<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter ended October 30, 1999 Commission File Number
0-19517
THE BON-TON STORES, INC.
2801 East Market Street
York, Pennsylvania 17402
(717) 757-7660
Incorporated in Pennsylvania IRS No. 23-2835229
________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
---
As of November 26, 1999 there were 12,278,512 shares of Common Stock,
$0.01 par value, and 2,989,853 shares of Class A Common Stock, $0.01 par value,
outstanding.
================================================================================
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE BON-TON STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 30, January 30,
(In thousands except share and per share data) 1999 1999
- ---------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 11,407 $ 10,607
Trade and other accounts receivable, net of allowance for doubtful accounts
of $3,036 and $3,692 at October 30, 1999 and January 30, 1999, respectively 26,797 34,677
Merchandise inventories 260,642 192,872
Prepaid expenses and other current assets 13,652 8,292
Deferred income taxes 1,355 -
----------------------------
Total current assets 313,853 246,448
----------------------------
Property, fixtures and equipment at cost,
less accumulated depreciation and amortization 136,732 112,521
Other assets 20,123 19,150
----------------------------
Total assets $ 470,708 $ 378,119
============================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 105,375 $ 71,448
Accrued payroll and benefits 9,723 9,639
Accrued expenses 21,055 25,594
Current portion of long-term debt 664 615
Current portion of obligations under capital leases 434 409
Deferred income taxes - 26
Income taxes payable - 9,740
----------------------------
Total current liabilities 137,251 117,471
----------------------------
Long-term debt, less current maturities 152,621 74,387
Obligations under capital leases, less current maturities 1,544 1,868
Deferred income taxes 1,324 823
Other long-term liabilities 3,270 3,359
----------------------------
Total liabilities 296,010 197,908
----------------------------
Commitments and contingencies
Shareholders' equity
Common Stock - authorized 40,000,000 shares at $0.01 par value; issued and outstanding
shares of 12,278,512 and 12,278,120 at October 30, 1999 and January 30, 1999,
respectively 123 123
Class A Common Stock - authorized 20,000,000 shares at $0.01 par value; issued
and outstanding shares of 2,989,853 at October 30, 1999 and January 30, 1999 30 30
Additional paid-in-capital 108,096 108,260
Deferred compensation (2,418) (3,114)
Retained earnings 68,867 74,912
----------------------------
Total shareholders' equity 174,698 180,211
----------------------------
Total liabilities and shareholders' equity $ 470,708 $ 378,119
============================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
2
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THIRTEEN THIRTY-NINE
WEEKS ENDED WEEKS ENDED
--------------------------------------------------------------
(In thousands except per share data) October 30, October 31, October 30, October 31,
(Unaudited) 1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 168,474 $ 154,748 $ 460,322 $ 443,746
Other income, net 477 424 1,515 1,398
--------------------------------------------------------------
168,951 155,172 461,837 445,144
--------------------------------------------------------------
Costs and expenses:
Costs of merchandise sold 106,469 97,047 292,378 279,942
Selling, general and administrative 59,950 52,352 161,821 150,094
Depreciation and amortization 4,194 3,566 10,595 9,746
--------------------------------------------------------------
(Loss) income from operations (1,662) 2,207 (2,957) 5,362
Interest expense, net 2,211 2,483 6,179 7,205
--------------------------------------------------------------
Loss before income taxes (3,873) (276) (9,136) (1,843)
Income tax benefit (1,472) (109) (3,472) (719)
--------------------------------------------------------------
Loss before extraordinary item (2,401) (167) (5,664) (1,124)
Extraordinary item - loss on early extinguishment of debt,
net of income tax benefit of $232 - - (378) -
--------------------------------------------------------------
Net loss $ (2,401) $ (167) $ (6,042) $ (1,124)
==============================================================
Per shares amounts:
Basic:
Loss before extraordinary item $ (0.16) $ (0.01) $ (0.38) $ (0.08)
Effect of extraordinary item - - (0.03) -
--------------------------------------------------------------
Net loss $ (0.16) $ (0.01) $ (0.41) $ (0.08)
==============================================================
Basic shares outstanding 14,781 14,672 14,733 13,590
Diluted:
Loss before extraordinary item $ (0.16) $ (0.01) $ (0.38) $ (0.08)
Effect of extraordinary item - - (0.03) -
--------------------------------------------------------------
Net loss $ (0.16) $ (0.01) $ (0.41) $ (0.08)
==============================================================
Diluted shares outstanding 14,781 14,672 14,733 13,590
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THIRTY-NINE
WEEKS ENDED
----------------------------------------
(In thousands) October 30, October 31,
(Unaudited) 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,042) $ (1,124)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 10,595 9,746
Changes in operating assets and liabilities, net (40,256) (28,048)
----------------------------------------
Net cash used in operating activities (35,703) (19,426)
Cash flows from investing activities:
Capital expenditures, net (34,723) (13,923)
Proceeds from sale of property, fixtures and equipment 419 1,459
Proceeds from sale of accounts receivable, net (5,000) (12,000)
Payment for the acquisition of business, net of cash received (2,192) -
----------------------------------------
Net cash used in investing activities (41,496) (24,464)
Cash flows from financing activities:
Payments on long-term debt and capital lease obligations (181,617) (197,671)
Proceeds from issuance of long-term debt 259,600 197,400
Proceeds from equity offering - 43,417
Exercised stock options 16 706
----------------------------------------
Net cash provided by financing activities 77,999 43,852
Net increase (decrease) in cash and cash equivalents 800 (38)
Cash and cash equivalents at beginning of period 10,607 9,109
----------------------------------------
Cash and cash equivalents at end of period $ 11,407 $ 9,071
========================================
Supplemental Cash Flow Information:
Interest paid $ 6,027 $ 7,398
Income taxes paid $ 7,318 $ 6,390
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
The Bon-Ton Stores, Inc., a Pennsylvania corporation, was incorporated on
January 31, 1996 as the successor of a company established on January 31, 1929
and currently operates, as one business segment, 72 retail department stores
located in Pennsylvania, New York, Maryland, New Jersey, Connecticut
Massachusetts, New Hampshire, Vermont and West Virginia.
1. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements include accounts of
The Bon-Ton Stores, Inc. and its wholly-owned subsidiaries (the "Company"). All
intercompany transactions and balances have been eliminated in consolidation.
The unaudited consolidated financial statements have been prepared in accordance
with the instructions for Form 10-Q and do not include all information and
footnotes required by generally accepted accounting principles. In the opinion
of management, all adjustments (primarily consisting of normal recurring
accruals) considered necessary for a fair presentation for interim periods have
been included. The Company's business is seasonal in nature and the results of
operations for the interim periods presented are not necessarily indicative of
the results for the full fiscal year. It is suggested these consolidated
financial statements be read in conjunction with the financial statements and
the notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended January 30, 1999 (the "1998 Annual Report").
2. PER SHARE AMOUNTS:
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS No. 128") in fiscal 1997. SFAS No. 128 requires dual
presentation of basic and diluted earnings per share ("EPS") on the face of the
statement of operations. Basic EPS is computed by dividing reported earnings
available to common shareholders by weighted average number of common shares
outstanding for the period. Diluted EPS is computed assuming the conversion of
all dilutive securities, such as options and restricted stock. The statement
requires a reconciliation of the numerators and denominators used in the basic
and diluted EPS calculations. The numerator, net loss, is identical in both
calculations.
The following table presents a reconciliation of the shares outstanding for the
respective calculations for each period presented on the accompanying
Consolidated Statements of Operations.
<TABLE>
<CAPTION>
THIRTEEN THIRTY-NINE
WEEKS ENDED WEEKS ENDED
------------------------------------- -------------------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
----------------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Basic Calculation 14,781,000 14,672,000 14,733,000 13,590,000
Dilutive Securities ---
Restricted Shares - - - -
Options - - - -
------------------------------------- -------------------------------------
Diluted Calculation 14,781,000 14,672,000 14,733,000 13,590,000
------------------------------------- -------------------------------------
Antidilutive shares and options --
Restricted Shares 487,000 598,000 535,000 454,000
Options 1,283,000 1,372,000 1,288,000 1,225,000
</TABLE>
Antidilutive shares and options, consisting of restricted shares and options to
purchase shares outstanding, were excluded from the computation of dilutive
securities due to the Company's net loss position in the thirteen weeks and
thirty-nine weeks ended October 30, 1999 and October 31, 1998.
5
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
The following table reflects the approximate dilutive securities calculated
under the treasury stock method had the Company reported a profit for the
thirteen and thirty-nine week periods ended October 30, 1999 and October 31,
1998.
<TABLE>
<CAPTION>
THIRTEEN THIRTY-NINE
WEEKS ENDED WEEKS ENDED
-------------------------------------- --------------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
----------------- ----------------- ----------------- ------------
<S> <C> <C> <C> <C>
Approximate Dilutive Securities ---
Restricted Shares 124,000 90,000 98,000 120,000
Options 15,000 220,000 32,000 300,000
Antidulitive Options 1,233,000 350,000 1,051,000 120,000
</TABLE>
Antidilutive options, options to purchase shares with exercise prices greater
than the average market price, were excluded from the "Approximate Dilutive
Securities" in the above table.
3. ACQUISITIONS:
On March 23, 1999, the Company acquired the leasehold interests and certain
other assets in three department stores located in Hamden, Connecticut, Red
Bank, New Jersey and Brick Township, New Jersey, through a bankruptcy auction,
for a total cost of $2.2 million. The leasehold interests were held by Steinbach
Stores, Inc., a wholly-owned subsidiary of Crowley, Milner and Company. The
Brick Township and Red Bank stores have been remodeled and opened for business
on September 1, 1999. The Hamden store opened on September 22, 1999. Certain
fixed assets and customer lists were also included in the purchase. This
business combination was accounted for under the purchase method.
4. REFINANCING:
On October 29, 1999, the Company amended its accounts receivable facility to
extend the term of the facility through January 31, 2003. The amended agreement
provides for changes in the pricing structure and financial covenants, with
substantially all other terms and conditions of the original agreement remaining
unchanged.
On April 7, 1999, the Company amended its revolving credit facility to extend
the term of the facility through April 15, 2004. The amended agreement extends
the term of the available fixed assets and real estate borrowing base and
provides a more favorable interest pricing structure, with substantially all
other terms and conditions remaining unchanged. As a result of this transaction,
the Company incurred a one-time after-tax charge of $378,000 in fiscal 1999
relating to the early extinguishment of debt.
5. SUBSEQUENT EVENTS:
On November 19, 1999, the Company entered into an agreement to terminate the
leasehold interest in the closed Johnstown, Pennsylvania location effective
October 31, 1999.
On November 11, 1999, the Company hired Mr. Frank Tworecke as Vice Chairman and
Chief Merchandising Officer pursuant to a three-year employment agreement. In
addition to a base salary, bonus eligibility, and other annual benefits and
perquisites, Mr. Tworecke received an option to purchase 200,000 shares of the
Company's common stock at $5.72 per share, the market value on the date of the
award. The options will become exercisable at the rate of 33-1/3% per annum over
three years beginning on the first anniversary of the date of the grant and
expiring upon the lapse of 10 years from the date of the grant. Should
Mr.Tworecke
6
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
leave the Company before vesting, the options will be forfeited upon departure,
except in certain limited circumstances.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The following table summarizes the changes in selected operating indicators,
illustrating the relationship of various income and expense items expressed as a
percentage of net sales for each period presented:
<TABLE>
<CAPTION>
THIRTEEN THIRTY-NINE
WEEKS ENDED WEEKS ENDED
------------------------------- -------------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Other income, net 0.3 0.3 0.3 0.3
------------------------ ---------------------------
100.3 100.3 100.3 100.3
------------------------ ---------------------------
Costs and expenses:
Costs of merchandise sold 63.2 62.7 63.5 63.1
Selling, general and administrative 35.6 33.8 35.2 33.8
Depreciation and amortization 2.5 2.3 2.3 2.2
------------------------ ---------------------------
(Loss) income from operations (1.0) 1.4 (0.6) 1.2
Interest expense, net 1.3 1.6 1.3 1.6
------------------------ ---------------------------
Loss before income taxes (2.3) (0.2) (2.0) (0.4)
Income tax benefit (0.9) (0.1) (0.8) (0.2)
------------------------ ---------------------------
Loss before extraordinary item (1.4) (0.1) (1.2) (0.3)
Extraordinary item - loss on early extinguishment of debt - - (0.1) -
------------------------ ---------------------------
Net loss (1.4)% (0.1)% (1.3)% (0.3)%
======================== ===========================
</TABLE>
Thirteen Weeks Ended October 30, 1999 Compared to Thirteen Weeks Ended October
31, 1998
For the purposes of the following discussions, all references to "third quarter
of 1999" and "third quarter of 1998" are to the Company's thirteen week period
ended October 30, 1999 and October 31, 1998, respectively.
Net sales. Net sales were $168.5 million for the thirteen weeks ended October
30, 1999, an increase of 8.9% over the same period last year. Comparable store
sales increased 2.1% for the period, with shoes, accessories, home, cosmetics,
intimate, petites and misses sportswear and children's achieving sales increases
during the quarter.
Other income, net. Net other income, which consisted mainly of income from
leased departments, remained constant at 0.3% of net sales in the third quarter
of 1999 compared to the third quarter of 1998.
Costs and expenses. Gross margin, in the third quarter of 1999, increased $4.3
million compared to the third quarter of 1998 reflecting the increase in sales.
Gross profit as a percentage of net sales decreased 0.5 percentage points to
36.8% for the thirteen week period ended October 30, 1999 from 37.3% for the
comparable period last year.
7
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
Selling, general and administrative expenses for the third quarter of 1999 were
$60.0 million, or 35.6% of net sales, as compared to $52.4 million, or 33.8% of
net sales, in the third quarter of 1998. The increase in the third quarter of
1999 was primarily attributable to the cost of improving customer service,
including personnel costs, and the expenses associated with opening new stores,
partially offset by the improvement in the credit operations.
Depreciation and amortization increased to 2.5% of net sales in the third
quarter of 1999 compared to 2.3% in the third quarter of 1998. The increase was
primarily due to the addition of new assets in fiscal 1999, relating to the
opening of seven new stores and the remodeling of certain other stores.
(Loss) income from operations. The loss from operations in the third quarter of
1999 amounted to $1.7 million, or 1.0% of net sales, compared to income from
operations of $2.2 million, or 1.4% of net sales, in the third quarter of 1998.
The Company sells receivables through its accounts receivable facility to
provide additional working capital. On a pro-forma basis, if the Company had
on-balance sheet financing, it would have reduced selling, general and
administrative expenses by $1.8 million in the third quarter of 1999 and $1.9
million in the third quarter of 1998. The lower selling, general and
administrative expenses would have been offset by a corresponding increase in
interest expense for both periods. The net result of the pro-forma
reclassification would reflect income from operations of $0.2 million in the
third quarter of 1999 and income from operations of $4.1 million for the third
quarter of 1998.
Interest expense, net. Net interest expense decreased $272,000 to 1.3% of net
sales, in the third quarter of 1999 from $2.5 million, or 1.6% of net sales, in
the third quarter of 1998. The decrease is primarily attributable to the
reduction in the cost of funds borrowed under the revolving credit facility.
Net loss. The net loss in the third quarter of 1999 amounted to $2.4 million
compared to a net loss of $0.2 million in the third quarter of 1998.
Due to the seasonal nature of the Company's business, the results for the
current period are not necessarily indicative of the results that may be
achieved for the full fiscal year of 1999.
Thirty-Nine Weeks Ended October 30, 1999 Compared to Thirty-Nine Weeks Ended
October 31, 1998
For the purposes of the following discussions, all references to "1999" and
"1998" are to the Company's thirty-nine week period ended October 30, 1999 and
October 31, 1998, respectively.
Net sales. Net sales were $460.3 million for the thirty-nine weeks ended October
30, 1999, an increase of 3.7% over the same period last year. Comparable store
sales decreased 0.2% for the period, with home, shoes, cosmetics, accessories
and misses sportswear achieving sales increases.
Other income, net. Net other income, which consisted mainly of income from
leased departments, remained constant at 0.3% of net sales in 1999 and 1998.
Costs and expenses. Gross margin, in 1999, increased $4.1 million compared to
1998 reflecting the increased sales. Gross profit as a percentage of net sales
decreased 0.4 percentage points to 36.5% for the thirty-nine week period ended
October 30, 1999 from 36.9% for the comparable period last year.
Selling, general and administrative expenses for 1999 were $161.8 million, or
35.2% of net sales, as compared to $150.1 million, or 33.8% of net sales, in
1998. During 1998, selling, general and administrative expenses were reduced by
the gain from the sale of a vacant property (see Note 5 of the 1998 Annual
Report) in the amount of $1.4 million, or 0.3% of net sales. The remaining
increase of 1.1% in 1999 was
8
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
primarily attributable to the cost of improving customer service, including
personnel costs, and the expenses associated with opening new stores, partially
offset by an improvement in credit operations.
Depreciation and amortization increased to 2.3% of net sales in 1999 from 2.2%
of net sales in 1998. The increase was primarily due to the addition of $37.4
million of new assets in fiscal 1999 and $19.4 million of new assets in fiscal
1998.
(Loss) income from operations. The loss from operations in 1999 amounted to
$3.0 million, or 0.6% of net sales, compared to an income from operations of
$5.4 million, or 1.2% of net sales, in 1998.
The Company sells receivables through its accounts receivable facility to
provide additional working capital. On a pro-forma basis, if the Company had
on-balance sheet financing, it would have reduced selling, general and
administrative expenses by $5.4 million in 1999 and $5.8 million in 1998. The
lower selling, general and administrative expenses would have been offset by a
corresponding increase in interest expense for both periods. The net result of
the pro-forma reclassification would reflect income from operations of $2.4
million in 1999 and $11.2 million in 1998.
Interest expense, net. Net interest expense decreased to $6.2 million, or 1.3%
of net sales, in 1999 from $7.2 million, or 1.6% of net sales, in 1998. The
decrease was primarily attributable to the reduction in the cost of funds
borrowed under the revolving credit facility.
Extraordinary item. The Company amended its revolving credit facility on April
7, 1999 (see Note 4). As a result of this transaction, the Company incurred an
extraordinary charge of $0.4 million, net of a $0.2 million income tax benefit,
in 1999.
Net loss. The net loss in 1999 amounted to $6.0 million compared to a net loss
of $1.1 million in 1998.
Due to the seasonal nature of the Company's business, the results for the
current period are not necessarily indicative of the results that may be
achieved for the full fiscal year of 1999.
Year 2000 Readiness Disclosure
The Year 2000 issue refers to the inability of some computer programs and
microprocessors to correctly interpret the date in which the year is represented
by only two digits (e.g., 98). As a result, on January 1, 2000, computer systems
throughout the world may experience operating difficulties unless they are
modified or upgraded to properly process date-related information. The Year 2000
issue can arise at any point in a company's supply, operational, distribution or
financial process.
Breakdowns or malfunctions in any number of the Company's computer systems or
applications could prevent the Company from being able to receive and sell its
merchandise. Examples are failures in the Company's receiving, inventory,
payment or point-of-sale applications software, computer chips embedded in
equipment, lack of supply of products from its vendors or lack of power, heat or
water from utilities servicing its facilities.
State of Readiness: The Company implemented a comprehensive risk-based plan
designed to make its operations Year 2000 compliant. The Company established a
corporate project team, which reports to the Vice Chairman and Chief Operating
Officer, to oversee, monitor and coordinate the company-wide Year 2000 effort.
The Company's plan focuses on four areas --- applications and mainframe
software, service providers, miscellaneous equipment providers and merchandise
vendors --- and generally covers three stages, including (i) assessment, (ii)
remediation and (iii) testing and certification. The remediation and testing and
certification stages do not apply to the merchandise vendor area. The Company is
primarily utilizing internal resources to complete its Year 2000 initiatives.
9
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
The applications and mainframe software area includes the Company's proprietary
and third party computer systems and related hardware, software and data and
telephone networks. The Company's merchandise system, which supports procurement
and distribution, inventory control and point-of-sale reporting systems, is
primarily proprietary. With respect to the Company's credit business, the
Company utilizes a third party software support vendor and has obtained
assurances from said vendor that it expects its systems to be Year 2000
compliant. The vast majority of the Company's information systems are presently
Year 2000 compliant. Remediation is complete and testing has been completed,
except for the Bridal Registry system, which is scheduled for completion by the
end of December.
The service providers area includes systems and processes provided by outside
agencies, such as freight carriers, inventory and direct mail service providers.
Based on assurances from third parties, the Company believes these systems
present little Year 2000 risk.
The miscellaneous equipment area includes equipment and systems that contain
embedded computer technology such as elevators, phone systems and security
systems. The Company believes the majority of these systems are presently Year
2000 compliant and the remaining systems present little Year 2000 exposure or
risk.
Merchandise vendors are currently being monitored by an outside agency,
co-sponsored by a group of retailers, which is surveying the vendors for Year
2000 readiness. The survey results are monitored by the retailers via an
internet webpage. The Company is reviewing its vendors' responses on the webpage
and expects to conduct follow-up assessments of certain of its critical vendors
to further monitor such vendors' progress.
Costs: The aggregate expenditures to achieve Year 2000 readiness are not
expected to exceed $1.3 million. These costs, which include modifying software,
consultant expenses and replacing non-compliant hardware and software, are being
incurred over the two-year period from 1998 through 1999, with the majority
expended in 1999. All costs incurred to modify existing internal-use software or
to correct problems associated with Year 2000 readiness will be expensed as
incurred and funded from operating cash flows. The Company's expenditures
associated with Year 2000 readiness through October 30, 1999 are approximately
$1.1 million.
Risks and Contingency Plans: Despite the Company's significant efforts to make
its systems and facilities Year 2000 compliant, the ability of third party
service providers, merchandise vendors and other third parties, including
governmental entities and utility companies, to be Year 2000 compliant, is
beyond the Company's control. Accordingly, no assurances can be given that the
systems of others on which the Company's systems rely will be timely converted
or compatible with the Company's systems. Additionally, there can be no
assurance that the Company's systems will be rendered Year 2000 compliant in a
timely manner. Failure of a third party or the Company to comply on a timely
basis could have a material adverse effect on the Company. At present, the
Company does not expect Year 2000 issues to materially affect its supply of
merchandise, services, competitive position or financial performance.
The Company believes it is very difficult to reasonably predict the most likely
worst case Year 2000 scenario. However, a reasonably likely worst case Year 2000
scenario would include the failure of a third party (including, without
limitation, merchandise vendors and service and utility providers) to timely
complete remediation of its Year 2000 deficiencies for any substantial period of
time. This could have a material adverse effect upon the Company's ability to
provide and sell merchandise to its customers. Additionally, a failure by the
Company to timely remediate its Year 2000 deficiencies could impair the
Company's ability to conduct its business of providing and selling merchandise
in a timely or profitable manner. The Company has developed contingency plans,
such as increasing inventory on basic stock items and identifying what actions
need to be taken if a critical system or third party provider is not Year 2000
compliant.
10
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
The foregoing statements as to costs and dates relating to Year 2000 efforts are
forward-looking and are made in reliance on the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. They are based on the
Company's best estimates, which may be updated as additional information becomes
available. The Company's forward-looking statements are also based on
assumptions about many important factors, including the technical skills of
employees and independent contractors, the representations and preparedness of
third parties, the failure of vendors to deliver merchandise or perform services
required by the Company and the collateral effects of the Year 2000 issues on
the Company's business partners and customers. While the Company believes its
assumptions are reasonable, it cautions that it is impossible to predict the
impact of certain factors that could cause actual costs or timetables to differ
materially from the expected results.
Liquidity and Capital Resources
The Company's working capital requirements are currently met through a
combination of cash, borrowings under its revolving credit facility and proceeds
from its accounts receivable facility.
The following table summarizes material measures of the Company's liquidity and
capital resources:
October 30, October 31,
(Dollars in millions) 1999 1998
------------------------------------------------------------------
Working capital $ 176.6 $ 163.6
Current capital 2.29:1 2.25:1
Funded debt to total capitalization 0.47:1 0.42:1
Unused availability under lines of credit $ 36.1 $ 87.1
For the thirty-nine weeks ended October 30, 1999, net cash used in operating
activities amounted to $35.7 million as compared to net cash used of $19.4
million for the comparable period last year. The increase in net cash used in
1999 as compared to 1998 was primarily attributable to the decline in the
Company's earnings and increased working capital requirements. The increased
working capital requirements primarily reflect a decrease in accounts payable
and income taxes payable and an increase in prepaid expense and other current
assets, partially offset by a decrease in accounts receivable.
Net cash used in investing activities amounted to $41.5 million in 1999 compared
to $24.5 million for the comparable period last year. The increase in net cash
used for the thirty-nine week period ended October 30, 1999 primarily reflects
increased capital expenditures and payments for the acquisition of leasehold
interests in three department stores (see Note 3).
Net cash provided by financing activities amounted to $78.0 million for 1999
compared to $43.9 million for the comparable period of 1998. The net increase in
borrowings under the revolving credit facility in 1999 reflects the increased
cash requirements for the operating and investing activities as discussed in the
two preceding paragraphs.
The Company anticipates its cash flow from operations, supplemented by
borrowings under its revolving credit facility, as amended (see Note 4), and
proceeds from its accounts receivable facility, as amended (see Note 4), will be
sufficient to satisfy its operating cash requirements.
11
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company entered into two new interest rate swap agreements in fiscal 1999.
The two "variable to fixed" rate swaps, with a notional amount of $30.0 million,
increase the interest rate swaps held by the Company to $110.0 million. The
average pay rate on the new swaps are 5.58% and both swaps mature in 2004. Refer
to the Company's discussion of "Market Risk and Financial Instruments"
in the 1998 Annual Report for additional information.
"Safe Harbor" Statement
- -----------------------
Certain information included in this report and other materials filed or to be
filed by the Company with the Securities and Exchange Commission contains
statements that are forward-looking within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements, which may be
identified by words such as "may," "will," "plan," "expect," "anticipate,"
"estimate," "project," "intend" or other similar expressions, involve important
risks and uncertainties that could significantly affect anticipated results in
the future and, accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of the Company. These risks and
uncertainties include, but are not limited to, uncertainties affecting retail in
general, such as consumer confidence and demand for soft goods; risks relating
to leverage and debt service; competition within markets in which the Company's
stores are located; and the need for, and costs associated with, store
renovations and other capital expenditures.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments in any legal proceedings since the
Company's disclosure in its 1998 Annual Report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed pursuant to the requirements of Item 601 of
Regulation S-K:
Exhibit No. Description
10.1 Amendment dated as of October 29, 1999 to Amended and Restated
Receivables Purchase Agreement
10.2 Employment Agreement between the Company and Frank Tworecke
27 Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter.
None.
12
<PAGE>
THE BON-TON STORES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE BON-TON STORES, INC.
DATE: December 14, 1999 BY: /s/ Michael L. Gleim
------------------------------- ------------------------------
Michael L. Gleim
Vice Chairman and
Chief Operating Officer
DATE: December 14, 1999 BY: /s/ James H. Baireuther
------------------------------- -------------------------------
James H. Baireuther
Senior Vice President and
Chief Financial Officer
13
<PAGE>
EXHIBIT 10.1
AMENDMENT
Dated as of October 29, 1999
to
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT
Dated as of June 12, 1995
THIS AMENDMENT ("Amendment") dated as of October 29, 1999 is entered
into among THE BON-TON RECEIVABLES PARTNERSHIP, L.P. ("TBTR" or the "Seller"),
BTRGP, INC. ("BTRGP"), FALCON ASSET SECURITIZATION CORPORATION ("Falcon"),
certain financial institutions, and BANK ONE, NA (formerly known as THE FIRST
NATIONAL BANK OF CHICAGO) ("Bank One"), as Agent (the "Agent").
PRELIMINARY STATEMENT. The Seller, BTRGP, Falcon, Bank One, PNC Bank,
N.A. ("PNC"), Natwest Bank N.A., The Bank of New York, and the Agent have
entered into an Amended and Restated Receivables Purchase Agreement dated as of
June 12, 1995 (as previously amended, the "Agreement", the terms defined therein
being used herein as therein defined unless otherwise defined herein), and now
desire to (i) terminate the Commitments of Natwest Bank N.A. and The Bank of New
York, as Investors under the Agreement, (ii) modify the amount of the Commitment
of Bank One and (iii) amend the Agreement in certain other respects as
hereinafter provided. The undersigned agree, on the terms and conditions set
forth below, to amend the Agreement as hereinafter set forth.
SECTION 1. Amendments to the Agreement and Effect Thereof. The
----------------------------------------------
parties hereto, effective the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, agree as follows:
---------
1.1 Section 1.7 of the Agreement is amended to add the following
-----------
sentence at the end of such provision:
"Notwithstanding the foregoing, in the event that any "Provisional
Excess" (as defined in Section 2.8 below) shall exist at any time
-----------
following the end of a Provisional Commitment Period, all Collections
allocable to the Receivables Interests of the Investors shall be remitted
first to the Provisional Commitment Provider, for application to a
reduction of its Capital outstanding, until such time that the Provisional
Excess shall cease to exist, and thereafter all Collections allocable to
the Receivables Interests of the Investors shall be shared ratably by the
Investors in accordance with their Pro Rata Shares."
1.2 Section 1.10 of the Agreement is hereby amended in its entirety
------------
to read as set forth below:
"Section 1.10. Seller Interest. The Seller shall ensure that the
---------------
aggregate Receivable Interests of the Purchasers shall at no time exceed
100%. If on the
1
<PAGE>
Liquidation Day of a Receivable Interest, the aggregate Receivable
Interests of the Purchasers exceeds 100%, the Seller shall pay to the Agent
not later than the earlier of (i) the one Business Day following the Seller
having knowledge of the existence of any such excess, and (ii) the fifth
Business Day following the occurrence of the existence of any such excess,
an amount to be applied to reduce the Capital of the Receivable Interests,
such that after giving effect to such payment the aggregate Receivable
Interest equals or is less than 100%. Such amount shall be applied ratably
to the reduction of the Capital of the Receivable Interests. Any amounts
received by the Investors pursuant to the preceding sentence shall be
applied ratably in accordance with their Pro Rata Shares. The Seller hereby
grants to the Agent for the ratable benefit of the Purchasers a security
interest in all of its interest in the Receivables, Related Security,
Collections and proceeds thereof to secure payment of the Aggregate
Unpaids, including its indemnity obligations under Article VIII and all
other obligations owed hereunder to the Purchasers."
1.3 Article I of the Agreement is hereby amended to add the following
---------
new Section 1.12 thereto at the end of such Article:
"Section 1.12. Extension of Facility Termination Date. The Seller
--------------------------------------
may request one or more one year extensions of the date referred to in
clause (i) of the definition of Facility Termination Date (such date or
such date as it may have been previously extended pursuant to this
Amendment; hereinafter referred to as the "Facility Termination Date") by
-------------------------
giving written notice of such request to the Agent during the month of
November of any year, commencing in November, 2000. Upon its receipt of
such notice, the Agent shall promptly advise each Investor of the request
so made by the Seller. If, within 30 days after receipt of such requested
extension, the Agent shall have been advised in writing by each Investor
that such Investor consents to the requested extension of the Facility
Termination Date, then the Facility Termination Date shall be extended,
effective on such Facility Termination Date, to the date which is the first
anniversary of the previously effective Facility Termination Date.
Notwithstanding anything hereinabove to the contrary, (i) failure by any
Investor to affirmatively advise the Agent of such Investor's consent to
any extension shall constitute a denial on the part of such Investor in
respect of such request, and (ii) in the event that fewer than all of the
Investors shall consent to any request for an extension of the Facility
Termination Date, the Facility Termination Date shall not be extended as so
requested and the Agent shall promptly advise the Seller and the Investors
of such fact."
1.4 Section 2.7 of the Agreement is hereby amended deleting the
-----------
percentage "0.20%" in the definition therein of "Liquidity Fee" and substituting
-------------
therefore the percentage "0.30%" in lieu thereof.
1.5 Article II of the Agreement is amended to add the following new
----------
section thereto:
"Section 2.8 Seasonal Increases in the Purchase Limit. (a) The
----------- ----------------------------------------
Seller may, at any time prior to the Facility Termination Date, request
that the Purchase Limit be increased and, in connection therewith, that
Bank One (in such capacity, the "Provisional
-----------
2
<PAGE>
Commitment Provider") agree to increase its Commitment hereunder (such
-------------------
increase being the "Provisional Commitment") on a provisional basis by an
----------------------
amount (the "Provisional Commitment Amount") equal to the increase then
-----------------------------
being requested in the Purchase Limit; provided that, without the prior
--------
written consent of all of the Investors, (i) the Purchase Limit shall not
be increased more frequently than once during any calendar year, (ii) the
Seller shall not request a period for the Provisional Commitment to be in
effect (the "Provisional Commitment Period") that exceeds ninety (90) days
-----------------------------
or that would extend beyond the Facility Termination Date, and (iii) the
Seller shall not make any request for an increase in the Purchase Limit at
any time that the Investors then hold any Receivables Interest hereunder.
(b) Any increase in the Purchase Limit under this Section 2.7
-----------
shall be subject to the following conditions: (i) Bank One (formerly known
as The First National Bank of Chicago) shall have agreed, in its sole and
absolute discretion, to increase its Commitment by the Provisional
Commitment Amount pursuant to the terms hereof; (ii) the Agent, on behalf
of FALCON, shall have consented to the requested increase in the Purchase
Limit and (iii) the Provisional Commitment Provider, the Seller and the
Agent shall have executed and delivered such instruments, documents and
agreements as the Provisional Commitment Provider or the Agent shall have
requested in connection with the implementation of the Provisional
Commitment (which documentation shall specify, among other things, the
fees, if any, payable by the Seller in connection with the Provisional
Commitment). Upon satisfaction of such conditions, the Agent shall provide
written notice thereof to each Investor, whereupon the Provisional
Commitment shall become effective for the Provisional Commitment Period
specified in such notice. During the Provisional Commitment Period, each
of the Purchase Limit and the Commitment of the Provisional Commitment
Provider shall increase by an amount equal to the Provisional Commitment
Amount.
(c) On the last day of a Provisional Commitment Period, the
Purchase Limit and the Commitment of the Provisional Commitment Provider
shall automatically reduce to the respective amounts in effect immediately
prior to the commencement of the Provisional Commitment Period; provided
--------
that, solely for purposes of the definition of "Required Investors",
------------------
Article II (and the definitions of terms used therein) of this Agreement
----------
and the calculation of any fees payable in respect of the Provisional
Commitment, the Commitment of the Provisional Commitment Provider shall
thereafter be equal to the amount of its Commitment immediately prior to
the commencement of the Provisional Commitment Period plus the lesser of
(i) the Provisional Commitment Amount then most recently in effect and (ii)
the excess (a "Provisional Excess"), if any, of the aggregate Capital at
------------------
such time over the aggregate Commitments of the Investors as in effect
immediately prior to the commencement of such Provisional Commitment
Period; and, provided further, that so long as a Provisional Excess shall
-------- -------
remain at any time other than during a Provisional Commitment Period, no
further purchases from the Seller, whether Incremental Purchases or
Reinvestments, shall be made hereunder."
3
<PAGE>
1.6 Section 7.1 of the Agreement is hereby amended to add the
-----------
following clause at the end thereof:
"(i) the ratio of (A) the accrued expenses, expense payables and trade
payables for The Bon-Ton Department Stores, Inc., The Bon-Ton Stores, Inc.,
and The Bon-Ton Stores of Lancaster, Inc. and their respective subsidiaries
for any fiscal quarter commencing with the fiscal quarter ending October
30, 1999 to (B) the book value of their inventory as at the end of such
fiscal quarter, all calculated on a consolidated basis in accordance with
generally accepted accounting principles consistently applied, shall be
less than .25 to 1.0."
1.7 Exhibit I of the Agreement is hereby further amended deleting the
---------
definition therein of "Commitment" in its entirety and to substitute the
following new definition therefor:
"Commitment" means, for each Investor, the commitment of such
----------
Investor to purchase its Pro Rata Share of Receivable Interests from (i)
the Seller and (ii) Falcon, such Pro Rata Share not to exceed, in the
aggregate, the amount set forth opposite such Investor's name on the
signature pages of the Amendment to the Agreement dated as of October 29,
1999, as such amount may be modified in accordance with the terms hereof."
1.8 Exhibit I to the Agreement is hereby amended by deleting the date
---------
"January 26, 2000" in the definition therein of "Facility Termination Date" and
-------------------------
substituting therefore the following clause in lieu thereof:
"(i) January 31, 2003, as such date may be extended pursuant to the
terms of Section 1.12 from time to time,"
------------
SECTION 2. Termination of Commitments of Certain Investors. Upon the
-----------------------------------------------
effectiveness of this Amendment pursuant to Section 3, the Commitments of
---------
Natwest Bank N.A. and of The Bank of New York are hereby terminated and
cancelled in full and Natwest Bank N.A. and The Bank of New York shall cease to
be Investors under the Agreement.
SECTION 3. Conditions Precedent. This Amendment shall become
--------------------
effective upon receipt by the Agent of (i) counterparts of this Amendment
executed by the Seller, BTRGP, Falcon, Bank One and each Investor or, as to any
Investor, advice satisfactory to the Agent that such Investor had executed this
Amendment, (ii) the amended and restated fee letter of even date herewith, duly
executed by each of the Seller, and BTRGP, and the payment of all fees stated
thereunder to be due on or prior to the effective date of this Amendment, (iii)
an opinion or reliance letter from Wolf, Block, Schorr and Solis-Cohen, LLP,
counsel to the Seller, and BTRGP, in form and substance satisfactory to the
Agent, and (iv) payment for the account of Natwest Bank N.A. and The Bank of New
York of all Liquidity Fees payable to such Investors under the Agreement,
accrued for the period through and including the date of this Amendment. The
Agent hereby agrees to promptly remit such amount to Natwest Bank N.A. and The
Bank of New York upon its receipt thereof.
4
<PAGE>
SECTION 4. Covenants, Representations and Warranties of the Seller
-------------------------------------------------------
and BTRGP.
- ---------
4.1 Upon the effectiveness of this Amendment, the Seller and BTRGP
hereby reaffirm all covenants, representations and warranties made by such party
in the Agreement as amended hereby and agree that all such covenants,
representations and warranties shall be deemed to have been remade as of the
effective date of this Amendment.
4.2 The Seller and BTRGP hereby represent and warrant that this
Amendment constitutes a legal, valid and binding obligation of such party,
enforceable against such party in accordance with its terms, subject to the same
limitations provided in Section 3.1(d) of the Agreement.
SECTION 5. Reference to and Effect on the Agreement.
----------------------------------------
5.1 Upon the effectiveness of this Amendment, each reference in the
Agreement to "this Agreement", "hereunder", "hereof", "herein", or words of like
import shall mean and be a reference to the Agreement, as amended hereby, and
each reference to the Agreement in any other document, instrument or agreement
executed and/or delivered in connection with the Agreement shall mean and be a
reference to the Agreement as amended hereby.
5.2 Except as specifically amended above, the Agreement and all other
documents, instruments and agreements executed and/or delivered in connection
therewith shall remain in full force and effect and are hereby ratified and
confirmed.
5.3 The execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any right, power or remedy of any Investor or the
Agent under the Agreement or any other document, instrument or agreement
executed in connection therewith, nor constitute a waiver of any provision
contained therein, except as specifically set forth herein.
SECTION 6. Execution in Counterparts. This Amendment may be executed
-------------------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.
SECTION 7. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance with the internal laws (and not the laws of conflicts)
of the State of Illinois.
SECTION 8. Headlines. Section headings in this Amendment are
---------
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
THE BON-TON RECEIVABLES
PARTNERSHIP, L.P.
By: BTRGP, INC., Its General Partner
By: /s/ H. Todd Dissinger
--------------------------------
Title: Treasurer
-----------------------------
BTRGP, INC.
By: /s/ H. Todd Dissinger
--------------------------------
Title: Treasurer
-----------------------------
FALCON ASSET SECURITIZATION
CORPORATION
By: /s/ Brooks P. Crankshaw
--------------------------------
Authorized Signatory
Commitment
- ------------
$138,450,000 BANK ONE, NA (formerly known
As THE FIRST NATIONAL BANK
CHICAGO) as Investor and as Agent
By: /s/ Anita Kramer
--------------------------------
Title: Vice President
-----------------------------
Investors
---------
Commitment
- ----------
$11,550,000 PNC BANK, N.A.
By: /s/ Brennan T. Danile
--------------------------------
Title: Assistant Vice President
-----------------------------
6
<PAGE>
Commitment
- ----------
$0 FLEET NATIONAL BANK
(formerly NATWEST BANK N.A.)
By: /s/ Thomas J. Bullard
--------------------------------
Title: Vice President
------------------------------
Commitment
- ----------
$0 THE BANK OF NEW YORK
By: /s/ Stephen C. Brennan
---------------------------------
Title: Vice President
------------------------------
7
<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT made as of this 11th day of November, 1999, by and between
THE BON-TON STORES, INC., a Pennsylvania corporation (the "Company"), and FRANK
TWORECKE ("Employee").
W I T N E S S E T H:
- - - - - - - - - -
In consideration of the mutual promises and covenants contained herein and
intending to be legally bound hereby, the Company and Employee agree as follows:
1. Position and Responsibilities
-----------------------------
(a) The Company hereby employs Employee and Employee hereby accepts
employment by the Company as the Company's Vice Chairman and Chief Merchandising
Officer. Employee shall have all the duties and responsibilities normally
attendant to the position of Vice Chairman and Chief Merchandising Officer and
shall report directly to the Chief Executive Officer of the Company. The
Company will also as soon as practicable following the Effective Date nominate
Employee to serve on the Board of Directors ("Board") for as long as he remains
employed by the Company.
(b) Throughout the term of this Agreement, Employee shall devote his
entire working time, energy, attention, skill and best efforts to the affairs of
the Company and to the performance of his duties hereunder in a manner which
will faithfully and diligently further the business and interests of the
Company. Employee may not, directly or indirectly, do any work for or on behalf
of a competitor or any other company while employed by the Company.
<PAGE>
However, nothing herein contained shall be deemed to prevent or limit the right
of Employee to invest any of his personal funds in less than one percent of the
capital stock or other securities of any corporation whose stock or securities
are publicly owned or are regularly traded on any public exchange, nor shall
this clause be construed as preventing Employee from investing his assets in
such other form or manner as will not require any services on the part of the
Employee in the operation or the affairs of entities in which such investments
are made. Notwithstanding the forgoing, Employee may continue to serve on the
Boards of Directors of Weather Vane Retail Corporation and South Moon Under
provided that such activities do not significantly interfere with Employee's
duties under this Agreement. Approval of other board memberships and
participation in lectures and teaching activities will be at the discretion of
the Chief Executive Officer, however, such approval will not be unreasonably
withheld.
(c) Employee shall not obtain goods or services or otherwise deal on
behalf of the Company with any business or entity in which Employee or a member
of his family has a financial interest or from which Employee or a member of his
immediate family may derive a financial benefit as a result of such transaction,
except that this prohibition shall not apply to any public company in which
Employee or a member of his family owns less than one percent of the outstanding
stock.
2. Term of Agreement This Agreement, and Employee's employment
-----------------
hereunder, shall commence as of November 11, 1999 (the "Effective Date"), and
shall continue through and terminate on February 1, 2003, unless sooner
terminated in accordance with Paragraph 13 below.
3. Place of Performance Employee shall be based at the regular
---------------------
executive offices of the Company, except for travel required for Company
business. The Company's executive offices currently are located in York,
Pennsylvania, but may be relocated at the sole discretion of
2
<PAGE>
the Board. In the event of a relocation of the Company's executive offices
requiring Employee to relocate his residence, Employee shall relocate subject to
reimbursement for relocation expenses on the same basis and to the same extent
as other similarly situated Company executives.
4. Compensation
------------
(a) Salary Employee shall receive a base salary at the annual rate
------
of $450,000. This base salary, less taxes and normal deductions, shall be paid
to Employee in substantially equal installments in accordance with the Company's
regular executive payroll practices in effect from time to time. The annual base
salary may be reviewed from time to time during the term of this Agreement by
the Compensation Committee of the Board to ascertain whether, in the sole
discretion of the Compensation Committee, such base salary should be increased,
and once increased, such base salary shall not be decreased.
(b) Bonus Commencing February 1, 2000 Employee shall be eligible to
-----
earn an annual bonus of up to 75% of his base salary in accordance with
objectives to be determined by the Company. To the extent reasonably
practicable, the annual bonus shall be computed within 90 days following the
close of the Company's fiscal year and paid within 30 days of its computation.
Accordingly, Employee shall be eligible to receive his first bonus payment in
April, 2001.
(c) Stock Options On the Effective Date, Employee shall receive (i)
-------------
a one time grant of options to purchase 200,000 shares of the Company's Common
Stock at a purchase price equal to the fair market value of the stock on the
date of grant ("Options") of which 75,000 shall be incentive stock options
("ISOs") or, if lower, the maximum number of ISOs as permitted under the Plan.
The Options will be granted pursuant to the terms of the Company's Amended and
Restated 1991 Stock Option and Restricted Stock Plan or a similar plan ("the
Plan"). The
3
<PAGE>
Options shall vest in three annual equal installments on the first, second and
third anniversaries of the Effective Date. If Employee is discharged other than
for Cause or resigns for Good Reason prior to the expiration of the Term, the
Options shall immediately vest and may be exercised during the 90 day period
following Employee's cessation of employment. If Employee's employment ceases
due to death or disability pursuant to paragraphs 13(a) or (b), one half of the
then unvested Options shall vest to the extent permissible under the Plan and
may be exercisable as provided pursuant thereto. If Employee is discharged for
Cause or resigns other than for Good Reason prior to the expiration of the Term,
he shall forfeit his interest in all non-vested Options. The grant of the
options shall be substantially in the form set forth as Exhibit A hereto, the
terms of which shall control the options.
5. Allowances
----------
(a) Car Allowance The Company shall provide Employee with a leased
-------------
Lexus 400 model or equivalent car. In addition, the Company shall pay Employee
for Employee's reasonable (i) car insurance; (ii) car phone and bills for car
phone charges; and (iii) car maintenance and other costs of operation, upon
Employee's timely submission of documentation regarding these expenses, so long
as these expenses are deemed reasonable by the Company.
(b) Special Allowance The Company shall pay Employee $10,000, less
-----------------
taxes and normal deductions, as a special allowance to defray dues for
membership in a club. Employee shall provide documentation of his use of the
allowance sufficient to allow the Company to account for the allowance.
(c) Home Purchase If the Employee decides to purchase a new
-------------
principal residence after the completion of one (1) year of employment, he shall
receive reimbursement for
4
<PAGE>
real estate commissions, attorneys fees and bank origination fees incurred in
the sale of his current residence and purchase of his new residence in a total
not to exceed $50,000, provided that: (1) Employee's most recent performance
evaluation rating is "effective" or higher; (2) his performance subsequent to
the evaluation is satisfactory; and (3) he is in compliance with his obligations
under this Agreement.
6. Insurance
---------
(a) Life Insurance Upon execution of the Agreement, the Company
--------------
agrees to pay Employee $10,000 which the Employee shall use to purchase life
insurance of his choice in his name. Thereafter, on or about February 1, 2001
and on February 1, 2002, the Company agrees to pay Employee an additional
$10,000 which the Employee shall also use to purchase life insurance of his
choice in his name.
(b) Medical Insurance Employee and his eligible dependents shall be
-----------------
eligible to participate in the Company's group medical plans in accordance with
the terms of such plans and, subject to the restrictions and limitations
contained in the insurance agreement or agreements.
(c) Medical Allowance The Company shall pay Employee up to $5,000
-----------------
per year for medical expenses which are not covered by the Company's medical
plan.
7. Loan and Repayment Schedule Within ten (10) business days of
---------------------------
Employee's execution of this Agreement and commencement of employment hereunder,
the Company shall loan Employee $160,000 bearing interest at the "applicable
federal rate" as the term is used by the Internal Revenue Code for a thirty-six
(36) month term to be repaid in thirty-six (36) equal monthly installments.
Employee shall receive a monthly payment during the term of said loan in a gross
amount prior to tax resulting in a net amount, after tax, equivalent to the
monthly loan
5
<PAGE>
balance due from Employee. In the event of a Change of Control if Employee's
employment ceases for any reason after the expiration of three months,
termination by the Company without Cause, resignation of the Employee for Good
Reason or termination due to the Employee's Death or Disability, the remaining
loan balance will be immediately forgiven and a tax gross-up payment shall be
provided by the Company within thirty (30) days. If Employee's employment with
the Company terminates for any other reason, including his resignation without
Good Reason, prior to his completion of thirty-six (36) months, Employee agrees
that the balance of the $160,000 loan shall be repaid to the Company within
thirty (30) days of his separation of employment.
8. Other Benefits Employee shall be eligible to participate in the
--------------
Company's profit sharing plan, discount program, vacation plan, long-term
disability plan and employee benefit programs generally made available to other
executives of the Company, subject to their respective generally applicable
eligibility requirements, terms, conditions and restrictions; provided however,
that payments under this Agreement shall be in lieu of any severance benefits
otherwise provided by the Company. However, nothing in this Agreement shall
preclude the Company from amending or terminating any such insurance, benefit,
program or plan so long as the amendment or termination is applicable to the
Company's executives generally. Moreover, the Company's obligations under this
provision shall not apply to any insurance, benefit, program or plan made
available on an individual basis to one or more select executive employees by
contract if such insurance, benefit, program or plan is not made available to
all executive employees. With respect to Employee's participation in the
Company's vacation plan, Employee shall be eligible for three weeks vacation per
calendar year, which vacation entitlement shall be pro-rated in any calendar
year in which the Employee does not work the entire calendar year.
6
<PAGE>
9. Supplemental Retirement Benefit In the event that Employee
-------------------------------
completes five (5) consecutive years of employment and continues his employment
with the Company he will become eligible for and vest in a supplemental
retirement benefit in the amount of $50,000 a year. For each full year that the
Employee remains in the Company's employ after the completion of the first five
(5) years, the amount of the annual supplemental retirement benefit to which
Employee shall receive shall increase by $15,000 per year. The maximum
supplemental retirement benefit the Employee can receive is $125,000 per year.
The Supplemental Retirement Benefit shall be payable in equal monthly
installments commencing with the month Employee's employment with the Company
ceases (after the benefit vests) through the month of the date of Employee's
death at age sixty-five (65) or greater. If Employee dies after the benefit
vests but before he reaches age sixty-five (65), whether he is still employed
with the Company, the Company will pay Employee's estate the amount of the
vested benefit, until the date of his 65th birthday. The Employee's entitlement
to this supplemental benefit shall terminate and the benefit will be forfeited
if (a) the Employee ceases employment with the Company at any time prior to
vesting for any reason; (b) the Employee violates any portion of the Agreement
or any subsequent agreement between him and the Company (even after vesting); or
(c) the Board determines at any time before or after termination of employment
that Employee is guilty of dishonesty or other unlawful acts causing injury or
damage to the Company, its employees or customers (even after vesting).
10. Business Expenses The Company shall pay or reimburse Employee for
-----------------
reasonable entertainment and other expenses incurred by Employee in connection
with the performance of Employee's duties under this Agreement upon receipt of
vouchers therefor and in
7
<PAGE>
accordance with the Company's regular reimbursement procedures and practices in
effect from time to time.
11. Legal Fees The Company will reimburse Employee for attorney's fees
----------
reasonably incurred in connection with the negotiation of this Agreement up to
$6,000.
12. Disability or Incapacity If Employee becomes physically or mentally
------------------------
unable to perform his essential duties hereunder, with or without reasonable
accommodations, the Company will continue Employee's benefits provided under
this Agreement to the extent permitted by the applicable plan documents or
insurance agreements and will pay Employee the difference between his base
salary and any benefits received by him under any disability insurance policy
during the period of the disability or incapacity for up to the lesser of either
13 weeks following the date Employee is first unable to perform his duties due
to such disability or incapacity or for a cumulative period of 26 weeks during
the term of this Agreement. In addition, the Company shall continue such
benefits and compensation referred to above for so long as the Company elects
not to terminate Employee pursuant to Paragraph 13 below.
13. Termination of Employment Notwithstanding any other provision of
-------------------------
this Agreement, Employee's employment and all of the Company's obligations or
liabilities under this Agreement may be terminated immediately, excluding any
obligations the Company may have under Paragraph 14 below in any of the
following circumstances:
(a) Disability or Incapacity In the event of Employee's physical or
------------------------
mental inability to perform his essential duties hereunder, with or without
reasonable accommodation, for a period of 13 consecutive weeks or for a
cumulative period of 26 weeks during the term of this Agreement.
(b) Death of Employee In the event of Employee's death.
-----------------
8
<PAGE>
(c) Resignation for Good Reason Employee may resign for "Good
---------------------------
Reason," defined below, upon 30 days' written notice by Employee to the Company
except as set forth in paragraph 13(d) below. The Company may waive Employee's
obligation to work during this 30 day notice period and terminate his employment
immediately, but if the Company takes this action in the absence of agreement by
Employee, Employee shall receive the salary which otherwise would be due through
the end of the notice period. For purposes of this Agreement, "Good Reason"
shall mean any of the following violations of this Agreement by the Company:
causing Employee to cease to be Vice Chairman and Chief Merchandising Officer
with commensurate duties and responsibilities; causing the Employee to cease
reporting to the CEO; any reduction in the Employee's base salary; any reduction
in the Employee's potential bonus eligibility amount; and any substantial breach
of any material provision of this Agreement. Notwithstanding the foregoing, the
acts or omissions described above shall not constitute "Good Reason" unless the
Employee provides the Company with written notice detailing the matters he
asserts to be "Good Reason" which the Company does not cure within thirty (30)
days of receiving the notice.
(d) Change in Control In the event of a Change of Control, the
-----------------
Employee shall be prohibited from resigning for Good Reason for a period of
three months following the Change of Control. For purposes of this Agreement, a
Change of Control shall be deemed to occur if:
(i) any "person," as such term is defined under Sections
3(a)(9) and 13(d) of the Exchange Act, who is not an Affiliate of Company on the
date hereof, becomes a "beneficial owner," as such term is used in Rule 13d-3
under the Exchange Act, of a majority of the Company's Voting Stock;
9
<PAGE>
(ii) the Company adopts any plan of liquidation providing for
the distribution of all or substantially all of its assets;
(iii) the Company is party to a merger, consolidation, other
form of business combination or a sale of all or substantially all of its
assets, unless the business of Company is continued following any such
transaction by a resulting entity (which may be, but need not be, Company) and
the shareholders of Company immediately prior to such transaction (the "Prior
Shareholders") hold, directly or indirectly, a majority of the voting power of
the resulting entity; or
(iv) if any shareholder owns stock possessing a greater voting
power than held by M. Thomas Grumbacher and his family, or if M. Thomas
Grumbacher and his family control less than 20% of the Voting Stock.
(e) Discharge for Cause Company may discharge Employee at any time
-------------------
for "Cause," which shall be limited to: willful and proven violation of
reasonable directives from either the Board or CEO or of standards of conduct
established by law; fraud, willful misconduct, misappropriation of funds or
other dishonesty; conviction of a crime of moral turpitude; any
misrepresentation made in this Agreement; or breach of any provision of this
Agreement (including, without limitation, acceptance of employment with another
company or performing work or providing advice to another company, as an
employee, consultant or in any other capacity - except work for or advice to
South Moon Under in his capacity as a board member that does not significantly
interfere with his employment - while still an Employee of the Company).
(f) Discharge without Cause Notwithstanding any other provision of
-----------------------
this Agreement, Employee's employment and any and all of the Company's
obligations under this
10
<PAGE>
Agreement (excluding any obligations the Company may have
under Paragraph 14 below) may be terminated by the Company at any time without
Cause.
(g) General
-------
(i) Termination of Employee's employment pursuant to this
Paragraph 13 shall release the Company of all of its liabilities and obligations
under this Agreement, except as expressly provided under Paragraph 14 below.
(ii) Termination of Employee's employment pursuant to this
Paragraph 13 shall not release Employee from Employee's obligations and
restrictions under Paragraphs 15 and 16 of this Agreement, and his loan
repayment obligation in Paragraph 7.
14. Payments Upon Termination
-------------------------
(a) Discharge Without Cause or Resignation for Good Reason. If
-------------------------------------------------------
Employee is discharged without Cause or resigns for Good Reason:
(i) Within the first two (2) years of this Agreement, Employee
shall receive his base salary (paid in monthly installments) and benefits and
allowances under paragraphs 5(a), 6(a)-(c) and 8, to the extent permissible
under the applicable plans and policies (("Continued Benefits") for eighteen
(18) months.
(ii) After the first two (2) years of this agreement but before
the term of the agreement expires, Employee will receive his base salary (paid
in monthly installments) and Continued Benefits for twelve (12) months.
(iii) Employee will receive a prorated portion (based on the
number of days employed in the fiscal year) of the bonus which would have been
earned by the Employee under Paragraph 4(b) above, for said fiscal year based on
the Company's full year's performance.
11
<PAGE>
The bonus, if any, will be paid as soon as practicable after the end of the
fiscal year in which the termination occurs.
(iv) Employee's Options shall immediately vest and he will
receive any payout to which he is entitled under the Company's stock option
plans in accordance with, to the extent provided in, and subject to the
restriction and payout schedules contained in those plans.
(v) Any remaining balance of the loan under Paragraph 7 shall
be forgiven and a tax gross-up payment shall be provided to Employee within
thirty (30) days of his termination.
(vi) The Company's obligation for base salary under subparagraph
(i) above shall be offset by fifty percent (50%) of any base salary from
employment with another employer during this period, or compensation earned by
Employee through self-employment (except for income from Employee's investments
in securities or real estate) and its obligation to continue medical and life
insurance shall cease upon Employee's acceptance of other employment pursuant to
which comparable coverage is normally provided. (With respect to the life
insurance, the Company's obligation will be limited to the difference between
the amount of coverage the Company is required to provide under this Agreement
and the amount for which the Employee is eligible with his new employer.)
Moreover, the Company's obligations under subparagraph (i) above shall cease in
the event that Employee breaches any of the restrictions set forth in
Paragraphs 15 or 16 below.
(vii) The Employee's right to commencement and continuation of
payments and Continued Benefits under 14(a)(i)-(ii), vesting of options under
14(a)(iv) and loan forgiveness and payment under 14(a)(v) shall be contingent
upon (i) execution by the Employee at or about the time of termination of his
employment of a general release of claims (including
12
<PAGE>
without limitation contractual, common law and statutory claims) in a form
satisfactory to the Company in favor of the Company and its officers, directors,
executives and agents substantially similar in substance to the release attached
as Exhibit "B" which he does not revoke; and (ii) compliance by the Employee
with all of the terms of this Agreement including without limitation paragraphs
15 and 16 hereof. Employer in connection with Employee's release shall execute a
general release of claims against Employee (including without limitation
contractual, common law and statutory claims) but preserving and excluding
matters constituting Cause under paragraph 13(e) above, substantially in the
form attached hereto as Exhibit "C".
(viii) Except as set forth above in this Paragraph 14(a),
Employee shall not be eligible for any payments or other benefits upon
termination of his employment without Cause or resignation for Good Reason.
(b) Death or Disability/Incapacity
------------------------------
(i) On death, Employee's estate's sole entitlement will be to
base salary for any days worked prior to his death, forgiveness of any remaining
loan balance and corresponding tax gross-up payment under Paragraph 7, amounts
payable on account of Employee's death under any insurance or benefit plans or
policies maintained by the Company, any vested Supplemental Retirement Benefit
until the date of his 65th birthday pursuant to Paragraph 9 herein, vesting of
one-half of his unvested Options and any pay-outs to which Employee is entitled
to under the Company's stock option plans in accordance with, to the extent
provided in, and subject to the restrictions and payout schedules contained in
those plans.
(ii) On termination for disability or incapacity, Employee's
sole entitlement will be to base salary for any days worked prior to the date of
termination, forgiveness of any remaining loan balance and corresponding tax
gross-up payment under Paragraph 7, amounts payable on account of disability or
incapacity under any insurance or
13
<PAGE>
benefit plans or policies maintained by the Company, vesting of one-half of his
unvested Options and any pay-outs to which he is entitled under the Company's
stock option plans in accordance with, to the extent provided in, and subject to
the restrictions and payout schedules contained in those plans.
(c) Discharge for Cause If Employee is discharged for Cause or
-------------------
resigns without Good Reason, Employee's sole entitlement will be the receipt of
base salary for any days worked through the date of termination and any pay-outs
to which he is entitled under the Company's stock option plans in accordance
with, to the extent provided in, and subject to the restrictions and payout
schedules contained in those plans and this Agreement.
(d) Change in Control
-----------------
(i) Notwithstanding the foregoing, upon a Change in Control as
defined in Paragraph 13(d) Employee's Options shall immediately vest following a
Change in Control if either (x) the Employee's employment ceases for any reason
after the expiration of three months following the Change in Control; or (y)
during the three months immediately following the Change in Control he is
terminated other than for Cause, Employee shall receive a "Change of Control
Payment" equal to the lesser of 2.99 time his base salary (at the salary level
immediately preceding the Change in Control) or, if applicable, the "280G
Permitted Payment" (as defined below).
(ii) Notwithstanding any other provision of this Agreement, if the
aggregate present value of the "parachute payments" to the Employee, determined
under Section 280G(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), would be at least three times the "base amount" determined under Code
Section 280G, then the "280G Permitted Payment" shall be the maximum amount that
may be paid as a Change of Control Payment under this Section 11(d) such that
the aggregate present value of such "parachute payments" to the
14
<PAGE>
Employee is less than three times his "base amount." In addition, in the event
the aggregate present value of the parachute payments to the Employee would be
at least three times his base amount even after a reduction of the Change of
Control Payment to $0 (all as determined for purposes of Code Section 280G),
compensation otherwise payable under this Agreement and any other amount payable
hereunder or any other severance plan, program, policy or obligation of the
Company or any other affiliate thereof shall be reduced so that the aggregate
present value of such parachute payments to the Employee, as determined under
Code Section 280G(b) is less than three times his base amount. Any decisions
regarding the requirement or implementation of such reductions shall be made by
such tax counsel as may be selected by the Company and acceptable to the
Employee.
15. Company Property All advertising, sales, manufacturers' and
----------------
other materials or articles or information, including without limitation data
processing reports, customer sales analyses, invoices, price lists or
information or any other materials or data of any kind furnished to Employee by
the Company or developed by Employee on behalf of the Company or at the
Company's direction or for the Company's use or otherwise in connection with
Employee's employment with the Company, are and shall remain the sole and
confidential property of the Company.
16. Non-Competition and Confidentiality To the maximum extent
-----------------------------------
permissible by law:
(a) During his employment with the Company and for a period equal to
the greater of (x) of one year after the termination of his employment with the
Company for any reason whatsoever, whether by Employee or by the Company and
whether during the term of this Agreement or subsequent to the expiration of
this Agreement, or (y) the period during which
15
<PAGE>
Employee is entitled to receives any payments under Paragraph 14(a) of this
Agreement, Employee shall not, directly or indirectly:
(i) Induce or influence any customer, employee, consultant,
independent contractor or supplier of the Company to cease to do business with
or terminate his employment with the Company.
(ii) After the cessation of his employment, engage in (as a
principal, partner, director, officer, agent, employee, consultant, owner,
independent contractor or otherwise) or be financially interested in any retail
department store business: (a) that is a direct competitor of the Company (ie.
competitive lines generate at least 30% of the Company's revenues and at least
30% of the competitor's revenues); (b) with at least $250 million in gross
annual sales; and (c) operating a store or stores within a 15 mile radius of any
Company store which is in existence or which is under contract to be acquired or
constructed by the Company at the time of Employee's termination of employment,
and which competing store or stores have total gross annual sales in excess of
15% of the Company's gross annual sales for the prior year, including owned and
leased businesses.
(b) During his employment with the Company and at all times
thereafter, and except as required by law, Employee shall not use for his
personal benefit, or disclose, communicate or divulge to, or use for the direct
or indirect benefit of, any person, firm, association or company other than the
Company, any confidential information of the Company which Employee acquires in
the course of his employment, which is not otherwise lawfully known by and
readily available to the general public. This confidential information includes,
but is not limited to: any material referred to in Paragraph 15 or any
information regarding the business, marketing, legal or accounting methods,
policies, plans, procedures, strategies or techniques; research or development
projects or results; trade secrets or other knowledge or
16
<PAGE>
processes of or developed by the Company; names and addresses of employees,
suppliers or customers. Employee confirms that such information is confidential
and constitutes the exclusive property of the Company, and agrees that,
immediately upon his termination, whether by Employee or by the Company and
whether during the term of this Agreement or subsequent to the expiration of
this Agreement, Employee shall deliver to Company all correspondence, documents,
books, records, lists, computer programs and other writings relating to
Company's business; and Employee shall retain no copies, regardless of where or
by whom said writings were kept or prepared.
(c) Both during his employment with the Company and following his
termination for any reason, whether by Employee or by the Company and whether
during the term of this Agreement or following the expiration of the Agreement,
Employee shall, upon reasonable notice, furnish to the Company such information
pertaining to his employment with the Company as may be in his possession. The
Company shall reimburse Employee for all reasonable expenses incurred by him in
fulfilling his obligation under this subparagraph (c).
(d) The provisions of subparagraphs (a), (b) and (c) shall survive the
cessation of Employee's employment for any reason, as well as the expiration of
this Agreement at the end of its term or at any time prior thereto.
(e) Employee acknowledges that the restrictions contained in this Paragraph
16, in view of the nature of the business in which the Company is engaged and
the Employee's position with the Company, are reasonable and necessary to
protect the legitimate interests of the Company, and that any violation of those
restrictions would result in irreparable injury to the Company. Employee
therefore agrees that, in the event of his violation of any of those
restrictions, the Company shall be entitled to obtain from any court of
competent jurisdiction preliminary and permanent injunctive relief against
Employee, in addition to damages from
17
<PAGE>
Employee and an equitable accounting of all commissions, earnings, profits and
other benefits arising from such violation, which rights shall be cumulative and
in addition to any other rights or remedies to which the Company may be
entitled.
(f) Employee agrees that if any or any portion of the foregoing
covenants, or the application thereof, is construed to be invalid or
unenforceable, the remainder of such covenant or covenants or the application
thereof shall not be affected and the remaining covenant or covenants will then
be given full force and effect without regard to the invalid or unenforceable
portions. If any covenant is held to be unenforceable because of the area
covered, the duration thereof, or the scope thereof, Employee agrees that the
Court making such determination shall have the power to reduce the area and/or
the duration, and/or limit the scope thereof, and the covenant shall then be
enforceable in its reduced form. If Employee violates any of the restrictions
contained in subparagraph (a), the period of such violation (from the
commencement of any such violation until such time as such violation shall be
cured by Employee to the satisfaction of the Company) shall not count toward or
be included in the one year (or such longer period as may be prescribed by such
section) restrictive period contained in subparagraph (a).
(g) Employee represents and warrants that the knowledge, skill and
abilities he possesses at the time of his execution of this Agreement are
sufficient to permit him to earn a living by working for a non-competitor of the
Company for the restrictive period set forth in subparagraph (a) above.
(h) For purposes of Paragraphs 15 and 16 of this Agreement, the term
"Company" shall include not only The Bon-Ton Stores, Inc., but also any of its
successors, subsidiaries or affiliates.
18
<PAGE>
17. Taxes Employee agrees that he is responsible for paying any and
-----
all federal, state and local income taxes assessed with respect to any money,
benefits or other consideration received from the Company and that the Company
is entitled to withhold any tax payments from amounts otherwise due Employee to
the extent required by applicable statutes, rulings or regulations.
18. Legal Fees, Costs and Expenses In the event of any litigation
------------------------------
brought by the Employee to enforce this Agreement after a Change in Control, he
shall be entitled to recover his reasonable attorney's fees, costs and expenses
incurred to enforce the Agreement if he prevails in the litigation. Any payment
due under this Agreement which was not timely made by the Company or by the
Employee shall include an award of interest at the Company's then current
revolving borrowing rate.
19. Prior Agreements
----------------
(a) Employee represents to the Company that the only contract or, to
his knowledge, other limitation upon his ability to compete with any former
employer is Section 6.8 of his contract with Jos A. Bank Clothiers, Inc.,
("Bank"), which has been provided to the Company. Employee and the Company
mutually believe that Employee's employment by the Company does not violate this
provision. Employee further believes that there are no other restrictions,
agreements or understandings whatsoever to which Employee is a party which could
impact upon his employment under the Agreement or would prevent or make unlawful
his execution of this Agreement or his employment hereunder.
(b) Employee agrees that he will not use or disclose any confidential
or proprietary information of any of his prior employers during the course of
his employment under this Agreement.
19
<PAGE>
(c) If litigation is commenced by Bank against Employee asserting a
claim for breach of Section 5(a) of his Settlement and Mutual Releases Agreement
with Bank as a result of his employment with the Company or performance of
activities for the Company, the Company shall both provide the Employee with a
defense and control the defense of the litigation. The Company shall indemnify
and hold Employee harmless for and against any liability and damages agreed to
or awarded in such litigation, and the Company's and the Employee's rights and
obligation under this Agreement shall otherwise not be changed.
20. Entire Understanding This Agreement contains the entire
--------------------
understanding between the Company and Employee with respect to the subject
matter hereof and supersedes all prior and contemporary agreements and
understandings, inducements or conditions, express or implied, written or oral,
between the Company and Employee except as herein contained. The express terms
hereof control and supersede any course of performance and/or usage of the trade
inconsistent with any of the terms hereof.
21. Modifications This Agreement may not be modified orally but
-------------
only by written agreement signed by Employee and the Company's Chief Executive
Officer or such other person as the Board may designate specifically for this
purpose.
22. Provisions Separable The provisions of this Agreement are
--------------------
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
23. Consolidation, Merger or Sale of Assets Nothing in this
---------------------------------------
Agreement shall preclude the Company from consolidating or merging into or with,
or transferring all or substantially all of its assets to, another entity which
assumes this Agreement and all obligations and undertakings of the Company
hereunder. Under such a consolidation, merger or transfer of
20
<PAGE>
assets and assumption, the term "the Company" as used herein, shall mean such
other entity and this Agreement shall continue in full force and effect.
24. Notices All notices, requests, demands and other communications
-------
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received when delivered (personally, by
courier service such as Federal Express, or by messenger) or when deposited in
the United States mails, registered or certified mail, postage pre-paid, return
receipt requested, addressed as set forth below:
(a) If to the Company:
The Bon-Ton Stores, Inc.
2801 East Market Street
York, PA 17402
Attention: Chief Employee Officer
with a copy to:
Henry F. Miller, Esquire
Wolf, Block, Schorr and Solis-Cohen LLP
1650 Arch Street
22nd Floor
Philadelphia, PA 19103-2097
(b) If to Employee:
Frank Tworecke
11102 Hidden Trail Drive
Owings Mills, MD 21117
with a copy to
Roger C. Siske, Esquire
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, IL 60606-6404.
In addition, notice by mail shall be by air mail if posted outside of the
continental United States. Any party may alter the address to which
communications or copies are to be sent by giving
21
<PAGE>
notice of such change of address in conformity with the provisions of this
paragraph for the giving of notice.
25. No Attachment Except as required by law, no right to receive
-------------
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
26. Binding Agreement This Agreement shall be binding upon, and
-----------------
shall inure to the benefit of the Company and its successors, representatives,
and assigns and shall be binding upon Employee, his heirs, executors and legal
representatives.
27. No Assignment by Employee Employee acknowledges that the
-------------------------
services to be rendered by him are unique and personal. Accordingly, Employee
may not assign or delegate any of his rights or obligations hereunder, except
that he may assign certain rights hereunder if agreed to in writing by the Chief
Employee Officer.
28. Indulgences Neither the failure nor any delay on the part of
-----------
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
29. Paragraph Headings The paragraph headings in this Agreement
------------------
are for convenience only; they form no part of this Agreement and shall not
affect its interpretation.
22
<PAGE>
30. Controlling Law This Agreement and all questions relating to its
---------------
validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania,
notwithstanding any conflict-of-laws doctrines of such state or any other
jurisdiction to the contrary, and without the aid of any canon, custom or rule
of law requiring construction against the draftsman.
31. Chief Employee Officer In the absence of the Chief Employee
----------------------
Officer, the decisions of the Chief Employee Officer may be made by such other
person as designated by the Board.
32. Execution in Counterparts This Agreement may be executed in
-------------------------
any number of counterparts, each of which shall be deemed to be an original
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties hereto.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have duly executed and delivered, in Pennsylvania, this Agreement as of the date
first above written.
THE BON-TON STORES, INC.
By: /s/ Heywood Wilansky
---------------------
Heywood Wilansky
Chief Executive Officer
FRANK TWORECKE
/s/ Frank Tworecke
---------------------------
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED OCTOBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> OCT-30-1999
<CASH> 11,407
<SECURITIES> 0
<RECEIVABLES> 29,833
<ALLOWANCES> 3,036
<INVENTORY> 260,642
<CURRENT-ASSETS> 313,853
<PP&E> 240,380
<DEPRECIATION> 103,648
<TOTAL-ASSETS> 470,708
<CURRENT-LIABILITIES> 137,251
<BONDS> 154,165
0
0
<COMMON> 153
<OTHER-SE> 174,545
<TOTAL-LIABILITY-AND-EQUITY> 470,708
<SALES> 460,322
<TOTAL-REVENUES> 461,837
<CGS> 292,378
<TOTAL-COSTS> 464,794
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,179
<INCOME-PRETAX> (9,136)
<INCOME-TAX> (3,472)
<INCOME-CONTINUING> (5,664)
<DISCONTINUED> 0
<EXTRAORDINARY> (378)
<CHANGES> 0
<NET-INCOME> (6,042)
<EPS-BASIC> (0.41)
<EPS-DILUTED> (0.41)
</TABLE>
