plan is administered by the Compensation Committee, which
will at all times consist exclusively of two or more outside directors (as
that term is defined for purposes of Code Section 162(m)). The resolution of
any questions with respect to payments and entitlements pursuant to the
provisions of the Cash Bonus Plan will be determined by the Compensation
Committee, and all such determinations shall be final and conclusive.
Amendment and Termination of the Cash Bonus Plan:
The Company may, acting through the Board, terminate or revoke the Cash
Bonus Plan at any time and may amend the Cash Bonus Plan from time to time. No
termination or amendment of the Cash Bonus Plan will reduce the amount of a
bonus payment that is due, but has not yet been paid, without the
participant's consent. In addition, no amendment to the Cash Bonus Plan will
increase the maximum amount of the bonus payable under the Cash Bonus Plan
without approval by the Compensation Committee and without disclosure to and
approval by the Company's shareholders in a separate vote prior to the payment
of such an increased bonus. The Cash Bonus Plan may, however, be modified or
amended by the Compensation Committee, as it deems appropriate, in order to
comply with any rules, regulations or other guidance promulgated by the
Internal Revenue Service with respect to any applicable provisions of the Code
relating to the qualification of the bonus payments under the Cash Bonus Plan
as "performance-based compensation" for purposes of Code Section 162(m).
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 a
bonus payment 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 payments to
qualify as performance-based.
In general, the Cash Bonus Plan is intended to pay compensation only on the
attainment of the performance goals established by the Compensation Committee.
If the Cash Bonus Plan is put into effect in accordance with its terms and
subject to the approval of the Company's shareholders, and provided the Cash
Bonus Plan is and continues to be administered in accordance with the
provisions set forth in the Cash Bonus Plan, the bonus payments under the Cash
Bonus Plan should be "performance-based compensation" that is exempt from the
Million Dollar Cap.
7
The following table sets forth the benefits that may be received by Heywood
Wilansky if the Cash Bonus Plan is approved.
NAME AND POSITION DOLLAR VALUE
----------------- -------------
Heywood Wilansky............... $1,000,000(1)
President and Chief Executive
Officer
- --------
(1) Annual bonus to be received if all performance goals are met.
THE BOARD OF DIRECTORS RECOMMENDS
VOTING "FOR" APPROVAL OF THE BON-TON STORES, INC.
FIVE YEAR CASH BONUS PLAN FOR HEYWOOD WILANSKY
PROPOSAL THREE
APPROVAL OF
THE BON-TON STORES, INC.
PERFORMANCE BASED STOCK INCENTIVE PLAN
FOR HEYWOOD WILANSKY
The Bon-Ton Stores, Inc. Performance Based Stock Incentive Plan for Heywood
Wilansky (the "Stock Incentive Plan") is a performance-based compensation plan
adopted by the Board in connection with a new employment agreement that was
entered into by the Company with Heywood Wilansky to continue as the Company's
President and Chief Executive Officer for a five year term. The Stock
Incentive Plan was adopted by the Board on the recommendation of the
Compensation Committee and is subject to the approval of the Company's
shareholders. The Stock Incentive Plan is a part of the Company's integrated
compensation program which is intended to assist the Company in motivating and
retaining employees of superior ability, industry and loyalty.
Under the Stock Incentive Plan, a discounted stock option and a restricted
stock award are granted to Heywood Wilansky, subject in all events to
provisions of the Stock Incentive Plan which cause forfeiture if the
performance goal established by the Compensation Committee under the terms of
the Stock Incentive Plan is not met. Satisfaction of the performance goal is
required to be certified in writing by the Compensation Committee.
The design and administration of the Stock Incentive Plan are intended to
cause all taxable compensation attributable to the Stock Incentive Plan to be
treated as "performance-based compensation" as that term is used for purposes
of Section 162(m) of the Code. As a consequence, the provisions of the Code
which would otherwise limit the deductibility by the Company of certain
executive compensation in excess of $1,000,000 should not be applicable to any
compensation expense attributable to the Stock Incentive Plan.
The provisions of the Stock Incentive Plan are generally described below.
Eligibility:
Heywood Wilansky is the only participant in the Stock Incentive Plan.
Shareholder Approval and Term of Stock Incentive Plan:
The Stock Incentive Plan goes into effect, subject to shareholder approval,
as of February 1, 1998 (the "Effective Date"), and will continue until
terminated by the Board.
Benefits Under the Stock Incentive Plan:
The participant will be granted 250,000 shares of Common Stock (the
"Award"), and options to acquire an additional 250,000 shares of Common Stock
at an exercise price of $8 per share (the "Option"). Both the Award and the
Option are forfeited if the Company's net after tax earnings (as determined by
the Company's regular accountants) does not meet or exceed, for the current
fiscal year, a level which was established by the Compensation Committee at
the time the Stock Incentive Plan was adopted. The achievement of this
performance goal must be certified in writing by the Compensation Committee in
order for the performance goal to be treated as having been satisfied for
these purposes.
8
If the performance standard described above is satisfied and certified in
writing by the Compensation Committee, the participant's Option and Award may
vest over time, subject to the general requirement that the participant
continue to be employed by the Company. The Option vests with respect to
83,334 shares on the first anniversary of the Effective Date, and with respect
to an additional 83,333 shares on each of the second and third anniversaries
of the Effective Date. The Award vests with respect to 83,334 shares on the
third anniversary of the Effective Date, and with respect to an additional
83,333 shares on each of the fourth and fifth anniversaries of the Effective
Date. The Option and the Award may also become vested on an accelerated basis
if there is a "change of control" of the Company after the performance goal
described above has been satisfied. The Option will terminate in all events on
the tenth anniversary of the Effective Date. It may terminate sooner if the
participant's employment with the Company terminates or if the Option would be
terminated under the termination provisions of the Company's Option Plan
(which provisions, while not directly applicable to the Option, are
incorporated in the Stock Incentive Plan by reference). If the participant's
employment terminates prior to the time at which the Award and the Option have
fully vested, the unvested portion of the Option and the Award will be
forfeited.
Amount of Bonus and Establishment of Performance Goals:
The maximum amount of compensation that may be earned by the participant
pursuant to the terms of the Stock Incentive Plan is dictated by the value of
the 250,000 shares of Common Stock that form the Award to the participant, and
by the value in excess of $8 per share of the 250,000 shares of Common Stock
that are subject to the Option. As no actual value for the maximum possible
compensation can be determined, the value of the compensation which may be
earned under the Stock Incentive Plan cannot be calculated. However, a
calculation may be made on the basis of assumptions as to the future value of
the Common Stock. If, for example, it is assumed that the value of a single
share of Common Stock will be $16, the maximum value of the performance based
compensation that may be earned by the participant under the Stock Incentive
Plan is $6,000,000. If a $20 per share value is assumed for purposes of these
calculations, the maximum value of the performance based compensation that may
be earned by the participant under the Stock Incentive Plan is $8,000,000. On
May 1, 1998, the closing price of a share of Common Stock was $16.50.
Administration of the Stock Incentive Plan:
The Stock Incentive Plan is administered by the Compensation Committee which
will at all times consist exclusively of two or more "outside directors" (as
that term is defined for purposes of Code Section 162(m)). The resolution of
any questions arising with respect to the Stock Incentive Plan will be
determined by the Compensation Committee, and all such determinations shall be
final and conclusive.
Amendment and Termination of the Stock Incentive Plan:
The Company may, acting through the Board, terminate or revoke the Stock
Incentive Plan at any time and may amend the Stock Incentive Plan from time to
time, provided that neither the termination, revocation or amendment of the
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 value of the benefit to the
participant under the terms of the Plan shall be effective without approval by
the Compensation Committee and without disclosure to and approval by the
shareholders of the Company in a separate vote prior to the provision of such
increased benefit. In addition, the Plan may be modified or amended by the
Compensation Committee, as it deems appropriate, in order to comply with any
rules, regulations or other guidance promulgated by the Internal Revenue
Service with respect to applicable provisions of the Code as they relate to
the exemption for "performance-based compensation" under the limitations on
the deductibility of compensation imposed under Code Section 162(m).
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
9
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.
In general, the Stock Incentive Plan is intended to provide compensation
only on the attainment of the performance goals established by the
Compensation Committee. If the Stock Incentive Plan is put into effect in
accordance with its terms and subject to the approval of the Company's
shareholders, and provided the Stock Incentive Plan is administered in
accordance with the provisions set forth therein, the taxable compensation
attributable to the Option and the Award under the terms of the Stock
Incentive Plan should be "performance-based compensation" that is exempt from
the Million Dollar Cap.
The following table sets forth the benefits that may be received by Heywood
Wilansky if the Stock Incentive Plan is approved.
NAME AND POSITION NUMBER OF SHARES
----------------- ----------------
Heywood Wilansky............ 500,000(1)
President and Chief Execu-
tive Officer
- --------
(1) Consists of a grant of 250,000 shares of Common Stock subject to
forfeiture and options to acquire 250,000 shares which options are subject
to forfeiture.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" APPROVAL OF
THE BON-TON STORES, INC. PERFORMANCE BASED STOCK INCENTIVE PLAN
FOR HEYWOOD WILANSKY
PROPOSAL FOUR
RATIFICATION OF THE APPOINTMENT
OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS
Subject to shareholder ratification, the Board, of Directors, upon recommendation of the
Audit Committee, has reappointed Arthur Andersen LLP, which served as the
Company's independent public accountants for the last
fiscal year,in 1998, to serve as the Company's
independent public accountants for the
current fiscal year.1999. If the shareholders do not ratify this
appointment, by the
affirmative vote of a majority of the votes cast, other independent public accountants will be considered by the Board of Directors
upon recommendation of the Audit Committee.
A representative of Arthur Andersen LLP is expected to be present at the
meeting. Such representative will have the opportunity to make a statement and
will be available to respond to appropriate questions of shareholders.
THE BOARD OF DIRECTORS RECOMMENDS VOTING
"FOR" RATIFICATION OF THE APPOINTMENT OF
ARTHUR ANDERSEN LLP
AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS
10questions.
6
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLESummary Compensation Table
The following table sets forth, for the Company's last three fiscal years, the
compensation paid or accrued by the Company for those years to each of the Named Executive Officers:Executives:
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------Long-Term
Annual Compensation Compensation Awards
--------------------------------------- -----------------------
NAME AND OTHER RESTRICTED SECURITIES
PRINCIPAL FISCAL ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY($Restricted Securities
Other Annual Stock Underlying All Other
Name and Position Year Salary($) BONUS($Bonus($) COMPENSATION($Compensation($) AWARDS($Awards($)(1) OPTIONS(#) COMPENSATION($Options(#) Compensation($)
--------- ----------------------- ---- --------- -------- --------------- ------------ ---------- ---------------
Heywood Wilansky........ 1998 996,154 621,100 106,471(2) 3,562,500 250,000 989,591(3)
President and Chief 1997 800,000 264,000 872,423(2)872,423 -- 99,000 1,065,260(3)
President and1,065,260
Executive Officer 1996 800,000 200,000 948,778 -- 104,800 --
Chief Executive Officer 1995 353,846 841,500 117,803 1,687,500 250,000 --
M. Thomas Grumbacher.... 19971998 350,000 87,120 7,931(4)73,626 8,061 -- 43,300-- --
Chairman of the 1997 350,000 87,120 7,931 -- 43,300 --
Board of Directors 1996 351,923 -- 2,175 -- 45,800 --
Board of Directors 1995 450,000 -- 675 -- 25,000 --
Michael L. Gleim........ 1998 427,659 110,550 11,436 40,000 15,000 49,575(3)
Vice Chairman and 1997 414,417 132,000 9,848(5)9,848 -- 49,600 291,147(3)
Vice Chairman and291,147
Chief Operating Officer 1996 414,417 -- 4,530 -- 52,400 --
Chief Operating Officer 1995 311,923 -- 20,628 117,500 56,600 --
Douglas G. Lamm(6)......Lamm......... 1998 307,269 12,622 9,684 343,750 25,000 --
Executive Vice
President, 1997 254,808 67,329 9,406(7)9,406 89,982 -- --
Executive Vice Presi-
dent,Softlines Merchandise 1996 244,984 -- 1,302 -- -- --
Softlines Merchandise 1995 79,279 -- -- -- 20,000 10,000
James H. Baireuther(6)..Baireuther..... 1998 239,192 35,000 9,076 -- 10,000 99,040(4)
Senior Vice President, 1997 224,808 42,000 6,367(8)6,367 -- -- 85,306(9)
Senior Vice President,85,306
Chief Financial Officer 1996 135,785 -- 381 -- 20,000 25,234
Chief Financial Officer
- --------
(1) The awards were made pursuant to the Option Plan or the MIP. Mr. Wilansky's award was made under the Performance Based Plan and vests
in three equal annual installments beginning August
21, 1998.on February 1, 2001, February 1, 2002 and
February 1, 2003. Mr. Gleim's award was made under the Option Plan and
will be fully vestedvest on December 15, 1998.August 31, 2001, provided if Mr. Gleim's employment agreement
is not extended beyond July 31, 2000, it will vest on July 31, 2000. Mr.
Lamm's award was made under the Option Plan and will vest in conjunction with his bonus payouts or, if none,
at the end of fiscal 2007.three equal
installments on February 1, 2001, February 1, 2002 and February 1, 2003.
At January 31, 1998,30, 1999, the aggregate number of Restricted Shares and market
value of such shares were: Mr. Wilansky--
250,000Wilansky--416,666 shares with a market
value of $3,500,000;$3,281,245; Mr. Gleim--6,666Gleim--5,000 shares with a market value of
$93,324;$39,375; Mr. Lamm--14,691Lamm--35,276 shares with a market value of $205,674.$277,799. No
dividends will be paid on these Restricted Shares.
(2) Includes $200,000 for the purchase of an annuitya $67,858 automobile allowance as provided in Mr. Wilansky's
name,
loan forgiveness in the amount of $375,000, imputed interest of $48,796 on
a loan by the Company to Mr. Wilansky, $230,709 for club membership fees
paid by the Company for Mr. Wilansky and Company contributions to its
Retirement Savings/Profit Sharing Plan of $7,256.employment agreement.
(3) Consists of valueValue realized on exercisevesting of stock options.Restricted Stock.
(4) Includes premiums on excess life insurance in the amount of $675 and
Company contributions to its Retirement Savings/Profit Sharing Plan of
$7,256.
(5) Includes premiums on excess life insurance in the amount of $2,592 and
Company contributions to its Retirement Savings/Profit Sharing Plan of
$7,256.
(6) Mr. Lamm joined the Company in 1995, and Mr. Baireuther joined the Company
in 1996.
(7) Includes premiums on excess life insurance in the amount of $2,150 and
Company contributions to its Retirement Savings/Profit Sharing Plan of
$7,256.
(8) Includes premiums on excess life insurance in the amount of $1,584 and
Company contributions to its Retirement Savings/Profit Sharing Plan of
$4,783.
(9) Consists of relocation expenses of $80,240 and imputed interest of $5,066
on a loan by the Company to Mr. Baireuther.
11Relocation reimbursements.
7
STOCK OPTION GRANTSStock Option Grants
The following table contains information concerningreflects the grant of stock options under the Company's Option Planoption grants to each of the Named
Executive
OfficersExecutives during fiscal 1997.1998. The Company does not have any plan pursuant to which
stock appreciation rights may be granted.
OPTION GRANTS IN FISCAL 1997Option Grants in 1998
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERMPotential Realizable Value at
Assumed Annual Rate
of Stock Price
Appreciation for Option
Individual Grants Term (1)
---------------------------------------------- ---------------------------------------------------------------------------------------- --------------------------------
Securities % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION
GRANTED(#) IN FISCAL 1997of Total
Underlying Options Granted Exercise Market Price
Options To Employees Price on Date of Expiration
Granted in 1998 ($/SH) DATESh) Grant ($/Sh) Date 0% 5% 10%
---------- ----------------------------- -------- ------------ ---------- ------------------------------------- ---------- ----------
Heywood Wilansky........ 99,000(2) 33.40 7.25 3/6/2007 $ 451,389 $ 1,143,909250,000(2) 62.28 8.00 14.25 2/1/2008 $1,562,500 $3,802,937 $7,240,208
M. Thomas Grumbacher.... 43,300(2) 14.61 7.25 3/6/2007 197,426 500,316
Michael L. Gleim........ 24,800(2) 8.37 7.25 3/6/2007 113,075 286,555
24,800(3) 8.37 7.25 3/6/2007 113,075 286,555
Douglas G. Lamm......... -- -- -- -- -- -- -- --
Michael L. Gleim........ 15,000(3) 3.74 8.00 8.00 9/9/2008 -- 75,467 191,249
Douglas G. Lamm......... 25,000(3) 6.23 13.75 13.75 2/1/2008 -- 216,183 547,849
James H. Baireuther..... 10,000(3) 2.49 14.25 14.25 2/26/2008 -- -- -- -- -- --89,617 227,108
- --------
(1) Illustrates value that might be realized upon exercise of options
immediately prior to the expiration of their term, assuming specified
compounded rates of appreciation on the Common Stock over the term of the
options. Assumed rates of appreciation are not necessarily indicative of
future stock performance.
(2) TheThese are performance based options which vest in three equal annual
installments.
(3) These options vest on March 6, 2000 only upon the Company meeting pre-
established goals for return on investmentin three equal annual installments.
Stock Option Exercises and for total shareholders'
return on the Common Stock as compared to a group of other retailers, each
measured during the three year period of fiscal 1997 to 1999. Fifty
percent of the options vest upon the attainment of each goal.
(3) One-third of the options vest on each of March 6, 1998, 1999 and 2000.
STOCK OPTION EXERCISES AND HOLDINGSHoldings
The following table sets forth information related to the stock options that
were exercised during fiscal 1997 andshows the number and value of stock options of
each of(exercised
and unexercised) for the Named Executive OfficersExecutives during 1998.
Option Exercises During 1998 and
Option Values at January 31, 1998.
OPTION EXERCISES DURING FISCAL 1997 AND
OPTION VALUES AT JANUARY 31, 199830, 1999
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
JANUARY 31, 1998(#) AT JANUARY 31, 1998(1)Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
January 30, 1999 January 30, 1999(1)
------------------------- -------------------------
SHARES ACQUIRED VALUE
ON EXERCISEShares Acquired Value
on Exercise (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLERealized Exercisable Unexercisable Exercisable Unexercisable
--------------- ------------------ ----------- ------------- ----------- -------------
Heywood Wilansky........ 166,667 $1,065,260 -0- 287,133 $ -0- $2,097,714-- -- 83,333 453,800 $93,750 $245,275
M. Thomas Grumbacher.... -0- -0- -0- 114,100 -0- 721,700-- -- -- 89,100 -- 107,213
Michael L. Gleim........ 25,076 291,147 106,649 117,667 672,754 817,44316,567 $137,647 123,182 91,267 235,372 86,968
Douglas G. Lamm......... -0- -0- 10,000 10,000 63,750 63,75067,500 5,000 30,000 1,250 1,250
James H. Baireuther..... -0- -0- 5,000-- -- 10,000 20,000 15,000 38,125 114,37515,000
- --------
(1) In-the-money options are options having a per sharean exercise price below $14.00,$7.875,
the closingyear end share price. Value is calculated by multiplying the
difference between the option exercise price of shares of Common Stock on the Nasdaq National
Market on January 30, 1998 (the last trading day in fiscal 1997). The
amounts shown are the amountsand $7.875 by which the product of such closing price
and the number of
shares purchasable uponunderlying the exercise of such in-the-
money options exceeds the aggregate exercise price of such shares.
12option.
8
EMPLOYMENT AGREEMENTS
The Company has entered into anEmployment Agreements
Heywood Wilansky
Mr. Wilansky's employment agreement with Mr. Wilansky,
effective February 1, 1998 (the "Employment Agreement"), which expirescontinues until January 31, 2003, pursuant to which Mr. Wilansky is entitled to receiveand
provides for an annual base salary of at least $1,000,000 and$1,000,000. He is eligible for an annual
cash bonus based onupon the Company's performance of the Companyand his individual performance
according to criteria established by the Compensation Committee under the terms of the Cash Bonus Plan established for
this purpose. TheCommittee--the maximum
bonus attainable under the Cash Bonus Plan is 100% of Mr. Wilansky'shis base salary, subject to a $1,000,000 limit.salary. The Employment
Agreement provides that the remaining $375,000 due on a loan previously made
by the Company to Mr. Wilansky will be forgiven on April 30, 1999 provided his
employment with the Company is not terminated prior to that date by the
Company for Cause (as defined in the Employment Agreement) or by Mr. Wilansky
for any reason other than following a Change of Control (as defined in the
Employment Agreement). The Employment Agreement also provides that the Company
will award Mr. Wilansky an additional 250,000 shares of Common Stock and
options to purchase an additional 250,000 shares of Common Stock at an option
price of $8.00 per share following the adoption by the Company of the Stock
Incentive Plan established for this purpose. Mr. Wilansky's ownership in the
shares vests in three annual installments on the third, fourth and fifth
anniversaries of the effective date of the Employment Agreement and the
options vest on the first, second and third anniversaries of the effective
date of the Employment Agreement provided thatgranted to Mr. Wilansky meets certain
performance goals. The Employment Agreement provides that inunder the event the
Company dischargesPerformance
Based Plan will vest over time. If Mr. Wilansky is discharged without Cause, Mr. Wilansky shallcause
(as defined in his employment agreement), he will continue to receive his base
salary and medical benefits for the greater of the remaining term of the Employment Agreementhis employment agreement or
one year, from termination of employment
and his bonus compensation for the year in which he is discharged determined on a
pro-rata basis, taking into account the number of days worked during the
year up to his termination of employment. In addition, Mr. Wilansky shalland he will be entitled to immediate vesting of his restricted
stock awards, and options and retirement benefits. The Company's obligation to continue Mr. Wilansky's base
salary is subject to Mr. Wilansky's obligation to mitigate damages by seeking
employment or as long as Mr. Wilansky is entitled to receive severance pay,
and the Company's obligation to pay certain amounts to Mr. Wilansky following
his termination ceases if the covenant against competition is broken. In the
event thatIf Mr. Wilansky voluntarily
terminates his employment following a Changechange of Control,control, he shallwill be entitled
to his base salary in monthly
installment payments for the remaining term of the Employment Agreement,
subject to certain potential taxation-related limitations on the value of such
payments,his employment agreement and to
immediate vesting of his restricted stock awards and stock options.
The Employment Agreement contains a covenant against competition for at least
one year after termination of his employment or as long as Mr. Wilansky is
entitled to receive severance pay, and the Company's obligation to pay certain
amounts to Mr. Wilansky following his termination ceases if the covenant
against competition is broken. In addition, to the other compensation provided
pursuant to the Employment Agreement, the
Company has agreed to establish a supplemental retirement plan for Mr.
Wilansky which will provide supplemental retirement income of approximately
$300,000 per year commencing when he reaches age 55 or following his
retirement or other termination of employment after reaching age 55. The
Company believes that the present value of the aggregate cost of this
supplemental retirement plan over time, assuming an interest rate of 6%, is
approximately $2,800,000.
The Company has entered into anMichael L. Gleim
Mr. Gleim's employment agreement with Mr. Gleim which
expires JanuaryJuly 31, 1999 pursuant to which Mr. Gleim is entitled to receive2000 and provides for an
annual base salary of at least $400,000 and$425,000. He is also eligible for an annual bonus to be
determined by the Compensation Committee. The agreement provides that in the
event the Company dischargesIf Mr. Gleim is discharged without
cause or Mr. Gleim resigns for good reason (each as defined in thehis employment
agreement), Mr. Gleim shallhe will continue to receive his base salary and other benefits for
the greater of the remaining term of the agreement or one year from
termination of employment.
Executive Severance
The Company has entered into a severance agreementagreements with certain of its
executive officers other than Messrs. Grumbacher, Wilansky and Gleim which
generally provides for certain payments to be made by the Company in the eventpayment of one year's base salary if the executive
officer is terminated without cause (as defined in such agreement).
Pursuant to such agreements, the Company shall pay such executive officers the
equivalent of one year's base salary following the date of termination.
Executive officers who have been employed by the Company less than one year as
of the date of termination shall be entitled to the equivalent of six months'
base salary following such termination.
139
STOCK PERFORMANCE GRAPHStock Performance Graph
The following graph compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock from January 30, 199329, 1994 through January
31, 1998,30, 1999, the cumulative total return on the CRSP Total Return Index for The
Nasdaq Stock Market (US Companies) and the Nasdaq Retail Trade Stocks Index
during such period. The comparison assumes $100 was invested on January 30, 199329,
1994 in the Common Stock and in each of the foregoing indices and assumes the
reinvestment of any dividends.
LOGO
[PERFORMANCE[BONTON GRAPH APPEARS HERE]
$100 INVESTMENT
- ---------------
NASDAQ
DATE NASDAQ RETAIL BON-TON
- ---- ------ ------ -------
1/30/93 100.00 100.00 100.00
1/29/94 113.73 106.86 98.44
1/28/95 109.69 95.69 132.81
2/2/96 159.67 107.44 65.63
2/1/97 207.06 132.60 87.50
1/30/98 245.02 155.16 175.00
REPORT OF THE COMPENSATION COMMITTEEReport of the Compensation Committee
The Compensation Committee, consisting entirely of non-employee directors,
approves all general policies under whichaffecting the compensation is paid or awarded toof the Company's
executive officers. The Compensation Committee determines the compensation of
M. Thomas Grumbacher, the Company's Chairman of the Board, of
Heywood Wilansky, the Company's President and Chief Executive Officer, M. Thomas Grumbacher,
Chairman of the Board, and of Michael L. Gleim, the Company's Vice Chairman and Chief Operating
Officer. The
Compensation CommitteeOfficer, and utilizes recommendations from the Executive Committee with
respect to the level and form of compensation forof the Company's other executive
officers, other than Messrs. Grumbacher, Wilansky and Gleim. The Compensation Committeebut retains the authority to determine the compensation of such
other executive officers and may accept, reject or modify, such recommendations in its discretion.discretion,
the Executive Committee recommendations.
The basic forms of executive compensation are annual compensation, in the
form of salary and possible bonuses, and long-term incentives, currently
consisting primarily of stock options. The Compensation Committee seeks to
achieve a mix of these various forms of compensation which willto properly compensate
and motivate its executives on an individual basis.the Company's executives. In doing so, the Compensation Committee with the input of the Executive Committee with
respect to the executive officers other than Messrs. Grumbacher, Wilansky and
Gleim,
considers various aspects of the Company's operating results as well as its
financial condition, and considers each executive's role in such achievement.
14
ANNUAL COMPENSATION--SALARY AND BONUSAnnual Compensation--Salary and Bonus
Annual compensation is comprised of a base salary and a possible bonus. The
Compensation Committee set the base salary of the Chairman of the BoardM. Thomas Grumbacher for fiscal 1997.1998.
The base salaries for the Company's Presidentof Heywood Wilansky and Chief Executive
Officer and for the Vice Chairman and Chief Operating OfficerMichael L. Gleim are established
pursuant to employment agreements which have been approved by the Compensation
Committee based on a variety of factors, including the general level of
executive compensation in the industry, the general level of executive
compensation in the Company the compensation of the executive in his prior
employment and the evaluation by the Compensation Committee of the importance
10
of the executive to the Company. The base salaries of the remainder of the
Company's executives have their base salariesare approved annually by the Compensation Committee upon
review of recommendations from the Executive Committee, based on such
subjective factors as individual and Company performance. The Compensation
Committee commissions an independent contractor to conduct periodic surveys of
executive compensation in the department store industry and utilizes such
survey information in making its decisions on executive compensation.
The Compensation Committee believes it appropriate that an increasing amount
of the potential annual compensation for the Chairman of the Board, the
President and Chief Executive Officer, and the Vice Chairman and Chief
Operating OfficerCompany's executives be provided in the
form of an annual bonus which is dependent upon the Company's performance. Mr.
Wilansky's annual bonus is determined pursuant to The Bon-Ton Stores, Inc.
Five Year Cash Bonus Plan for Heywood Wilansky which was approved by the
shareholders in 1998. For fiscal 1997, thereMessrs. Grumbacher and Gleim, the bonus for 1998 was
determined under a bonus plan based on the Company's net income during 1998.
For 1998, the Compensation Committee certified that the performance goals
required to be achieved under these plans were reached, which resulted in
place
a plan to grant bonuses paid to these Company officers based on a combination of
the Company's earnings before interest and taxes during fiscal 1997. As a
result of the Company's performance for fiscal 1997, there were bonuses paidexecutives in the amounts indicated in the Summary
Compensation Table.
With respect to the Company's executive officers other than Messrs.
Grumbacher, Wilansky and Gleim, the Company has adopted the Management
Incentive Plan (the "MIP") which provides for the granting of cash bonuses
and/or shares of Common Stock to participants based on a combination of
Company performance, measured by earnings before interest, and the
participant's individual performance, measured against various personal goals
and objectives established at the beginning of the year. The MIP is currently
administered by the Compensation Committee. Bonus payouts are discretionary
and no bonus payouts may be made if the Company fails to achieve established
minimum performance goals. MIP participants may elect to receive a portion of
their MIP bonus in shares of Common Stock ("Restricted MIP Shares") which
Shares are issued in the name of the participant but are restricted and are
not eligible for resale until bonus awards for such participants are made. In
addition, the Compensation Committee may accelerate the vesting of the
unvested Restricted MIP Shares.
A cash bonus award or option grant may, in addition, be made at the
discretion of the Compensation Committee without regard to whether any
specified criteria are met.
LONG-TERM INCENTIVES--STOCK OPTIONS AND RESTRICTED STOCK AWARDSLong-Term Incentives--Stock Options and Restricted Stock Awards
The Compensation Committee administers the Option Plan which provides for
the grant of stock options and restricted stock awards, both of whose value is
related to the value of the Common Stock. Accordingly, grants of stockThese options and restricted stock awards are
intended to help align the executive officers' interests with thatthose of
shareholders by increasing such officers' stake in the Company.
Stock options and restricted stock awards generally vest over a number of
years, and any unvested options or shares of restricted stock are usually
forfeited ninety90 days after termination of the recipient's employment with the
Company.employment. Such
awards, therefore, are also intended to encourage recipients to remain in the
employ of the Company over a substantial period of time.
The Compensation Committee adopted in February 1994 the Long Term Incentive
Plan for Principals ("LTIP") for the Company's Chairman of the Board, the
President and Chief Executive Officer and the Vice Chairman and Chief
Operating Officer. Under this plan, each of these executive officers received
in fiscal 1997 stock options that will vest only if the Company meets pre-
established goals for return on investment and for total shareholders' return
on the Common Stock as compared to a group of other retailers, each measured
during
15
the succeeding three-year period. Each participant in this plan chose, on the
date of the grant, to have any performance award earned paid in options to
purchase Common Stock at the fair market value on the date of grant. Other
choices made available to each participant included cash and shares of Common
Stock. By establishing the LTIP, the Compensation Committee intended to
increase the participants' stakes in the long-term performance of the Company.
In addition, the Vice Chairman and Chief Operating Officer received a grant
of stock options under the LTIP which vests in three equal annual installments
beginning on the first anniversary of the date of grant.
No additional grants or awards will be made under the LTIP.
Of the 301,400 total401,400 stock options granted in fiscal 1997, 266,4001998, 86% were granted to the
Company's senior executive officers.
QUALIFYING EXECUTIVE COMPENSATION FOR DEDUCTIBILITY UNDER PROVISIONS OF THE
INTERNAL REVENUE CODEQualifying Executive Compensation for Deductibility Under Provisions of the
Internal Revenue Code
The Internal Revenue Code provides that publicly heldpublicly-held corporations 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""performance based" as defined
in the Code. The Compensation Committee has taken such actions as are
appropriate to qualify, to the extent possible,it determines such actions are in the
best interests of the Company, compensation paid to executives for
deductibility under the Code. Nevertheless, the Compensation Committee has in
the past, and may in the future, recommend or approve payment of compensation
that may not be deductible under these provisions of the Code wheneverif the Compensation
Committee has determined that such payments are in the best interests of the
Company.
COMPENSATION COMMITTEE:11
Compensation Committee:
Samuel J. Gerson
Roger S. HillasLawrence J. Ring
Leon F. Winbigler
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires theBeneficial Ownership Reporting Compliance
The Company's executive officers and directors and persons who own more than
ten percent of a registeredeither class of the Company's equity securities (collectively, the "reporting persons")stock are required to file
reports of ownership and changes in ownership with the Securities and
Exchange CommissionSEC and to furnish the
Company with copies of these reports. Based on the Company's review of the
copies of these reports received, by it,
and written representations received from reporting persons, the Company believes that all filings required to be made
by the reporting persons during fiscal 19971998 were made on a timely basis.
CERTAIN TRANSACTIONSbasis other than:
. the Form 4 report for June 1998 by M. Thomas Grumbacher, an officer,
director and beneficial owner of more than 10% of the Common Stock, with
respect to one transaction by Mr. Grumbacher and one transaction by a
trust of which Mr. Grumbacher is the trustee, was filed late;
. the Form 4 report for June 1998 by Mary Jo Grumbacher, who was at such
time a beneficial owner of more than 10% of the Common Stock, on which
one transaction was reported, was filed late;
. the Form 4 report for October 1998 by Lawrence J. Ring, a director, on
which two transactions were reported, was filed late;
. the Form 4 report for December 1998 by Leon D. Starr, a director, on
which two transactions were reported, was filed late; and
. the Form 4 reports for August 1998 and September 1998 by Leon F.
Winbigler, a director, on which a total of ten transactions were
reported, were filed late.
Certain Transactions
The Company leases its Oil City, Pennsylvania and Butler, Pennsylvania
stores from M. Thomas Grumbacher. Mr. Grumbacher is the ground tenant under
leases from the owners of the respective shopping centers. These leases
between the Company and Mr. Grumbacher were entered into on January 1, 1981
and February 17, 1981, respectively. The aggregate rental payments during fiscal 19971998
for the Oil City store and the Butler store to Mr. Grumbacher were $223,500
and $264,000,$273,000, respectively. Mr. Grumbacher has agreed to sell his interest in
the Butler lease to the owner of the shopping center, and the Company has
entered into a lease for this store directly with the owner. The Oil City
and Butler leases also
require payment of a percentage rent (1% of sales in excess of $5.3 million
with respect to Oil City and 1% of sales in excess of $7.0 million with
respect to Butler) which Mr. Grumbacher passes through to the ground lessor.
Both leases terminatelease terminates on July 31, 2006 and provideprovides the Company with five five-
yearfive-year
renewal options.
Additionally, the Company leases the land for its York Galleria store from
MBM Land Associates Limited Partnership ("MBM"), a partnership of which M.
Thomas Grumbacher, through a wholly-owned corporation, and certain trusts
established for the benefit of his three children, are the partners. The lease
expires on September 30, 2019, and the Company has the right to extend the
term of the lease for six additional periods of five years each. Rental
payments by the Company during fiscal 19971998 under this lease aggregated $63,000.
16
The Company also leases from MBM a portion of the property on which its
distribution center is located from MBM.located. The remainder is leased from Mr. Grumbacher.
Aggregate annual rental payments under the leases are $162,000 until January
1, 2001. During fiscal 1997,1998, Mr. Grumbacher and MBM received rental payments from the
Company under such leases aggregating $126,767 and $35,233, respectively. Each
of the leases terminates on May 31, 2017, and the Company has the right to
extend the term of each of the leases for two additional periods of five years
each at the then fair market rental value.
Total lease payments to M. Thomas Grumbacher and affiliated entities with
respect to fiscal 1997during
1998 were $712,500.$721,500.
In 1995, in connection with his employment by the Company, Heywood Wilansky,
President and Chief Executive Officer of the Company, received a non-interest
bearing loan from the Company in the principal
12
amount of $750,000, which loan was to be forgiven in two installments of
$375,000 each in December 1997 and April 1999 provided that Mr. Wilansky
remained employed by the Company. One such installment was forgiven in
December 1997, and $375,000 inthe balance was forgiven on April 30, 1999.
The Company also made a $480,447 loan to Mr. Wilansky during 1998, the
principal amount of such loan remains outstanding.
In November 1996, the Company extended to James H. Baireuther, Senior Vice
President--Chief Financial Officer, an interest-free relocation loan inbeing the amount of $85,000 in connection with Mr. Baireuther'sWilansky's tax liability attributable to the
vesting of Mr. Wilansky's Restricted Shares. This loan bears interest at 4.25%
per annum. Interest is payable annually and the principal is payable on the
earlier of termination of Mr. Wilansky's employment byor the Company. Suchsale of those
shares of the Company's Common Stock which gave rise to the tax liability.
This loan has been paid in full.was made pursuant to the terms of Mr. Wilansky's employment
agreement.
In January 1998, the Company extended to Patrick J. McIntyre, Senior Vice
President--ChiefPresident and Chief Information Officer, an interest-free relocation loan in
the amount of $65,000 in connection with Mr. McIntyre'shis employment by the Company. SuchThis
loan has been paidwas repaid in full.April 1998.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 19992000 Annual Meeting of
Shareholders must be received by the Company by January 15, 19992000 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 2000 Annual
Meeting of Shareholders but not included in the Company's proxy statement and
form of proxy for that meeting. If notice of any such proposal is received by
the Company after March 30, 2000, such proposal shall be deemed "untimely" for
purposes of Rule 14a-4(c) under the Securities Exchange Act of 1934 and,
therefore, the Company will have the right to exercise discretionary voting
authority with respect to such proposal.
SOLICITATION OF PROXIES
The enclosed form ofYour proxy is being solicited on behalf ofby the Company's Board of Directors. The Company will
bear the cost of this solicitation, including the cost of preparing, assembling and mailing proxy materials, the
handling and tabulation of proxies received, and charges of brokerage houses
and other institutions, nominees and fiduciaries in forwarding suchthese materials
to beneficial owners.
In addition to the mailing of the proxy material, suchThis solicitation may be made in person or by telephone telegraph or telecopy by
directors, officers or regular employees of the Company, or by a professional proxy
solicitation organization engaged by the Company.
By order of the Board of Directors
ROBERT E. STERN
Vice President and
Corporate Secretary
17May 14, 1999
13
APPENDIX A
THE BON-TON STORES, INC.
PERFORMANCE BASED STOCK INCENTIVE PLAN
FOR HEYWOOD WILANSKY
1. PURPOSE
-------
The Bon-Ton Stores, Inc. Performance Based Stock Incentive Plan for
Heywood Wilansky, as set forth herein, is established by the Committee (has
hereinafter defined), along with the performance goals required to be satisfied
for the payment of any stock bonus under the terms of the Plan, and is adopted
by the Board of Directors, subject to the approval of the shareholders of the
Bon-Ton Stores, Inc., a Pennsylvania corporation (the "Company"), for the
purpose of providing performance-based compensation to Heywood Wilansky (the
"Participant") in the form of stock bonuses granted in connection with services
to be provided by the Participant during the term of the Plan in accordance with
a formula that is based on the financial success of the Company as part of an
integrated compensation program which is intended to assist the Company in
motivating and retaining employees of superior ability, industry and loyalty.
2. DEFINITIONS
-----------
The following words and phrases as used herein shall have the
following meanings, unless a different meaning is plainly required by the
context:
"Award" shall mean an award of shares of Company Stock subject to
forfeiture if the performance goals set forth in the Plan are not satisfied, and
subject further to the restrictions contained in the vesting schedule set forth
in the Plan.
"Board of Directors" shall mean the Board of Directors of the Company.
"Cause" shall have the meaning set forth in the Participant's
Employment Agreement in effect as of the date the Plan is adopted.
"Change of Control" shall have the meaning set forth in the
Participant's Employment Agreement in effect as of the date the Plan is adopted.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Compensation Committee of the Board of
Directors, consisting of two or more Outside Directors, to act as the Committee
with respect to the Plan, or
A-1
such other committee as may be appointed by the Board of Directors to act as
the Committee with respect to the Plan.
"Company" shall mean the Bon-Ton Stores, Inc., a Pennsylvania
corporation, and any successor thereto.
"Company's Accountants" shall mean the certified public accountants
charged with the responsibility for determining the Company's earnings for the
relevant fiscal year for purposes of the disclosure of such information as may
be required under applicable law or under such rules as may be applicable to the
Company in connection with any public filings or in connection with the listing
of the Company's securities on any securities exchange.
"Company Stock" shall mean the Company's Common Stock, par value $.01
per share.
"Designated Beneficiary" shall mean the person, if any, specified in
writing by the Participant to receive any payments due to the Participant in the
event of the Participant's death. In the event no person is specified by the
Participant, the Participant's estate shall be deemed to be the Designated
Beneficiary.
"Effective Date" shall mean February 1, 1998.
"Outside Director" shall mean a member of the Board of Directors who
is treated as an "outside director" for purposes of Code Section 162(m).
"Option" shall mean a grant of an option to acquire shares of Company
Stock, subject to forfeiture if the performance goals set forth in the Plan are
not satisfied and subject further to the restrictions contained in the vesting
schedule set forth in the Plan. The Option granted under the Plan is not
intended to be an "incentive stock option" as that term is used for purposes of
Code Section 422.
"Participant" shall mean Heywood Wilansky.
"Plan" shall mean the Bon-Ton Stores, Inc. Performance Based Stock
Incentive Plan for Heywood Wilansky.
"Plan Year" shall mean the taxable year of the Company. The first
Plan Year shall be taxable year of the Company that commenced on or about
February 1, 1998.
A-2
3. PARTICIPATION
-------------
Heywood Wilansky shall be the sole Participant in the Plan.
4. TERM OF PLAN
------------
Subject to approval of the Plan by the shareholders of the Company,
the Plan shall be in effect as of the Effective Date and shall continue until
terminated by the Board of Directors.
5. COMPANY STOCK AWARD AND OPTIONS
-------------------------------
(a) Restricted Stock Award. The Company shall award to the
----------------------
Participant 250,000 shares of Company Stock, subject to the risk of forfeiture
based on Company performance and subject further to the vesting schedule set
forth in Section 6 of the Plan, as soon as practicable following shareholder
approval of the Plan. Issuance of shares may, with the consent of the
Participant, be deferred until an appropriate filing is made with the Securities
Exchange Commission registering the shares that may be granted under the Plan.
(b) Option Grant. On or shortly following the Effective Date, the
------------
Company shall grant to the Participant the Option, which shall be an option to
acquire 250,000 shares of Company Stock (the "Shares"), subject to the risks of
forfeiture based on Company performance and subject further to the vesting
schedule set forth in Section 6 of the Plan. The Option shall have an exercise
price (the "Option Price") of $8.00 per share of Company Stock, and shall expire
on the day before the tenth anniversary of the Effective Date, unless the Option
shall have terminated or been forfeited prior to such date under the terms of
the Plan or would have terminated or been forfeited prior to such date under the
terms of The Bon-Ton Stores, Inc. Amended and Restated 1991 Stock Option and
Restricted Stock Plan if the Option were subject to such plan. The Option shall
also be subject to the following terms:
(i) Exercise. The Option shall not be deemed to have been exercised
--------
prior to the receipt by the Company of written notice of such exercise and of
payment in full of the Option Price for the Shares to be purchased. Each such
notice shall specify the number of Shares to be purchased and shall (unless the
Shares are covered by a then current registration statement or a Notification
under Regulation A under the Securities Act of 1933, as amended (the "Act")),
contain the Participant's acknowledgment in form and substance satisfactory to
the Company that (i) such Shares are being purchased for investment and not for
distribution or resale (other than a distribution or resale which, in the
opinion of counsel satisfactory to the Company, may be made without violating
the registration provisions of the Act), (ii) the Participant has been advised
and understands that (A) the Shares have not been registered under the Act and
are "restricted securities" within the meaning of Rule 144 under the Act and are
subject to restrictions on transfer and (B) the Company is under no obligation
to register the Shares under the Act or to take any action which would make
available to the Optionee any exemption from such registration, (iii) such
Shares may not be transferred without compliance
A-3
with all applicable federal and state securities laws, and (iv) an appropriate
legend referring to the foregoing restrictions on transfer and any other
restrictions imposed under the Option Documents may be endorsed on the
certificates. Notwithstanding the foregoing, if the Company determines that
issuance of Shares should be delayed pending (I) registration under federal or
state securities laws, (II) the receipt of an opinion that an appropriate
exemption from such registration is available, (III) the listing or inclusion
of the Shares on any securities exchange or in an automated quotation system
or (IV) the consent or approval of any governmental regulatory body whose
consent or approval is necessary in connection with the issuance of such
Shares, the Company may defer exercise of any Option granted hereunder until
any of the events described herein.
(ii) Medium of Payment. The Participant shall pay for Shares (i) in
-----------------
cash, (ii) by certified check payable to the order of the Company, or (iii) by
such other mode of payment as the Committee may approve, including payment
through a broker in accordance with procedures permitted by Regulation T of the
Federal Reserve Board. Furthermore, the Committee may permit, at its
discretion, that payment may be made in whole or in part in shares of Company
Stock held by the Participant for at least six months. If payment is made in
whole or in part in shares of Company Stock, then the Participant shall deliver
to the Company certificates registered in his name representing the shares owned
by him, free of all liens, claims and encumbrances of every kind and having an
aggregate Fair Market Value (as defined below) on the date of delivery that is
at least as great as the Option Price of the Shares (or relevant portion
thereof) with respect to which the Option is to be exercised by the payment in
shares of Company Stock, accompanied by stock powers duly endorsed in blank by
the Participant. For these purposes, Fair Market Value means the last reported
sale price of a share of Company Stock on the relevant date, if Company Stock is
traded in a public market, or, if no such sale price is reported value, the mean
between the last reported "bid" and "asked" prices for a shares of Company Stock
as reported on NASDAQ shall be used, or, if not so reported, as reported by the
National Daily Quotation Bureau, Inc., or as reported in a customary financial
reporting service, as applicable, and as the Committee determines, on the
relevant date. If the Company Stock is not traded in a public market on the
relevant date, the Fair Market Value shall be as determined in good faith by the
Committee. Notwithstanding the foregoing, the Committee may impose from time to
time such limitations and prohibitions on the use of shares of Company Stock to
exercise the Option as it deems appropriate.
(iii) Termination of Options. The Option shall terminate
----------------------
after the first to occur of the following:
(A) The tenth anniversary of the Effective Date.
(B) Expiration of ninety (90) days from the date the
Participant's employment with the Company terminates for any reason other than
disability (as defined in the Company's long term disability plan, if any, or
otherwise by reference to eligibility for federal social security disability
benefits) or death;
A-4
(C) Expiration of one year from the date the
Participant's employment with the Company or its Affiliates terminates due to
his disability or death;
(D) The date that the Participant's employment with
the Company terminates at any time prior to January 31, 2003 on account of the
Participant's resignation or on account of the termination of his employment
by the Company for Cause; or
(E) The date, if any, set by the Board of Directors
as an accelerated expiration date in connection with a Change of Control of
the Company.
Notwithstanding the foregoing, the Committee may extend the period during which
the Option may be exercised to a date no later than the tenth anniversary of the
Effective Date.
(iv) Transfers. The Option may not be transferred, except by will or
---------
by the laws of descent and distribution. During the lifetime of the
Participant, the Option may be exercised only by him. Notwithstanding the
foregoing, the Option may be transferred pursuant to the terms of a "qualified
domestic relations order," within the meaning of sections 401(a)(13) and 414(p)
of the Code or within the meaning of Title I of the Employee Retirement Income
Security Act of 1974, as amended.
(v) Amendment. The Committee shall have the right to amend the
---------
Option, subject to the Participant's consent if such amendment is not favorable
to the Optionee.
(c) Adjustments on Changes in Capitalization. The aggregate number of
----------------------------------------
Shares and class of Shares subject to the Option shall be appropriately adjusted
in the event of a stock dividend, stock split, recapitalization or other change
in the number or class of issued and outstanding equity securities of the
Company resulting from a subdivision or consolidation affecting the Company
Stock subject to the Option. The Committee shall have authority to determine
the adjustments to be made hereunder, and any such determination by the
Committee shall be final, binding and conclusive.
6. PERFORMANCE GOALS, FORFEITURES AND VESTING
------------------------------------------
(a) Performance Goal Requirement. If the net after tax earnings of
----------------------------
the Company for the first Plan Year, as determined by the Company's Accountants,
is not at least equal to $3,000,000, as certified in writing by the Committee,
the shares of Company Stock and the Option granted to the Participant pursuant
to Section 5 of the Plan shall be forfeited, and the Participant shall have no
further rights to any benefits under the terms of the Plan.
(b) Vesting Schedule.
----------------
(i) General Vesting Schedule.
------------------------
A-5
(A) Award: If the Participant has not forfeited the shares
of Company Stock granted under the Plan by reason of a failure to meet the
performance goal set forth in Section 6(a) of the Plan, the Participant shall
become fully vested in the shares of Company Stock granted under the Plan, and
such shares of Company Stock shall be freely transferable, subject to such
limitations as may be imposed under applicable law or governmental
regulations, in three annual installments on the last day of the Company's
fiscal year which occurs on or about the third, fourth and fifth anniversaries
of the Effective Date in the amount of 83,334, 83,333 and 83,333 shares of
Company Stock respectively.
(B) Option: If the Participant has not forfeited the
Option by reason of a failure to meet the performance goal set forth in
Section 6(a) of the Plan, the Option shall become vested and the Participant
shall be able to exercise the Option in three annual installments (with
respect to 83,334, 83,333 and 83,333 Shares respectively) on day before the
first, second and third anniversaries of the Effective Date.
(ii) Special Vesting Schedule. If the Participant has not forfeited
------------------------
the shares of Company Stock granted under the Plan or the Option by reason of a
failure to meet the performance goal set forth in Section 6(a) of the Plan, the
Participant shall become fully vested in all of the shares of Company Stock
granted under the Plan and in the Option, and the Option shall be fully
exercisable if, at any time following the date the performance goal set forth in
Section 6(a) of the Plan is satisfied, the Participant is discharged without
Cause or if there is a Change of Control.
7. COMMITTEE
---------
(a) Powers. The Committee shall have the power and duty to do all
------
things necessary or convenient to effect the intent and purposes of the Plan and
not inconsistent with any of the provisions hereof, whether or not such powers
and duties are specifically set forth herein, and, by way of amplification and
not limitation of the foregoing, the Committee shall have the power to:
(i) provide rules and regulations for the management, operation
and administration of the Plan, and, from time to time, to amend or supplement
such rules and regulations;
(ii) construe the Plan, which construction, as long as made in
good faith, shall be final and conclusive upon all parties hereto; and
(iii) correct any defect, supply any omission, or reconcile
any inconsistency in the Plan in such manner and to such extent as it shall deem
expedient to carry the same into effect, and it shall be the sole and final
judge of when such action shall be appropriate.
A-6
The resolution of any questions with respect to payments and entitlements
pursuant to the provisions of the Plan shall be determined by the Committee, and
all such determinations shall be final and conclusive.
(b) Indemnity. No member of the Committee shall be directly or
---------
indirectly responsible or under any liability by reason of any action or default
by him as a member of the Committee, or the exercise of or failure to exercise
any power or discretion as such member. No member of the Committee shall be
liable in any way for the acts or defaults of any other member of the Committee,
or any of its advisors, agents or representatives. The Company shall indemnify
and save harmless each member of the Committee against any and all expenses and
liabilities arising out of his own membership on the Committee.
(c) Compensation and Expenses. Members of the Committee shall receive
-------------------------
no separate compensation for services other than compensation for their
services as members of the Board of Directors, which compensation can include
compensation for services at any committee meeting attended in their capacity as
members of the Board of Directors. Members of the Committee shall be entitled
to receive their reasonable expenses incurred in administering the Plan. Any
such expenses, as well as extraordinary expenses authorized by the Company,
shall be paid by the Company.
(d) Participant Information. The Company shall furnish to the
-----------------------
Committee in writing all information the Company deems appropriate for the
Committee to exercise its powers and duties in administration of the Plan. Such
information shall be conclusive for all purposes of the Plan and the Committee
shall be entitled to rely thereon without any investigation thereof; provided,
however, that the Committee may correct any errors discovered in any such
information.
(e) Inspection of Documents. The Committee shall make available to
-----------------------
the Participant and his Designated Beneficiary, for examination at the principal
office of the Company (or at such other location as may be determined by the
Committee), a copy of the Plan and such of its records, or copies thereof, as
may pertain to the benefits of the Participant and beneficiary under the Plan.
8. EFFECTIVE DATE, TERMINATION AND AMENDMENT
-----------------------------------------
(a) Effective Date of Participation in Plan. Subject to shareholder
---------------------------------------
and Committee approval of the Plan, participation in this Plan shall be
effective as of February 1, 1998 and shall continue thereafter for the term of
the Plan.
(b) Amendment and Termination of the Plan. The Plan may be
-------------------------------------
terminated or revoked by the Company at any time and amended by the Company from
time to time, provided that neither the termination, revocation or amendment of
the Plan may, without the written approval of the Participant, reduce the amount
of the benefit to which the Participant would otherwise be entitled, and
provided further that no changes that would increase the value of the
A-7
benefit to which the Participant is entitled under the terms of the Plan shall
be effective without approval by the Committee and without disclosure to and
approval by the shareholders of the Company in a separate vote prior to
effective date of any such change. In addition, the 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, as they relate to
the exemption for "performance-based compensation" under the limitations on
the deductibility of compensation imposed under Code Section 162(m).
9. MISCELLANEOUS PROVISIONS
------------------------
(a) Unsecured Creditor Status. The Participant, if entitled to a
-------------------------
bonus payment hereunder, shall rely solely upon the unsecured promise of the
Company, as set forth herein, for the payment thereof, and nothing herein
contained shall be construed to give to or vest in the Participant or any other
person now or at any time in the future, any right, title, interest, or claim in
or to any specific asset, fund, reserve, account, insurance or annuity policy or
contract, or other property of any kind whatever owned by the Company, or in
which the Company may have any right, title, or interest, now or at any time in
the future.
(b) Other Company Plans. It is agreed and understood that any
-------------------
benefits under this Plan are in addition to any and all benefits to which the
Participant may otherwise be entitled under any other contract, arrangement, or
voluntary pension, profit sharing or other compensation plan of the Company,
whether funded or unfunded, and that this Plan shall not affect or impair the
rights or obligations of the Company or the Participant under any other such
contract, arrangement, or voluntary pension, profit sharing or other
compensation plan.
(c) Separability. If any term or condition of the Plan shall be
------------
invalid or unenforceable to any extent or in any application, then the remainder
of the Plan, with the exception of such invalid or unenforceable provision,
shall not be affected thereby, and shall continue in effect and application to
its fullest extent.
(d) Continued Employment. Neither the establishment of the Plan, any
--------------------
provisions of the Plan, nor any action of the Committee shall be held or
construed to confer upon the Participant the right to a continuation of
employment by the Company. The Company reserves the right to dismiss any
employee (including the Participant), or otherwise deal with any employee
(including the Participant) to the same extent as though the Plan had not been
adopted.
(e) Incapacity. If the Committee determines that the Participant or
----------
Beneficiary is unable to care for his affairs because of illness or accident, or
is a minor, any benefit due the Participant or Beneficiary under the Plan may be
paid to his spouse, child, parent, or any other person deemed by the Committee
to have incurred expense for the Participant or Beneficiary (including a duly
appointed guardian, committee, or other legal representative), and any such
payment shall be a complete discharge of the Company's obligation hereunder.
A-8
(f) Jurisdiction. The Plan shall be construed, administered, and
------------
enforced according to the laws of the Commonwealth of Pennsylvania, except to
the extent that such laws are preempted by the Federal laws of the United States
of America.
(g) Claims. If, pursuant to the provisions of the Plan, the Committee
------
denies the claim of the Participant for benefits under the Plan, the Committee
shall provide written notice, within 60 days after receipt of the claim, setting
forth in a manner calculated to be understood by the claimant:
(i) the specific reasons for such denial;
(ii) the specific reference to the Plan provisions on which the
denial is based;
(iii) a description of any additional material or information
necessary to perfect the claim and an explanation of why such material or
information is needed; and
(iv) an explanation of the Plan's claim review procedure and
the time limitations of this subsection applicable thereto.
If the Participant's claim for benefits has been denied, the Participant may
request review by the Committee of the denied claim by notifying the Committee
in writing within 60 days after receipt of the notification of claim denial. As
part of said review procedure, the claimant or his authorized representative may
review pertinent documents and submit issues and comments to the Committee in
writing. The Committee shall render its decision to the claimant in writing in
a manner calculated to be understood by the claimant not later than 60 days
after receipt of the request for review, unless special circumstances require an
extension of time, in which case decision shall be rendered as soon after the
sixty-day period as possible, but not later than 120 days after receipt of the
request for review. The decision on review shall state the specific reasons
therefor and the specific Plan references on which it is based.
(h) Withholding. The Participant or the Designated Beneficiary shall
-----------
make appropriate arrangements with the Company for satisfaction of any federal,
state or local income tax withholding requirements and Social Security or other
tax requirements applicable to the accrual or payment of benefits under the
Plan. If no other arrangements are made, the Company may provide, at its
discretion, for any withholding and tax payments as may be required.
(i) Interpretation. The Plan is intended to pay compensation only on
--------------
the attainment of the performance goals set forth above in a manner that will
exempt such compensation from the limitations on the deduction of certain
compensation payments under Code Section 162(m). To the extent that any
provision of the Plan would cause a conflict with the conditions required for
such an exemption or would cause the administration of the Plan to fail to
satisfy the applicable requirements for the performance-based compensation
exemption under Code Section 162(m), such provision shall be deemed null and
void to the extent permitted by applicable law. In addition, the Plan is
intended to enable transactions under the Plan to satisfy the conditions of Rule
16b-3 promulgated by the Securities Exchange Commission under the Securities
Exchange Act of 1934, as amended, and any provision of the Plan which would
A-9
cause a conflict with such conditions shall be deemed null and void to the
extent permitted by applicable law and in the discretion of the Committee.
A-10
THE BON-TON STORES, INC.
STOCK OPTION
------------
THIS STOCK OPTION (the "Option") is granted this _____ day of _______,
1998, by THE BON-TON STORES, INC., a Pennsylvania corporation (the "Company"),
to Heywood Wilansky (the "Optionee").
W I T N E S S E T H:
- - - - - - - - - -
1. Grant. The Company hereby grants to the Optionee an Option to
-----
purchase on the terms and conditions hereinafter set forth all or any part of an
aggregate of 250,000 shares of the Company's Common Stock, par value $.01 per
share (the "Option Shares"), at a purchase price of $8.00 per share (the "Option
Price"). This Option is granted pursuant to The Bon-Ton Stores, Inc.
Performance Based Stock Incentive Plan for Heywood Wilansky (the "Plan"), and is
subject to all provisions set forth therein, including the forfeiture provisions
which become applicable to the Option in the event the performance goals
established under the terms of the Plan are not met. This Option is not
intended to be an "incentive stock option" within the meaning of section 422(b)
of the Internal Revenue Code of 1986, as amended. The terms of this Option are
subject to the applicable provisions of Optionee's employment agreement with the
Company (the "Employment Agreement") effective as of February 1, 1998, and the
Plan. In the event there is a conflict between the terms of this Option and the
Employment Agreement or the Plan, the provisions of the Employment Agreement or
the Plan shall apply, and in the event the terms of
A-11
the Employment Agreement conflict with the terms of the Plan, the terms of the
Plan shall apply.
2. Term.
----
(a) General Rule. The Option granted hereunder shall vest and
------------
be exercisable as set forth as follows: On the day prior to the first, second
and third anniversaries of the Effective Date, 83,334, 83,333, and 83,333
shares, respectively, shall become vested; provided that the Optionee meets the
performance goals established by the Compensation Committee of the Company's
Board of Directors (the "Committee") pursuant to the Plan. The Option granted
hereunder shall terminate in full at 5:00 p.m. York, Pennsylvania time on the
tenth anniversary of the Effective Date, unless sooner terminated under
subsection 2(b), (c), (d) or (e) below. This Option or any installment may be
exercised in whole or in part with respect to any Option Shares that have vested
and become exercisable, except that this Option may in no event be exercised
with respect to fractional shares.
(b) Termination of Employment. If Optionee is discharged
-------------------------
without Cause (as that term is used in the Employment Agreement), all options
shall become immediately vested and shall remain exercisable for a period of 90
days after termination of employment. If Executive resigns or is discharged for
Cause prior to the expiration of the Term (as that term is used in the
Employment Agreement), all options not exercised, whether or not vested, shall
immediately be canceled.
A-12
(c) Certain Transactions. In the event of a Change of Control
--------------------
(as defined in the Plan), this Option shall terminate on any date specified by
the Committee. The Committee shall give the Optionee at least thirty (30) days
written notice of an accelerated termination date pursuant to this subsection
2(c). If this subsection 2(c) shall become applicable, the Committee shall have
the right to amend this Option, without the consent of the Optionee, as it deems
necessary or desirable.
(d) Forfeiture. If the Committee makes a finding, after full
----------
consideration of the facts presented on behalf of both the Company and the
Optionee, that the Optionee (i) has breached any employment or service contract
with the Company or an Affiliate, or has been engaged in any sort of disloyalty
to the Company or an Affiliate, including, without limitation, fraud,
embezzlement, theft, commission of a felony or proven dishonesty in the course
of the Optionee's employment or service or (ii) has disclosed trade secrets of
the Company or an Affiliate, then this Option shall terminate on the date of
such finding. In addition to immediate termination of this Option, the Optionee
shall forfeit all Option Shares for any exercised portion of this Option for
which the Company has not yet delivered the share certificates to the Optionee
upon refund by the Company of the Option Price paid by the Optionee with respect
to such Option Shares.
(e) In no event shall this Option be exercisable after the
expiration of ninety days from the date the Optionee's employment with the
Company or its Affiliates (as that term is used
A-13
in the Plan) terminates for any reason other than Disability (as that term is
used in the Plan) or death, or the expiration of one year from the date the
Optionee's employment with the Company or its Affiliates terminates due to the
Optionee's Disability or death.
3. Transfers. This Option is not transferable by the Optionee
---------
otherwise than by will or pursuant to the laws of descent and distribution in
the event of the Optionee's death, in which event this Option may be exercised
by the heirs or legal representatives of the Optionee. This Option may be
exercised during the lifetime of the Optionee only by the Optionee. Any attempt
at assignment, transfer, pledge or disposition of this Option contrary to the
provisions hereof or the levy of any execution, attachment or similar process
upon the Option shall be null and void and without effect. Any exercise of the
Option by a person other than the Optionee shall be accompanied by appropriate
proofs of the right of such person to exercise the Option.
4. Method of Exercise and Payment. When exercisable under Section
------------------------------
2, this Option may be exercised by written notice, pursuant to Section 8, to the
Company's Controller specifying the number of Option Shares to be purchased and,
unless the Option Shares are covered by a then current registration statement or
a Notification under Regulation A under the Securities Act of 1933, as amended
(the "Act"), and current registrations under all applicable state securities
laws, containing the Optionee's acknowledgment, in form and substance
satisfactory to the Company,
A-14
that the Optionee (a) is purchasing such Option Shares for investment and not
for distribution or resale (other than a distribution or resale which, in the
opinion of counsel satisfactory to the Company, may be made without violating
the registration provisions of the Act or any state securities laws), (b) has
been advised and understands that (i) the Option Shares have not been registered
under the Act and are "restricted securities" within the meaning of Rule 144
under the Act and are subject to restrictions on transfer and (ii) the Company
is under no obligation to register the Option Shares under the Act or to take
any action which would make available to the Optionee any exemption from such
registration, and (c) has been advised and understands that such Option Shares
may not be transferred without compliance with all applicable federal and state
securities laws. The notice shall be accompanied by payment of the aggregate
Option Price of the Option Shares being purchased (a) in cash, (b) by certified
check payable to the order of the Company or (c) by a combination of the
foregoing. Such exercise shall be effective upon the actual receipt by the
Company's Controller of such written notice and payment. In addition, except as
provided below, the Optionee may make payment in whole or in part in shares of
the Company's Common Stock held by the Optionee for more than six months. If
payment is made in whole or in part in shares of the Company's Common Stock,
then the Optionee shall deliver to the Company certificates registered in the
name of the Optionee representing shares of the Company's Common Stock legally
and
A-15
beneficially owned by the Optionee, free of all liens, claims and encumbrances
of every kind and having a Fair Market Value (as defined in the Plan) on the
date of delivery of such notice that is not greater than the Option Price of the
Option Shares with respect to which the Option is to be exercised, accompanied
by stock powers duly endorsed in blank by the record holder of the shares
represented by such certificates. Notwithstanding the foregoing, the Committee,
in its sole discretion, may refuse to accept shares of the Company's Common
Stock in payment of the Option Price. In that event, any certificates
representing shares of the Company's Common Stock which were delivered to the
Company shall be returned to the Optionee with notice of the refusal of the
Committee to accept such shares in payment of the Option Price. Furthermore, the
Committee may impose such limitations and prohibitions on the use of shares of
the Company's Common Stock to exercise the Option as it deems appropriate.
5. Adjustments on Changes in Capitalization. In the event that,
----------------------------------------
prior to the delivery by the Company of all of the Option Shares in respect of
which the Option is granted, there shall be a stock dividend, stock split,
recapitalization or other change in the number or class of issued and
outstanding equity securities of the Company resulting from a subdivision or
consolidation of the Company's Common Stock and/or other outstanding equity
security or a recapitalization or other capital adjustment affecting the
Company's Common Stock or an equity security of the Company which is effected
without receipt of
A-16
consideration by the Company, the remaining number of Option Shares (or class of
shares) subject to the Option and the Option Price therefor shall be adjusted in
a manner determined by the Committee so that the adjusted number of Option
Shares (or class of shares) and the adjusted Option Price shall be the
substantial equivalent of the remaining number of Option Shares subject to the
Option and the Option Price thereof prior to such change. For purposes of this
Section, no adjustment shall be made as a result of the issuance of the
Company's Common Stock upon the conversion of other securities of the Company
which are convertible into Common Stock.
6. Legal Requirements. If the listing, registration or
------------------
qualification of the Option Shares upon any securities exchange or under any
federal or state law, or the consent or approval of any governmental regulatory
body is necessary as a condition of or in connection with the purchase of such
Option Shares, the Company shall not be obligated to issue or deliver the
certificates representing the Option Shares as to which the Option has been
exercised unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained. If registration is considered
unnecessary by the Company or its counsel, the Company may cause a legend to be
placed on the Option Shares being issued calling attention to the fact that they
have been acquired for investment and have not been registered.
7. Administration. This Option has been granted pursuant to and is
--------------
subject to the terms and provisions of the Plan, as it may be amended from time
to time. All questions of
A-17
interpretation and application of the Plan and this Option shall be determined
by the Committee. The Committee's determination shall be final, binding and
conclusive.
8. Notices. Any notice to be given to the Company shall be
-------
addressed to the Treasurer of the Company at its principal executive office, and
any notice to be given to the Optionee shall be addressed to the Optionee at the
address then appearing on the personnel records of the Company or the Affiliate
of the Company by which he is employed, or at such other address as either party
hereafter may designate in writing to the other. Any such notice shall be
deemed to have been duly given when personally delivered, by courier service
such as Federal Express, or by other messenger, or when deposited in the United
States mail, addressed as aforesaid, registered or certified mail, and with
proper postage and registration or certification fees prepaid.
9. Employment. Nothing herein contained shall affect the right of
----------
the Company or any Affiliate to terminate the Optionee's employment, services,
responsibilities, duties, or authority to represent the Company or any Affiliate
at any time or for any reason whatsoever.
10. Withholding of Taxes. Whenever the Company proposes or is
--------------------
required to deliver or transfer Option Shares in connection with the exercise of
this Option, the Company shall have the right to (a) require the Optionee to
remit to the Company an amount sufficient to satisfy any federal, state and/or
local withholding tax requirements prior to the delivery or transfer of any
A-18
certificate or certificates for such Option Shares or (b) take whatever action
it deems necessary to protect its interests with respect to tax liabilities.
IN WITNESS WHEREOF, the Company has granted this Option on the day and
year first above written.
THE BON-TON STORES, INC.
By:
-----------------------------
M. Thomas Grumbacher
Chairman of the Board
ACCEPTED BY:
--------------------------------
A-19
APPENDIX B
THE BON-TON STORES, INC.
FIVE YEAR CASH BONUS PLAN
FOR HEYWOOD WILANSKY
1. PURPOSE
-------
The Bon-Ton Stores, Inc. Five Year Cash Bonus Plan for Heywood Wilansky
(the "Plan"), is established by the Committee (as hereinafter defined), along
with the current performance goals required to be satisfied for the payment of
any bonus under the terms of the Plan, and is adopted by the Board of Directors,
subject to the approval of the shareholders of The Bon-Ton Stores, Inc., a
Pennsylvania corporation (the "Company"). The Plan is established for the
purpose of providing performance-based compensation to Heywood Wilansky (the
"Participant") in the form of cash bonuses to be paid in connection with
services to be provided by the Participant during the five year period
commencing with the fiscal year of the Company that started as of February __,
1998, in accordance with a formula that is based on the financial success of the
Company as part of an integrated compensation program which is intended to
assist the Company in motivating and retaining employees of superior ability,
industry and loyalty.
2. DEFINITIONS
-----------
The following words and phrases as used herein shall have the following
meanings, unless a different meaning is plainly required by the context:
"Base Compensation" shall mean $1,000,000.
"Board of Directors" shall mean the Board of Directors of the Company.
"Bonus Base" shall mean seventy five percent (75%) of the Participant's
base salary for the Plan Year by reference to the Participant's annual rate of
base salary in effect as of the date the Committee establishes the Earned
Percentage Schedule for the Plan Year.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Compensation Committee of the Board of
Directors, consisting of two or more Outside Directors, to act as the Committee
with respect to the Plan, or such other committee as may be appointed by the
Board of Directors to act as the Committee with respect to the Plan.
"Company" shall mean The Bon-Ton Stores, Inc., a Pennsylvania corporation,
and any successor thereto.
B-1
"Company's Accountants" shall mean the certified public accountants charged
with the responsibility for determining the Company's earnings for the relevant
fiscal year for purposes of the disclosure of such information as may be
required under applicable law or under such rules as may be applicable to the
Company in connection with any public filings or in connection with the listing
of the Company's securities on any securities exchange.
"Designated Beneficiary" shall mean the person, if any, specified in
writing by the Participant to receive any payments due the Participant in the
event of the Participant's death. In the event no person is specified by the
Participant, the Participant's estate shall be deemed to be the Designated
Beneficiary.
"Effective Date" shall mean February 1, 1998.
"Earned Percentage" shall mean the percentage determined by reference to
the schedule established for each Plan Year by the Committee.
"Outside Director" shall mean a member of the Board of Directors who is
treated as an "outside director" for purposes of Code Section 162(m).
"Plan Year" shall mean the taxable year of the Company. The first Plan
Year shall be taxable year of the Company that commenced on or about February 1,
1998.
3. PARTICIPATION
-------------
Heywood Wilansky shall be the sole Participant in the Plan.
4. TERM OF PLAN
------------
Subject to approval of the Plan by the shareholders of the Company, the
Plan shall be in effect as of the Effective Date and shall continue until the
payment of any bonuses as may be required to be paid pursuant to the terms of
the Plan attributable to the five Plan Years ending on the Saturday nearer
January 31, 1999, 2000, 2001, 2002 and 2003.
5. BONUS ENTITLEMENT
-----------------
The Participant shall be entitled to receive a bonus in accordance with the
provisions of Section 6 of the Plan only after certification in writing by the
Committee that the performance goals set forth in Section 6 have been satisfied.
The bonus payment with respect to each Plan Year shall be payable to the
Participant in the next Plan Year on or before April 15 of such Plan Year.
Notwithstanding anything to the contrary contained herein, no bonus shall be
payable under the Plan without the prior disclosure of the material terms of the
Plan to the shareholders of the Company and the approval of the Plan by such
shareholders, consistent with applicable requirements for such disclosure and
approval under Section 162(m) of the Code.
B-2
6. AMOUNT OF PERFORMANCE-BASED COMPENSATION BONUS
----------------------------------------------
(a) Formula Amount of Bonus. The Participant (or the Designated
-----------------------
Beneficiary of the Participant in the event of the death of the Participant
prior to payment of the bonus hereunder), shall be entitled to a bonus with
respect to each Plan Year that is equal to a percentage of his Base
Compensation, from a minimum of 0% to a maximum of 100%, based on the
achievement of the performance goals as described below. The performance goals
that may be established for each Plan Year shall be set forth on a schedule by
the Committee, no later than 90 days after the beginning of each Plan Year. The
performance goals for each Plan Year shall be stated as a level of earnings of
the Company, net after taxes, as established by the Company's Accountants, that
is substantially uncertain at the time such schedule is established. In no
event shall the Participant be eligible for a bonus in excess of $1,000,000 with
respect to any Plan Year under the terms of the Plan.
(i) Initial Performance Goal. If the net after tax earnings of the
Company for the first Plan Year, as determined by the Company's Accountants, is
equal to or greater than $3,000,000, the Participant shall receive a cash bonus
under the Plan with respect to each Plan Year in which a bonus is otherwise
payable equal to 40% of his Base Compensation.
(ii) Annual Performance Goals. If the Participant is eligible for a
performance bonus as a result of meeting the Initial Performance Goal, as
described in subsection (i) of this Section 6(a), the percentage of his Base
Compensation which may be paid in the form of a bonus under the Plan shall be
equal to the 40% minimum payable by virtue of having satisfied such Initial
Performance Goal, plus an additional percentage, between 0% and 60%, based on
the Company's achievement of earnings, net after taxes, as established by the
Company's Accountants, as set forth by the Committee on the schedule applicable
to the relevant Plan Year. For the first Plan Year, the bonus attributable to
satisfying the Annual Performance Goal shall be as follows:
Net After Tax Earnings Additional Bonus Percentage
---------------------- ---------------------------
Below $11,000,000 0%
$11,000,000 20%
$15,000,000 or above 60%
In the event the net after tax earnings of the Company for the first Plan Year,
as determined by the Company's Accountants, is above $11,000,000 but is below
$15,000,000, the amount of the Additional Bonus Percentage shall be a percentage
between 20% and 60%, equal to the sum of 20% plus an additional percentage
determined by multiplying 40% times a fraction, the numerator of which is equal
to the net after tax earnings of the Company for the first Plan Year in excess
of $11,000,000, and the denominator of which is equal to $4,000,000.
For each subsequent Plan Year, the Committee shall establish appropriate levels
of net after tax earnings to be used in establishing the Participant's
Additional Bonus Percentage within the first 90 days of the Plan Year. If no
action is taken to establish such new levels of net after tax earnings for these
purposes, the levels in effect for the prior Plan Year shall be treated as
having been selected by the Committee during such 90 day period.
B-3
(b) Termination of Employment During Plan Year. Notwithstanding anything
------------------------------------------
contained herein to the contrary, in the event the Participant is not an
employee of the Company as of the last day of the Plan Year, the bonus payable
to the Participant shall be equal to the bonus that would otherwise have been
payable under the Plan but for this Section 6(b), multiplied by a fraction, the
numerator of which is equal to the number of days the Participant was employed
by the Company during the Plan Year, and the denominator of which is 365.
7. COMMITTEE
---------
(a) Powers. The Committee shall have the power and duty to do all things
------
necessary or convenient to effect the intent and purposes of the Plan and not
inconsistent with any of the provisions hereof, whether or not such powers and
duties are specifically set forth herein, and, by way of amplification and not
limitation of the foregoing, the Committee shall have the power to:
(i) provide rules and regulations for the management, operation and
administration of the Plan, and, from time to time, to amend or supplement such
rules and regulations;
(ii) construe the Plan, which construction, as long as made in good
faith, shall be final and conclusive upon all parties hereto; and
(iii) correct any defect, supply any omission, or reconcile any
inconsistency in the Plan in such manner and to such extent as it shall deem
expedient to carry the same into effect, and it shall be the sole and final
judge of when such action shall be appropriate.
The resolution of any questions with respect to payments and entitlements
pursuant to the provisions of the Plan shall be determined by the Committee, and
all such determinations shall be final and conclusive.
(b) Indemnity. No member of the Committee shall be directly or indirectly
---------
responsible or under any liability by reason of any action or default by him as
a member of the Committee, or the exercise of or failure to exercise any power
or discretion as such member. No member of the Committee shall be liable in any
way for the acts or defaults of any other member of the Committee, or any of its
advisors, agents or representatives. The Company shall indemnify and save
harmless each member of the Committee against any and all expenses and
liabilities arising out of his own membership on the Committee.
(c) Compensation and Expenses. Members of the Committee shall receive no
-------------------------
separate compensation for services other than compensation for their services
as members of the Board of Directors, which compensation can include
compensation for services at any committee meeting attended in their capacity as
members of the Board of Directors. Members of the Committee shall be entitled
to receive their reasonable expenses incurred in administering the Plan. Any
such expenses, as well as extraordinary expenses authorized by the Company,
shall be paid by the Company.
(d) Participant Information. The Company shall furnish to the Committee in
-----------------------
writing all information the Company deems appropriate for the Committee to
exercise its powers and
B-4
duties in administration of the Plan. Such information shall be conclusive for
all purposes of the Plan and the Committee shall be entitled to rely thereon
without any investigation thereof; provided, however, that the Committee may
correct any errors discovered in any such information.
(e) Inspection of Documents. The Committee shall make available to the
-----------------------
Participant and his Designated Beneficiary, for examination at the principal
office of the Company (or at such other location as may be determined by the
Committee), a copy of the Plan and such of its records, or copies thereof, as
may pertain to the benefits of the Participant and beneficiary under the Plan.
8. EFFECTIVE DATE, TERMINATION AND AMENDMENT
-----------------------------------------
(a) Effective Date of Participation in Plan. Subject to shareholder and
---------------------------------------
Committee approval of the Plan, participation in this Plan shall be effective as
of February 1, 1998 and shall continue thereafter for the term of the Plan.
(b) Amendment and Termination of the Plan. The Plan may be terminated or
-------------------------------------
revoked by the Company at any time and amended by the Company from time to time,
provided that neither the termination, revocation or amendment of the Plan may,
without the written approval of the Participant, reduce the amount of a bonus
payment that is due, but has not yet been paid, and provided further that no
changes that would increase the amount of bonuses determined under the formula
contained in Section 6(a) of the Plan shall be effective without approval by the
Committee and without disclosure to and approval by the shareholders of the
Company in a separate vote prior to payment of such bonuses. In addition, the
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, as
they relate to the exemption for "performance-based compensation" under the
limitations on the deductibility of compensation imposed under Code Section
162(m).
9. MISCELLANEOUS PROVISIONS
------------------------
(a) Unsecured Creditor Status. The Participant, if entitled to a bonus
-------------------------
payment hereunder, shall rely solely upon the unsecured promise of the Company,
as set forth herein, for the payment thereof, and nothing herein contained shall
be construed to give to or vest in the Participant or any other person now or at
any time in the future, any right, title, interest, or claim in or to any
specific asset, fund, reserve, account, insurance or annuity policy or contract,
or other property of any kind whatever owned by the Company, or in which the
Company may have any right, title, or interest, now or at any time in the
future.
(b) Other Company Plans. It is agreed and understood that any benefits
-------------------
under this Plan are in addition to any and all benefits to which the Participant
may otherwise be entitled under any other contract, arrangement, or voluntary
pension, profit sharing or other compensation plan of the Company, whether
funded or unfunded, and that this Plan shall not affect or impair the rights or
obligations of the Company or the Participant under any other such contract,
arrangement, or voluntary pension, profit sharing or other compensation plan.
B-5
(c) Separability. If any term or condition of the Plan shall be invalid or
------------
unenforceable to any extent or in any application, then the remainder of the
Plan, with the exception of such invalid or unenforceable provision, shall not
be affected thereby, and shall continue in effect and application to its fullest
extent.
(d) Continued Employment. Neither the establishment of the Plan, any
--------------------
provisions of the Plan, nor any action of the Committee shall be held or
construed to confer upon the Participant the right to a continuation of
employment by the Company. The Company reserves the right to dismiss any
employee (including the Participant), or otherwise deal with any employee
(including the Participant) to the same extent as though the Plan had not been
adopted.
(e) Incapacity. If the Committee determines that the Participant or
----------
Beneficiary is unable to care for his affairs because of illness or accident, or
is a minor, any benefit due the Participant or Beneficiary under the Plan may be
paid to his spouse, child, parent, or any other person deemed by the Committee
to have incurred expense for the Participant or Beneficiary (including a duly
appointed guardian, committee, or other legal representative), and any such
payment shall be a complete discharge of the Company's obligation hereunder.
(f) Jurisdiction. The Plan shall be construed, administered, and enforced
------------
according to the laws of the Commonwealth of Pennsylvania except to the extent
that such laws are preempted by the Federal laws of the United States of
America.
(g) Claims. If, pursuant to the provisions of the Plan, the Committee
------
denies the claim of the Participant for benefits under the Plan, the Committee
shall provide written notice, within 60 days after receipt of the claim, setting
forth in a manner calculated to be understood by the claimant:
(i) the specific reasons for such denial;
(ii) the specific reference to the Plan provisions on which the denial
is based;
(iii) a description of any additional material or information
necessary to perfect the claim and an explanation of why such material or
information is needed; and
(iv) an explanation of the Plan's claim review procedure and the time
limitations of this subsection applicable thereto.
If the Participant's claim for benefits has been denied, the Participant may
request review by the Committee of the denied claim by notifying the Committee
in writing within 60 days after receipt of the notification of claim denial. As
part of said review procedure, the claimant or his authorized representative may
review pertinent documents and submit issues and comments to the Committee in
writing. The Committee shall render its decision to the claimant in writing in
a manner calculated to be understood by the claimant not later than 60 days
after receipt of the request for review, unless special circumstances require an
extension of time, in which case decision shall be rendered as soon after the
sixty-day period as possible, but not later than 120 days after receipt of the
request for review. The decision on review shall state the specific reasons
therefor and the specific Plan references on which it is based.
(h) Withholding. The Participant or the Designated Beneficiary shall make
-----------
appropriate arrangements with the Company for satisfaction of any federal, state
or local income tax withholding requirements and Social Security or other tax
requirements applicable to the
B-6
accrual or payment of benefits under the Plan. If no other arrangements are
made, the Company may provide, at its discretion, for any withholding and tax
payments as may be required.
(i) Interpretation. The Plan is intended to pay compensation only on the
--------------
attainment of the performance goals set forth above in a manner that will exempt
such compensation from the limitations on the deduction of certain compensation
payments under Code Section 162(m). To the extent that any provision of the
Plan would cause a conflict with the conditions required for such an exemption
or would cause the administration of the Plan to fail to satisfy the applicable
requirements for the performance-based compensation exemption under Code Section
162(m), such provision shall be deemed null and void to the extent permitted by
applicable law.
B-7
--------------------------------------------------------------------------------
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 Heywood Wilansky and Michael L.
Gleim, or either of them, with full power
of substitution, to act as attorneys and
proxies for the undersigned and to vote
all shares of stock of the Company which
the undersigned is entitled to vote if
personally present at the Annual Meeting
of Shareholders of the Company, to be held
at the HolidayRamada Inn, 2600 East Market
Street, York, Pennsylvania, 17402 on June
15, 19981999 at 9:00 a.m., and at any adjournment or
postponement thereof, provided that said
proxies are authorized and directed to
vote as indicated with respect to the
matters set forth on the opposite side of
this Proxy.
UNLESS OTHERWISE SPECIFIED, THE SHARES
WILL BE VOTED "FOR" THE ELECTION OF ALL
NOMINATED DIRECTORS "FOR" APPROVAL OF THE BON-TON STORES, INC. FIVE YEAR
CASH BONUS PLAN FOR HEYWOOD WILANSKY, "FOR" APPROVAL OF THE BON-TON STORES, INC.
PERFORMANCE BASED STOCK INCENTIVE PLAN FOR HEYWOOD WILANSKY AND "FOR" RATIFICATION
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP
AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS.
THIS PROXY ALSO DELEGATES DISCRETIONARY
AUTHORITY TO VOTE WITH RESPECT TO ANY OTHER BUSINESS WHICH MAY PROPERLY COME
BEFORE THE MEETING AND ANY ADJOURNMENT OR POSTPONEMENT THEREOF.This Proxy also delegates discretionary
authority to vote with respect to any
other business which may properly come
before the meeting.
(Please sign and date on reverse side)
-------------------------------------------------------------------------------- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
[X] Please mark
your votes as
X indicated in
this example
FOR WITHHOLD
1. Election of the Directors. FOR WITHHOLD [_] [_]
M. Thomas Grumbacher, Heywood Wilansky, Samuel J. Gerson, Michael L. Gleim,
Lawrence J. Ring, Robert C. Siegel, Leon D. Starr, Leon F. Winbigler, Thomas
W. Wolf
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the line below.)
-----------------------------------------------------------------------------------------------------------------------------------------------------------
2. Approve The Bon-Ton Stores, Inc. Five-Year FOR AGAINST ABSTAIN
Cash Bonus Plan for Heywood Wilansky. [_] [_] [_]
3. Approve The Bon-Ton Stores, Inc. Performance FOR AGAINST ABSTAIN
Based Stock Incentive Plan for Heywood Wilansky. [_] [_] [_]
4. *Ratification of the appointment of Arthur FOR AGAINST ABSTAIN
Andersen LLP as the Company's independent public accountants. [_] [_] [_]
accountants.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting,
Proxy Statement and Annual Report.
________________________________
________________________________
SIGNATURE(S)_________________________________________
_________________________________________
Signature(s)
Date _______________________________________________________________
NOTE: Please sign this proxy exactly as
name(s) appears in address. When signing
as attorney-in-fact, executor,
administrator, trustee or guardian,
please add your title as such, and if the
signer is a corporation, please sign with
full cor-
poratecorporate name by duly authorized
officer. Where stock is issued in the
name of two or more persons, all such
persons should sign.
PLEASE SIGN, DATE AND RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
- --------------------------------------------------------------------------------
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