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(THE BON-TON PHOTO)
Proxy Statement and
Notice of 2003 Annual
Meeting
(THE BON-TON LOGO)
[THE BON-TON LOGO]
THE BON-TON STORES, INC.
2801 EAST MARKET STREET
YORK, PA 17402
May 15, 2003
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders to
be held at 9:00 a.m. on Tuesday, June 17, 2003, at the Heritage Hills Conference
Center, 2700 Mount Rose Avenue, York, Pennsylvania. Enclosed is the official
notice of meeting, the proxy statement, the proxy card and our 2002 Annual
Report.
You may vote your shares via the Internet by accessing the voting site
shown on your proxy card, by telephone by calling the toll-free number shown on
your proxy card, by mail using the proxy card, or in person by attending and
voting at the meeting.
Your vote is important to us. Even if you plan to attend the meeting,
please sign, date and return your proxy in the enclosed postage-paid envelope or
vote by telephone or over the Internet.
Sincerely,
/s/ Tim Grumbacher
Tim Grumbacher
Chairman of the Board and
Chief Executive Officer
THE BON-TON STORES, INC.
2801 EAST MARKET STREET
YORK, PA 17402
NOTICE OF ANNUAL MEETING
The Annual Meeting of Shareholders of The Bon-Ton Stores, Inc. will be
held on Tuesday, June 17, 2003, at 9:00 a.m., at the Heritage Hills Conference
Center, 2700 Mount Rose Avenue, York, Pennsylvania.
The purposes of this year's meeting are:
1. To elect an eleven member Board of Directors for a one-year term.
2. To amend The Bon-Ton Stores, Inc. 2000 Stock Incentive Plan to
increase the maximum number of shares of stock available from an
aggregate of 400,000 shares to an aggregate of 1,900,000 shares.
3. To ratify the appointment of KPMG LLP as independent auditor for
2003.
4. To consider any other matters as may properly come before the
meeting.
Shareholders who owned shares of our stock at the close of business on
May 2, 2003 may attend and vote at the meeting. If you cannot attend the
meeting, you may vote by telephone or over the Internet as instructed on the
enclosed proxy card or by mailing the proxy card in the enclosed postage-paid
envelope. Any shareholder attending the meeting may vote in person, even though
he or she has already returned a proxy card or voted by telephone or over the
Internet.
Robert E. Stern
Vice President,
General Counsel and Secretary
York, Pennsylvania
May 15, 2003
Please vote by telephone or over the Internet as instructed on the enclosed
proxy card or complete, sign and date the proxy card as promptly as possible and
return it in the enclosed envelope. If you vote by telephone or over the
Internet, do not return your proxy card.
CONTENTS
<Table>
Proxy Statement............................................. 1
Voting Procedures and Security Ownership.................... 1
Outstanding Shares and Voting Rights...................... 1
Principal Shareholders.................................... 2
Security Ownership of Directors and Executive Officers.... 5
Election of Directors....................................... 6
Meetings and Committees of the Board of Directors......... 7
Compensation of Directors................................. 8
Amendment of The Bon-Ton Stores, Inc. 2000 Stock Incentive
Plan...................................................... 9
Ratification of the Appointment of the Independent
Auditor................................................... 13
Executive Compensation...................................... 14
Summary Compensation Table................................ 14
Stock Option Grants....................................... 14
Stock Option Exercises and Holdings....................... 15
Employment Agreements..................................... 15
Supplemental Retirement Benefits.......................... 16
Executive Severance....................................... 16
Equity Compensation Plan Information...................... 16
Stock Performance Graph..................................... 17
Report on Executive Compensation............................ 17
Report of the Audit Committee............................... 19
Independent Auditor's Fees.................................. 20
Relationship with Independent Auditor....................... 20
Section 16(a) Beneficial Ownership Reporting Compliance..... 21
Certain Transactions........................................ 21
Shareholder Proposals....................................... 21
Exhibit A -- Audit Committee Charter........................ A-1
</Table>
THE BON-TON STORES, INC.
---------------------
PROXY STATEMENT
We are providing this proxy statement to solicit your proxy for use at
the Annual Meeting of Shareholders. The proxy materials, which consist of the
Annual Report, the Notice of Annual Meeting, this proxy statement and the proxy
card, are first being sent to our shareholders on or about May 15, 2003.
We do not anticipate that any matters will be raised at the meeting other
than those described in the notice. If any other matters come before the
meeting, your proxies will be authorized to act in accordance with their
judgment.
When your proxy card is returned properly signed, or you have effectively
voted over the Internet or by telephone, your shares will be voted in accordance
with your instructions. If your proxy card is signed and returned without
specifying choices, your shares will be voted "for" the Board nominees and "for"
each of the other proposals presented in this proxy statement.
You may revoke your proxy before its exercise by notifying the Secretary
of the Company in writing, by delivering a properly executed, later-dated proxy
card, by voting again over the Internet or by telephone, or by voting in person
at the meeting.
Your proxy is being solicited by the Board of Directors. We will bear the
cost of this solicitation, including the charges of brokerage houses, nominees
and fiduciaries in forwarding these materials to beneficial owners. This
solicitation may be made in person, by telephone or by other means of
communication by our directors, officers or employees, or by a professional
proxy solicitation organization engaged by us.
References in this proxy statement to a year refer to our fiscal year,
which is the 52 or 53 week period ending on the Saturday nearer January 31 of
the following calendar year (for example, a reference to 2002 is a reference to
the fiscal year ended February 1, 2003).
VOTING PROCEDURES AND SECURITY OWNERSHIP
OUTSTANDING SHARES AND VOTING RIGHTS
Only shareholders of record at the close of business on May 2, 2003, are
entitled to vote at the meeting. At that time, there were 12,142,085 shares of
common stock and 2,989,853 shares of Class A common stock outstanding. The
common stock and the Class A common stock vote together on all matters. Holders
of common stock are entitled to one vote per share and holders of Class A common
stock are entitled to ten votes per share. There are no other classes of voting
securities outstanding. In the election of directors, shareholders do not have
cumulative voting rights.
The presence at the meeting, in person or by proxy, of persons entitled
to cast a majority of the shareholder votes will constitute a quorum.
In the election of directors, the eleven nominees receiving a plurality
of the votes cast (that is, the eleven nominees receiving the greatest number of
votes) will be elected. A proxy marked "withhold" with respect to the election
of a director will not be voted as to the director indicated, but will be
counted for purposes of determining whether there is a quorum.
Approval of any other matter submitted to the shareholders requires the
affirmative vote of a majority of the votes cast. Abstentions and broker
non-votes are counted only to determine whether a quorum is present at the
meeting. A broker "non-vote" occurs when a nominee for a beneficial owner does
not vote on a particular matter because the nominee does not have discretionary
voting power as to that item and has not received voting instructions from the
beneficial owner.
If you own common stock in your own name, you are an "owner of record."
This means you may direct the persons named as proxies how to vote your shares.
If you fail to vote, the proxies cannot vote your shares at the meeting.
You have four voting options:
- - INTERNET: You can vote over the Internet at the web address shown on your
proxy card. Internet voting is available 24 hours a day. If you have access
to the Internet, we encourage you to vote this way. IF YOU VOTE OVER THE
INTERNET, DO NOT RETURN YOUR PROXY CARD.
- - TELEPHONE: You can vote by telephone by calling the toll-free telephone
number on your proxy card. Telephone voting is available 24 hours a day.
Easy-to-follow voice prompts allow you to vote your shares and confirm that
your instructions have been properly recorded. IF YOU VOTE OVER THE
TELEPHONE, DO NOT RETURN YOUR PROXY CARD.
- - PROXY CARD: You can vote by mail by signing, dating and mailing your proxy
card in the postage-paid envelope provided.
- - VOTE IN PERSON: You can attend the Annual Meeting and vote at the meeting.
If a broker, bank or other nominee holds your common stock for your
benefit but not in your name, your shares are in "street name." In that case,
your bank, broker or other nominee will send you a voting instruction form to
use in voting your shares. The availability of Internet and telephone voting
depends on their voting processes. Please follow the instructions on the voting
instruction form they send you.
If you are a participant in The Bon-Ton Stores, Inc. Profit
Sharing/Retirement Plan (the "401(k) Plan"), your proxy will incorporate all
shares you own through the 401(k) Plan, assuming all your shares are registered
in the same name. Your proxy will serve as a voting instruction for the trustee
of the 401(k) Plan. If you own shares through the 401(k) Plan and you do not
vote, the plan trustee will vote your shares in the same proportion as shares
for which instructions were received from other shareholders under the 401(k)
Plan.
The Nasdaq Stock Market has proposed a regulation which provides that if
more than 50% of the voting power in a company is held by an individual, group
or another company, the company is a "controlled" company. Using this
definition, The Bon-Ton is a "controlled" company because Tim Grumbacher is the
beneficial owner of shares of common stock and Class A common stock entitled to
vote more than 50% of the votes entitled to be cast at the meeting. Mr.
Grumbacher has indicated that he will vote "for" each of the nominees for
director, "for" amendment of the 2000 Stock Incentive Plan and "for"
ratification of the appointment of KPMG LLP. Consequently, the election of each
nominee for director, amendment of the plan, and ratification of the appointment
of KPMG LLP is each assured.
PRINCIPAL SHAREHOLDERS
This table shows owners of 5% or more of the common stock or Class A
common stock as of April 4, 2003. Each person listed has sole voting power and
sole investment power as to the shares indicated unless otherwise noted.
<Table>
<Caption>
Class A Common Stock Common Stock(1)
--------------------- ---------------------
Number of Number of
Name and Address Shares Percent Shares Percent
- ----------------------------------------------------------------------------------------
Tim Grumbacher 2,951,490(2) 98.7% 6,001,518(3) 39.5%
2801 E. Market Street
York, PA 17402
Nancy T. Grumbacher 545,237(4) 18.2% 1,082,464(5) 8.5%
2801 E. Market Street
York, PA 17402
Henry F. Miller 545,237(4) 18.2% 1,077,464(6) 8.5%
1650 Arch Street - 22(nd) Floor
Philadelphia, PA 19103
</Table>
2
<Table>
<Caption>
Class A Common Stock Common Stock(1)
--------------------- ---------------------
Number of Number of
Name and Address Shares Percent Shares Percent
- ----------------------------------------------------------------------------------------
Thomas W. Wolf 545,237(4) 18.2% 956,691(7) 7.5%
2801 E. Market Street
York, PA 17402
Dimensional Fund Advisors, Inc. -- -- 883,700(8) 7.3%
1299 Ocean Avenue
Santa Monica, CA 90401
David R. Glyn 545,237(4) 18.2% 896,691(9) 7.0%
1650 Arch Street - 22(nd) Floor
Philadelphia, PA 19103
M. Thomas Grumbacher Trust 181,746(10) 6.1% 288,914(10) 2.3%
dated March 9, 1989 for benefit of
Matthew Reed Grumbacher
1650 Arch Street - 22(nd) Floor
Philadelphia, PA 19103
M. Thomas Grumbacher Trust 181,746(10) 6.1% 288,914(10) 2.3%
dated March 9, 1989 for benefit of
Beth Anne Grumbacher Elser
1650 Arch Street - 22(nd) Floor
Philadelphia, PA 19103
M. Thomas Grumbacher Trust 181,745(10) 6.1% 288,913(10) 2.3%
dated March 9, 1989 for benefit of
Max Aaron Grumbacher
1650 Arch Street - 22(nd) Floor
Philadelphia, PA 19103
</Table>
(1) Each share of Class A common stock is convertible into one share of common
stock. Accordingly, the number of shares of common stock for each person
includes the number of shares of common stock issuable upon conversion of
all shares of Class A common stock beneficially owned by such person. Also,
the total number of shares of common stock outstanding for purposes of
calculating percentage ownership of a person includes the number of shares
of Class A common stock beneficially owned by such person.
(2) Includes 545,237 shares of Class A common stock held by trusts for the
benefit of Mr. Grumbacher's children of which Nancy T. Grumbacher (Mr.
Grumbacher's wife), Thomas W. Wolf, Henry F. Miller and David R. Glyn are
the trustees. Mr. Grumbacher disclaims beneficial ownership of all shares
referred to in this note.
(3) Includes (a) 185,773 shares of common stock held by The Grumbacher Family
Foundation, a charitable foundation of which Mr. Grumbacher, Nancy T.
Grumbacher and Henry F. Miller are the directors, (b) 545,237 shares of
Class A common stock and 321,504 shares of common stock held by trusts for
the benefit of Mr. Grumbacher's children of which Ms. Grumbacher, Thomas W.
Wolf, Mr. Miller and David R. Glyn are the trustees, (c) 24,950 shares of
common stock held by other trusts for the benefit of Mr. Grumbacher's
children of which Ms. Grumbacher and Messrs. Wolf, Miller and Glyn are the
trustees, and (d) 5,000 shares of common stock held by a trust for the
benefit of Mr. Grumbacher's grandchild of which Ms. Grumbacher, Beth Elser,
and Messrs. Wolf and Glyn are the trustees. Mr. Grumbacher disclaims
beneficial ownership of all shares referred to above. Also includes options
to purchase 44,550 shares of common stock.
(4) Consists of Class A common stock held by trusts for the benefit of Tim
Grumbacher's children of which Nancy T. Grumbacher, Thomas W. Wolf, Henry
F. Miller and David R. Glyn are the trustees. Ms. Grumbacher and Messrs.
Wolf, Miller and Glyn each disclaim beneficial ownership of all shares
referred to in this note.
3
(5) Consists of (a) 185,773 shares of common stock held by The Grumbacher
Family Foundation, a charitable foundation of which Ms. Grumbacher, Tim
Grumbacher and Henry F. Miller are the directors, (b) 545,237 shares of
Class A common stock and 321,504 shares of common stock held by trusts for
the benefit of Mr. Grumbacher's children of which Ms. Grumbacher, Thomas W.
Wolf, Mr. Miller and David R. Glyn are the trustees, (c) 24,950 shares of
common stock held by other trusts for the benefit of Mr. Grumbacher's
children of which Ms. Grumbacher and Messrs. Wolf, Miller and Glyn are the
trustees, and (d) 5,000 shares of common stock held by a trust for the
benefit of Mr. Grumbacher's grandchild of which Ms. Grumbacher, Beth Elser
and Messrs. Wolf and Glyn are the trustees. Ms. Grumbacher disclaims
beneficial ownership of all shares referred to in this note.
(6) Consists of (a) 185,773 shares of common stock held by The Grumbacher
Family Foundation, a charitable foundation of which Tim Grumbacher, Nancy
T. Grumbacher and Mr. Miller are the directors, (b) 545,237 shares of Class
A common stock and 321,504 shares of common stock held by trusts for the
benefit of Mr. Grumbacher's children of which Ms. Grumbacher and Thomas W.
Wolf, Mr. Miller and David R. Glyn are the trustees, and (c) 24,950 shares
of common stock held by other trusts for the benefit of Mr. Grumbacher's
children of which Ms. Grumbacher and Messrs. Wolf, Miller and Glyn are the
trustees. Mr. Miller disclaims beneficial ownership of all shares referred
to in this note.
(7) Includes (a) 545,237 shares of Class A common stock and 321,504 shares of
common stock held by trusts for the benefit of Tim Grumbacher's children of
which Nancy T. Grumbacher, Mr. Wolf, Henry F. Miller and Mr. Glyn are the
trustees, (b) 24,950 shares of common stock held by other trusts for the
benefit of Mr. Grumbacher's children of which Ms. Grumbacher and Messrs.
Wolf, Miller and Glyn are the trustees, and (c) 5,000 shares of common
stock held by a trust for the benefit of Mr. Grumbacher's grandchild of
which Ms. Grumbacher, Beth Elser and Messrs. Wolf and Glyn are the
trustees. Mr. Wolf disclaims beneficial ownership of all shares referred to
above. Also includes options to purchase 5,000 shares of common stock.
(8) Based solely on a Schedule 13G dated February 3, 2003 filed with the
Securities and Exchange Commission by Dimensional Fund Advisors, Inc. These
shares are owned by investment companies, trusts and accounts as to which
Dimensional is investment advisor or manager, and Dimensional disclaims
beneficial ownership of all such shares.
(9) Consists of (a) 545,237 shares of Class A common stock and 321,504 shares
of common stock held by trusts for the benefit of Tim Grumbacher's children
of which Nancy T. Grumbacher, Thomas W. Wolf, Henry F. Miller and Mr. Glyn
are the trustees, (b) 24,950 shares of common stock held by other trusts
for the benefit of Mr. Grumbacher's children, of which Ms. Grumbacher and
Messrs. Wolf, Miller and Glyn are the trustees, and (c) 5,000 shares of
common stock held by a trust for the benefit of Mr. Grumbacher's grandchild
of which Ms. Grumbacher, Beth Elser and Messrs. Wolf and Glyn are the
trustees. Mr. Glyn disclaims beneficial ownership of all shares referred to
in this note.
(10) In notes (2), (3), (4), (5), (6), (7) and (9) above, we discussed trusts
for the benefit of Tim Grumbacher's children, of which Nancy T. Grumbacher,
Thomas W. Wolf, Henry F. Miller and David R. Glyn serve as trustees. This
is one of such trusts.
The holders of the Class A common stock have entered into an agreement
granting Tim Grumbacher (or his personal representative) the right of first
refusal to acquire any shares of Class A common stock proposed to be
transferred.
4
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
This table shows, as of April 4, 2003, the holdings of our Chief
Executive Officer, the four other most highly compensated executive officers
during 2002 (the "named executives"), each director, and all directors and
executive officers as a group. Each person listed has sole voting power and sole
investment power with respect to the shares indicated unless otherwise noted.
<Table>
<Caption>
Class A Common Stock Common Stock(1)
------------------------ ------------------------
Shares Shares
Beneficially Beneficially
Name Owned Percent Owned Percent
- --------------------------------------------------------------------------------------------
Tim Grumbacher 2,951,490(2) 98.7% 6,001,518(3) 39.5%
James H. Baireuther -- -- 156,034(4) 1.3%
Robert B. Bank -- -- -- *
Philip M. Browne -- -- -- *
Shirley A. Dawe -- -- -- *
Marsha M. Everton -- -- -- *
John S. Farrell -- -- 32,041(4) *
Samuel J. Gerson -- -- 8,000(4) *
Michael L. Gleim -- -- 464,054(5) 3.8%
William T. Harmon -- -- 88,573(6) *
Robert E. Salerno -- -- 2,100 *
Robert C. Siegel -- -- 7,000(4) *
Leon D. Starr -- -- 27,080(7) *
Frank Tworecke -- -- 240,000(4) 1.9%
Thomas W. Wolf 545,237(8) 18.2% 956,691(9) 7.5%
All directors and executive officers
as a group (20 persons) 2,951,490(10) 98.7% 7,252,299(11) 46.2%
</Table>
* less than 1%
(1) See note (1) to Principal Shareholders table.
(2) See note (2) to Principal Shareholders table.
(3) See note (3) to Principal Shareholders table.
(4) Includes options exercisable before June 4, 2003 to purchase the number of
shares indicated: Mr. Baireuther -- 63,334 shares; Mr. Farrell -- 3,000
shares; Mr. Gerson -- 7,000 shares; Mr. Siegel -- 5,000 shares; and Mr.
Tworecke -- 200,000 shares.
(5) Includes 60,000 shares owned by Mr. Gleim's spouse, as to which Mr. Gleim
disclaims beneficial ownership, and options exercisable before June 4, 2003
to purchase 156,711 shares.
(6) Includes 1,440 shares owned by Mr. Harmon's spouse, as to which Mr. Harmon
disclaims beneficial ownership, and options exercisable before June 4, 2003
to purchase 25,000 shares.
(7) Includes 21,500 shares owned by Mr. Starr's spouse, as to which Mr. Starr
disclaims beneficial ownership, and options exercisable before June 4, 2003
to purchase 3,000 shares.
(8) See note (4) to Principal Shareholders table.
(9) See note (7) to Principal Shareholders table.
(10) See notes (2) and (4) to Principal Shareholders table.
(11) See notes (3), (4), (5), (6) and (7) to Security Ownership of Management
table. Includes 675 shares held in an IRA plan by the spouse of an
executive officer as to which the executive officer disclaims beneficial
ownership. Also includes options exercisable before June 4, 2003 to
purchase 550,327 shares.
5
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board proposes the following nominees for election as directors to
hold office until the 2004 Annual Meeting of Shareholders and until their
respective successors have been elected. Each is currently a director and has
agreed to serve if elected. Should a nominee become unable or decline to serve
before the Annual Meeting, the proxies may vote for a substitute the Board
recommends unless the Board reduces the number of directors.
ROBERT B. BANK -- Director since 2002. Age 56
President of Robert B. Bank Advisory Services, a private capital investment and
consulting firm, since 1990. Mr. Bank is a director of Nautica Enterprises,
Inc., an apparel marketer.
PHILIP M. BROWNE -- Director since 2002. Age 43
Senior Vice President and Chief Financial Officer of Advanta Corp., one of the
nation's largest providers of business credit cards to small businesses, since
June 1998. Prior to that, Mr. Browne was a partner at Arthur Andersen LLP, where
he was employed for more than 15 years. Mr. Browne is a director and a member of
the audit committee of AF&L Insurance Company, a privately held long-term care
and home health care insurance company.
SHIRLEY A. DAWE -- Director since 2002. Age 56
President of Shirley Dawe Associates, Inc., a Toronto based consumer goods
marketing and merchandising consulting group, since 1986. Prior to such time,
she held progressively senior merchandising positions with the Hudson's Bay
Company, a Canadian national department store chain, for over 15 years. Ms. Dawe
is a director of OshKosh B'Gosh, Inc., a children's apparel manufacturer; the
National Bank of Canada; and Henry Birks & Sons, Inc., a Canadian fine jewelry
retailer.
MARSHA M. EVERTON -- Director since 2003. Age 51
President and Chief Executive Officer of The Pfaltzgraff Co., a casual
dinnerware manufacturer, since January 2002. Ms. Everton was Vice President of
The Pfaltzgraff Co. for more than ten years prior, responsible during this
period for various departments including stores and direct marketing, corporate
development and market planning and administration.
SAMUEL J. GERSON -- Director since 1996. Age 61
Chairman of the Board of Genuone, Inc., which provides supply chain security
services, since January 2001. Mr. Gerson is a director of Allmerica Financial
Corp., trustee emeritus of the Kennedy Library Foundation, trustee associate of
Boston College, and a board member of Herald Media Group, Inc. and of College
Coach, Inc. Mr. Gerson was Chairman and Chief Executive Officer of Filene's
Basement Corp. from 1984 to June 2000. Filene's Basement Corp. filed for relief
under chapter 11 of the U.S. Bankruptcy Code in August 1999 and sold
substantially all its assets in March 2000.
MICHAEL L. GLEIM -- Director since 1991. Age 60
Vice Chairman and Chief Operating Officer of The Bon-Ton from December 1995 to
February 2002. From 1991 to December 1995 he was Senior Executive Vice President
and from 1989 to 1991 he was Executive Vice President of The Bon-Ton.
TIM GRUMBACHER -- Director since 1967. Age 63
Chairman of the Board of The Bon-Ton since August 1991, and Chief Executive
Officer since June 2000. From 1977 to 1989 he was President and from 1985 to
1995 he was Chief Executive Officer of The Bon-Ton.
6
ROBERT E. SALERNO -- Director since 2002. Age 55
Chief Operating Officer of Kieselstein-Cord International, a luxury accessories
wholesaler and retailer, since December 2002. Vice President and Chief Operating
Officer of Circline.Com, an internet based broker of fine arts and antiques,
from November 2001 to December 2002. From October 1999 to August 2001, Mr.
Salerno was Chief Executive Officer of Bluefish Clothing, an apparel marketer.
In November 1999, Bluefish Clothing filed for relief under chapter 11 of the U.
S. Bankruptcy Code and the company was liquidated in November 2001. From June
1996 to February 1999, he was Senior Vice President of Bergdorf Goodman,
responsible for all operational, financial and administrative functions.
ROBERT C. SIEGEL -- Director since 1998. Age 66
Chairman of Lacoste U.S.A., an apparel company, since January 1, 2002. From
December 1998 to December 2001, he was a consultant to the apparel and footwear
industry. From December 1993 to December 1998, he was Chairman and Chief
Executive Officer of The Stride Rite Corporation, a shoe manufacturer and
retailer. Mr. Siegel is a director of OshKosh B'Gosh, Inc., a children's apparel
manufacturer.
LEON D. STARR -- Director since 1991. Age 84
Management consultant to department and specialty stores since 1984. Prior to
such time, he held various positions with Allied Stores Corporation, a national
operator of department stores, for over 35 years.
THOMAS W. WOLF -- Director since 1998. Age 54
President of the Wolf Organization, Inc., a building materials manufacturer and
distributor, since 1985. He is also a director of Irex Corporation, a national
building contractor.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 2002, the Board held six meetings and took action by unanimous
consent without a meeting four times. The Board has an Executive Committee, an
Audit Committee, a Human Resources and Compensation Committee, and a Governance
and Nominating Committee. The primary functions of the committees, the members
thereof, and the number of times the committees met during 2002 are as follows:
Executive Committee - has the authority to act in place of the Board on
certain specified matters.
- members are Thomas W. Wolf, Chair, Michael L. Gleim,
Tim Grumbacher and Leon D. Starr.
- held twelve meetings during 2002.
Audit Committee - responsible for the appointment, compensation and
oversight of the Company's independent auditor.
- monitors the integrity of the Company's financial
statements, the auditor's qualifications and
independence, and performance of the independent
auditor.
- members are Philip M. Browne, Chair, Robert B. Bank
and Robert E. Salerno.
- held three meetings during 2002.
7
Human Resources and
Compensation
Committee - determines the compensation of the Chairman of the
Board and Chief Executive Officer, the President and
Chief Operating Officer, and the Vice Chairman and
Chief Administrative Officer, and oversees the
compensation of all other employees.
- assists in planning senior executive development and
succession.
- administers our stock option and compensation plans.
- members are Robert C. Siegel, Chair, Robert B. Bank
and Shirley A. Dawe.
- held two meetings during 2002.
Governance and
Nominating Committee - evaluates and recommends candidates for election to
the Board and the committees of the Board.
- determines the compensation of directors.
- evaluates the Company's compliance with corporate
governance requirements.
- has not adopted any procedures whereby the committee
will consider nominees recommended by shareholders.
- members are Michael L. Gleim, Chair, Marsha M.
Everton, Samuel J. Gerson and Leon D. Starr.
- held three meetings in 2002.
No director other than Samuel J. Gerson attended fewer than 75% of the
total number of meetings of the Board and committees on which he or she served
while in office.
COMPENSATION OF DIRECTORS
We do not pay employee directors any separate compensation for serving as
directors.
During 2002, we paid each non-employee director an annual fee of $20,000
and each non-employee director sitting on the Executive Committee an additional
annual fee of $22,000. Non-employee directors also received $2,000 for
attendance at each Board meeting and $500 for attendance at each committee
meeting other than Executive Committee meetings.
Each non-employee director is eligible for an annual grant of options to
purchase shares of common stock, the amount of shares to be determined each year
by the Governance and Nominating Committee. We reimburse all directors for any
expenses related to their Board service.
In 2003, the Governance and Nominating Committee proposed, and the Board
adopted, a revised compensation program for non-employee directors. We will pay
each non-employee director an annual fee of $30,000, an additional annual fee of
$20,000 for each non-employee director who is a member of the Executive
Committee, and an annual fee of $5,000 for serving on each committee other than
the Executive Committee.
Mr. Starr, a non-employee director, rendered consulting services to The
Bon-Ton from 1984 to March 2002. Upon the conclusion of Mr. Starr's consulting
agreement, the Company commenced payments to Mr. Starr in the amount of $65,000
per year in consideration of his agreement not to provide consulting services to
any of the Company's competitors.
Mr. Gleim, a non-employee director, rendered consulting services to The
Bon-Ton during 2002 for which he was paid $73,850.
8
PROPOSAL TWO
AMENDMENT OF THE BON-TON STORES, INC.
2000 STOCK INCENTIVE PLAN
The Bon-Ton Stores, Inc. 2000 Stock Inventive Plan (the "Plan") was
adopted by the Board of Directors and approved by the Company's shareholders in
June 2000. The purpose of the Plan is to recognize the contributions made to the
Company by its employees, consultants and advisors, to provide these individuals
with additional incentives to devote themselves to the future success of the
Company, and to improve the ability of the Company to attract, retain and
motivate individuals upon whom the sustained growth and financial success of the
Company depends.
The Plan provides for the grant of options ("Options") to purchase shares
of common stock and awards ("Awards") of shares of common stock subject to risk
of forfeiture ("Restricted Shares"). Under the Plan, Options and Awards
presently can be granted for up to an aggregate of 400,000 shares (exclusive of
shares granted and thereafter cancelled). The Board of Directors, at the
recommendation of the Human Resources and Compensation Committee, has amended
the Plan, subject to shareholder approval, to increase by 1,500,000 the number
of shares available to an aggregate of 1,900,000 shares (the "Plan Amendment").
As of April 4, 2003, an aggregate of 300,000 shares of common stock
remain reserved for issuance under the Plan. The Board believes that the
availability of an adequate number of shares in the share reserve of the Plan is
an important factor in attracting, motivating and retaining qualified employees
and advisors essential to the success of the Company.
The Board increased the share reserve under the Plan to a total of
1,900,000 shares in contemplation of using these shares to grant options over
the next few years. In light of historical usage and expected future grants, we
expect that the increase will be adequate to meet these foreseeable
requirements.
Future Options and Awards, if any, that will be made to eligible
participants in the Plan are subject to the discretion of the Human Resources
and Compensation Committee and, therefore, are not determinable at this time.
The key provisions of the Plan, as proposed to be amended, are as
follows:
Number of Shares. The maximum number of shares that may be issued under
the Plan is 1,900,000. The maximum number of shares will be adjusted to reflect
certain changes in the Company's capitalization. If any shares subject to any
Option or Award are forfeited, or an Option is terminated without the issuance
of shares, the shares subject to such Option or Award will again be available
pursuant to the Plan. The closing sales price for a share of common stock on May
2, 2003 was $4.35 as reported by the Nasdaq Stock Market.
Administration. The Plan is administered by the Board of Directors, or,
at the discretion of the Board of Directors, by a committee composed of two or
more members of the Board of Directors (for purposes of this Proposal Two, the
"Committee"). To the extent possible, and to the extent the Board of Directors
deems it necessary or appropriate, each member of the Committee shall be a
"Non-Employee Director" (as such term is defined in Rule 16b-3 under the
Securities Exchange Act) and an "Outside Director" (as such term is defined in
Treasury Regulations Section 1.162-27 under the Internal Revenue Code (the
"Code")); however, the Board may designate two committees to operate and
administer the Plan in its stead. The Plan presently is administered by the
Human Resources and Compensation Committee.
Eligibility. All employees (including all executive officers),
directors, consultants and advisors of the Company or its subsidiaries and
affiliates are eligible to receive Options or Awards under the Plan.
9
Term of the Plan. The Plan became effective March 3, 2000 and provides
that no Options or Awards may be granted after March 2, 2010.
Options and Awards. From time to time, at its discretion, the Committee
may select eligible recipients to whom Options or Awards will be granted,
determine when each Option or Award will be granted, determine the number of
shares subject to such Option or Award and, subject to the provisions of the
Plan, determine the terms and conditions of each Option or Award.
Options. Options granted under the Plan may be either incentive stock
options ("ISOs") or non-qualified stock options. ISOs are intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Code. Unless
an Option is specifically designated at the time of grant as an ISO, Options are
non-qualified options. Options are not transferrable by the optionee except by
will or by the laws of descent and distribution. No Option granted under the
Plan may be exercised unless at least six months has elapsed since the date of
the grant.
The exercise price of the Options is determined by the Committee,
provided that the exercise price of an ISO must be at least 100% of the fair
market value of a share of common stock on the date the Option is granted, or at
least 110% of the fair market value if the recipient owns shares possessing more
than 10% of the total combined voting power of all classes of stock of the
Company. The term of each Option is fixed by the Committee. The aggregate fair
market value, determined as of the time of grant, of the shares with respect to
which an ISO is exercisable for the first time by the recipient during any
calendar year (under all incentive stock option plans of the Company) may not
exceed $100,000.
Maximum Grants. The Plan provides that the maximum number of shares for
which options may be granted to any single optionee in any fiscal year is
200,000 shares.
Termination of Options. All Options terminate on the earliest of:
a. The expiration of the term specified in the Option, which shall not
exceed ten years from the date of grant or five years from the date
of grant of an ISO if the recipient owns shares possessing more than
10% of the total combined voting power of all classes of stock of the
Company;
b. The expiration of 90 days from the date the optionee's employment or
service with the Company terminates for any reason other than
disability (as defined in the Code) or death or as otherwise
specified in subparagraphs d. or e. below;
c. The expiration of one year from the date the optionee's employment or
service with the Company terminates due to the optionee's death or
disability;
d. A finding by the Committee that the optionee has breached his or her
employment contract with the Company or has engaged in disloyalty to
the Company; or
e. Such time as the Committee may determine if there is a Change of
Control of the Company as defined in the Plan.
Payment for Options. An optionee may pay for shares in cash, certified
check or such other mode of payment as the Committee may approve, including
payment in shares held by the optionee for at least six months.
Awards. The Committee will determine the period, which under the Plan
must extend for at least six months from the date of grant, during which the
grantee may not sell, transfer, pledge or assign Restricted Shares (the
"Restrictions"). Restrictions may lapse in installments, as determined by the
Committee. The Committee may, at its sole discretion, waive any Restrictions in
whole or in part. The Committee will determine the rights that grantees have
with respect to Restricted Shares, including the right to vote Restricted Shares
and the right to receive dividends paid with respect to Restricted Shares. In
the event a grantee terminates employment with the
10
Company for any reason other than death or disability, all Restricted Shares
remaining subject to Restrictions will be forfeited by the grantee and canceled
by the Company.
Provisions Relating to a Change of Control of the
Company. Notwithstanding any other provision of the Plan, in the event of a
Change of Control of the Company, the Committee may take whatever action with
respect to Options and Awards outstanding as it deems necessary or desirable,
including acceleration of the expiration or termination date or the date of
exercisability of an Option or removing any restrictions from or imposing any
additional restrictions on outstanding Awards.
A "Change of Control" will occur if: (a) the Company is dissolved or
liquidated; (b) an agreement to sell or dispose of substantially all of the
assets of the Company is approved; (c) subject to certain exceptions, an
agreement to merge or consolidate the Company with or into another corporation
is approved; (d) any entity, person or group (within the meaning of certain
provisions of the Securities Exchange Act), other than Tim Grumbacher, members
of his family, his lineal descendants or entities of which such persons are the
beneficial owners of at least 50% of the voting interests, the Company or any of
its subsidiaries or any employee benefit plan (or related trust) sponsored or
maintained by the Company or any subsidiary of the Company, becomes the
beneficial owner or has obtained voting control over securities of the Company
representing more than 50% of the voting power of the Company's outstanding
voting stock; or (e) directors constituting a majority of the Board of Directors
have been members of the Board of Directors for less than 12 months, unless the
nomination for election of each new director who was not a director at the
beginning of such 12-month period was approved by a vote of at least two-thirds
of the directors then still in office who were the directors at the beginning of
such period.
Amendment and Termination. The Board of Directors may amend the Plan at
any time, provided the Board may not (a) change the class of individuals
eligible to receive an ISO, (b) increase the maximum number of shares as to
which Options and Awards may be granted or (c) make any other change or
amendment as to which shareholder approval is required in order to satisfy the
conditions set forth in Rule 16b-3 under the Securities Exchange Act, in each
case without obtaining shareholder approval within 12 months before or after
such action. No Option or Award will be adversely affected by any such amendment
without the consent of the optionee or grantee.
Federal Income Tax Consequences. The following discussion is a summary
of certain federal income tax consequences of the issuance of Options and the
acquisition of shares of common stock by exercising Options or receiving Awards
of Restricted Shares under the Plan and does not present a complete analysis of
all tax consequences which may be relevant to any particular recipient. It does
not purport to discuss state or local income tax laws.
(a) Options. With respect to ISOs, for federal income tax
purposes, an optionee will not have taxable income upon grant or
exercise. However, upon exercise of an ISO, an optionee will generally
recognize income for alternative minimum tax purposes in an amount equal
to the difference between the exercise price of the ISO and the fair
market value of the shares received. Any gain realized on sale of the
shares acquired upon exercise of an ISO will be treated as long-term
capital gain, provided the optionee does not dispose of the shares for at
least two years after the date of grant or within one year after the date
of exercise. No gain or loss will generally be recognized by an optionee
upon, nor will any deduction be allowed to the Company as a result of,
the grant or exercise of ISOs.
In general, in the case of non-qualified stock options or ISOs
as to which the foregoing holding period limitations have not been
satisfied, an optionee will have taxable income at ordinary income rates
upon exercise (or at the time of a sale of ISO stock which does not
satisfy the holding periods) for the difference between the exercise
price and the fair market value at the date of exercise or, if the
optionee is subject to certain restrictions imposed by federal securities
laws, upon the lapse of those restrictions, unless the optionee
11
elects under Section 83(b) of the Code within 30 days after exercise to
be taxed upon exercise). The amount of that difference will generally be
a deductible expense to the Company.
The ability of the Company to deduct compensation expense is
generally subject to limitations under Section 162(m) of the Code
(applicable to compensation in excess of $1,000,000 paid to certain
"covered" employees). Any income recognized as ordinary compensation
income on the exercise of a non-qualified stock option should, however,
be exempt from these Code limitations as "performance-based" compensation
provided the option grant meets certain requirements. It is the Company's
intention to administer the Plan in accordance with all applicable
"performance-based" compensation requirements, including administration
of the Plan with respect to "covered" employees by a committee of two or
more "outside" directors (as that term is used in applicable IRS
regulations) and to make Option grants to such employees with an exercise
price that is at least equal to the fair market value of the shares on
the date of grant. Under these circumstances, such Options should, on
exercise, result in a deductible compensation expense that is exempt from
Section 162(m) of the Code as "performance-based" compensation.
(b) Restricted Shares. For federal income tax purposes, the
recipient of an Award will not recognize income and the Company will not
be entitled to a deduction at the time of the Award because the
Restricted Shares are subject to risk of forfeiture and are not
transferable. When the risk of forfeiture and non-transferability
restrictions lapse, the recipient will recognize compensation income and
the Company will be entitled to a deduction (subject generally to a
$1,000,000 limitation on deductible compensation of certain employees of
the Company as provided under Section 162(m) of the Code) in an amount
equal to the then fair market value of the Restricted Shares. Except as
provided below, an Award recipient may nevertheless elect pursuant to
Section 83(b) of the Code to include the Restricted Shares in his income
at their fair market value at the time of award, in which event the
Company would be entitled to a corresponding deduction. Such election
must be made within 30 days after the Award. If this election is made,
any appreciation in value recognized by the Award recipient on a
subsequent disposition of the Restricted Shares will in general be taxed
at capital gains rates and not as ordinary income. If, however, an Award
recipient who makes a Section 83(b) election forfeits the Restricted
Shares back to the Company, the recipient will not recognize a loss on
such forfeiture. In some cases, the particular restrictions with respect
to an Award may be such that an Award recipient will not be entitled to
make the Section 83(b) election.
The Board of Directors approved the Plan Amendment on March 18, 2003.
Approval of the Plan Amendment requires the affirmative vote of a majority of
the votes cast by holders of common stock and Class A common stock.
THE BOARD OF DIRECTORS RECOMMENDS
VOTING "FOR" AMENDMENT OF THE BON-TON STORES, INC.
2000 STOCK INCENTIVE PLAN
12
PROPOSAL THREE
RATIFICATION OF THE APPOINTMENT
OF THE INDEPENDENT AUDITOR
Subject to shareholder ratification, the Audit Committee has reappointed
KPMG LLP, which served as our independent auditor in 2002, to serve as our
independent auditor for 2003. If the shareholders do not ratify this
appointment, another independent auditor will be considered by the Audit
Committee.
A representative of KPMG LLP is expected to be present at the meeting,
will have the opportunity to make a statement if he or she so desires, and be
available to respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS
VOTING "FOR" RATIFICATION OF THE APPOINTMENT
OF THE INDEPENDENT AUDITOR
13
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
This table sets forth, for the last three years, the compensation paid or
accrued to each of the named executives:
<Table>
<Caption>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------- -------------------------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($)(1) OPTIONS(#) COMPENSATION($)(2)
- -------------------------------------------------------------------------------------------------------------------------
Tim Grumbacher 2002 558,654 270,000 -- -- -- 11,068
Chairman of the 2001 241,346 75,000 -- -- -- 8,258
Board of Directors and 2000 278,846 -- -- -- -- 9,302
Chief Executive Officer
Frank Tworecke 2002 471,021 175,000 10,000 -- -- 108,089(3)
President and 2001 461,095 60,000 19,046 75,000 -- 133,209
Chief Operating Officer 2000 484,754 75,000 10,000 -- -- 134,595
James H. Baireuther 2002 410,737 147,000 9,500 -- -- 13,378
Vice Chairman, Chief 2001 315,113 50,000 6,200 127,500 100,000 9,922
Administrative Officer 2000 319,115 30,000 -- -- -- 9,724
and Chief Financial
Officer
John S. Farrell 2002 244,650 61,000 -- -- -- 10,835
Senior Vice President -- 2001 231,843 15,951 -- 65,000 -- 9,201
Stores 2000 213,694 11,482 -- -- -- 8,260
William T. Harmon 2002 249,853 43,000 6,200 -- -- 11,028
Senior Vice President -- 2001 241,185 10,000 6,200 -- -- 8,469
Marketing, Planning 2000 244,069 10,000 6,200 -- -- 9,245
and Allocation
</Table>
(1) The total number of restricted stock awards held by the named executives at
the end of 2002 was 97,666 shares. The closing price of the common stock on
February 1, 2003 was $4.14 per share, giving the named executives restricted
stock holdings a value of $404,337 at year end. Restricted stock awarded to
the named executives vests in equal installments on the third, fourth and
fifth anniversary of the date of award. Holders of restricted stock are
entitled to the same dividend that the Company pays on common stock.
(2) The amounts disclosed in this column for 2002 include Company contributions
under the Company's Profit Sharing/Retirement Savings Plan in the amount of
$10,474 for each of Messrs. Grumbacher, Tworecke, Baireuther and Harmon and
$9,545 for Mr. Farrell, and life insurance premiums in the amounts of $594
for Mr. Grumbacher, $2,903 for Mr. Baireuther, $2,815 for Mr. Tworecke,
$1,290 for Mr. Farrell and $554 for Mr. Harmon.
(3) Includes $84,800 of payments made by the Company to Mr. Tworecke pursuant to
the loan repayment provisions of his employment contract and $10,000 to
reimburse Mr. Tworecke for life insurance premiums.
STOCK OPTION GRANTS
None of the named executives received a stock option grant during 2002.
We do not have any plan pursuant to which stock appreciation rights may be
granted.
14
STOCK OPTION EXERCISES AND HOLDINGS
None of the named executives exercised any options during 2002.
The following table shows the number and value of unexercised stock
options for the named executives at the end of 2002:
OPTION VALUES AT FEBRUARY 1, 2003
<Table>
<Caption>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FEBRUARY 1, 2003 AT FEBRUARY 1, 2003(1)
--------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------
Tim Grumbacher 44,550 -- -- --
Frank Tworecke 200,000 -- -- --
James H. Baireuther 63,334 66,666 $58,335 $116,666
John S. Farrell 3,000 -- -- --
William T. Harmon 25,000 -- -- --
</Table>
(1) In-the-money options are options having an exercise price below $4.14, the
year-end share price. Value is calculated by multiplying the difference
between the option exercise price and $4.14 by the number of shares
underlying the option.
EMPLOYMENT AGREEMENTS
Tim Grumbacher
The Human Resources and Compensation Committee (the "Compensation
Committee") and Tim Grumbacher reached an understanding pursuant to which Mr.
Grumbacher's base salary for 2002 was fixed at $550,000. In addition, he was
eligible for an annual bonus of up to 100% of his base salary. During 2003, Mr.
Grumbacher's base salary has been fixed at $650,000, and his bonus maximum at
150% of his base salary.
Frank Tworecke
Mr. Tworecke's employment agreement commenced November 11, 1999 and
continues to January 29, 2005. During 2002, it provided for a minimum annual
base salary of $475,000 and a bonus in accordance with criteria established by
the Compensation Committee up to a maximum bonus of 75% of his base salary.
During 2003, Mr. Tworecke's minimum annual base salary is $500,000, and his
bonus maximum is 100% of his base salary. If Mr. Tworecke is discharged without
cause or resigns for good reason (each as defined in the employment agreement),
he will continue to receive his base salary and other benefits for one year.
Pursuant to the terms of his employment agreement, the Company made a
$160,000 loan to Mr. Tworecke in 1999. This loan bore interest at 5.57% per
annum and was repayable in 36 equal installments. Mr. Tworecke received a
monthly payment during the term of the loan that, in net amount after tax, was
equivalent to the monthly loan balance due. This loan was paid in full in 2002.
James H. Baireuther
Mr. Baireuther's employment agreement commenced February 3, 2002 and
continues to January 31, 2004. During 2002, it provided for a minimum base
salary of $400,000 and a bonus in accordance with criteria established by the
Compensation Committee up to a maximum bonus of 75% of his base salary. During
2003, Mr. Baireuther's minimum base salary is $400,000, and his bonus maximum is
80% of his base salary. If Mr. Baireuther is discharged without cause or resigns
for good reason (each as defined in the employment agreement), he will continue
to receive his
15
base salary and other benefits for the greater of one year or the remaining term
of the employment agreement.
SUPPLEMENTAL RETIREMENT BENEFITS
The Company has established a nonqualified, unfunded retirement plan for
certain key executives. Under the terms of this plan, each participant is
entitled to an annual retirement benefit if he remains employed by the Company
for a stated period, and, in certain instances, with an increase in this annual
benefit for each full year thereafter that the participant remains so employed,
subject to a maximum annual benefit.
The table below reflects the benefits available under this plan for the
named executives who are participants in this plan:
<Table>
<Caption>
ANNUAL ANNUAL INCREASE MAXIMUM ANNUAL
PARTICIPANT BENEFIT IF EMPLOYED THROUGH THEREAFTER BENEFIT
- ----------------------------------------------------------------------------------------------
James H. Baireuther $50,000 February 1, 2005 -- --
John S. Farrell 10,000 March 4, 2006 -- --
Frank Tworecke 50,000 November 10, 2004 $15,000 $125,000
</Table>
EXECUTIVE SEVERANCE
We have entered into severance agreements with Mr. Harmon and certain of
our other executive officers other than Messrs. Grumbacher, Baireuther and
Tworecke, which generally provide for payment of one year's base salary if the
executive officer is terminated without cause (as defined in such agreement).
EQUITY COMPENSATION PLAN INFORMATION
At February 1, 2003, the Amended and Restated 1991 Stock Option and
Restricted Stock Plan, The Bon-Ton Stores, Inc. 2000 Stock Incentive Plan and
the Company's Phantom Equity Replacement Plan were in effect. Each of these
plans has been approved by the shareholders. There were no other equity
compensation plans in effect. The following information concerning these plans
is as of February 1, 2003:
<Table>
<Caption>
NUMBER OF SECURITIES NUMBER OF SECURITIES
TO BE ISSUED UPON WEIGHTED-AVERAGE REMAINING AVAILABLE FOR FUTURE
EXERCISE OF EXERCISE PRICE OF ISSUANCE (EXCLUDING SECURITIES
PLAN CATEGORY OUTSTANDING OPTIONS OUTSTANDING OPTIONS REFLECTED IN THE FIRST COLUMN)
- -----------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security
holders 941,446 $5.82 300,000
Equity compensation plans
not approved by security
holders Not applicable Not applicable Not applicable
</Table>
16
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
cumulative total shareholder return on common stock from February 1, 1998
through February 1, 2003, the cumulative total return on the CRSP Total Return
Index for The Nasdaq Stock Market (US Companies) and the Nasdaq Retail Trade
Stocks Index during such period. The comparison assumes $100 was invested on
February 1, 1998 in the Company's common stock and in each of the foregoing
indices and assumes the reinvestment of any dividends.
[STOCK PERFORMANCE GRAPH]
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------
NASDAQ
DATE NASDAQ RETAIL BON-TON
- -------------------------------------------------------------------------------------------------------------------------
1/31/98 100.00 100.00 100.00
1/30/99 155.84 121.79 56.25
1/29/00 235.28 99.88 25.89
2/3/01 163.88 74.89 22.32
2/2/02 118.53 89.91 17.86
2/1/03 82.80 73.27 29.57
- -------------------------------------------------------------------------------------------------------------------------
</Table>
REPORT ON EXECUTIVE COMPENSATION
The Human Resources and Compensation Committee (the "Compensation
Committee"), which consists of only non-employee directors, approves all general
policies affecting the compensation of The Bon-Ton's executive officers. The
Compensation Committee determines the compensation of Tim Grumbacher, Chairman
of the Board and Chief Executive Officer, Frank Tworecke, President and Chief
Operating Officer, and James H. Baireuther, Vice Chairman, Chief Administrative
Officer and Chief Financial Officer, and utilizes recommendations from the
Executive Committee with respect to the compensation of all other executive
officers, but retains the authority to determine the compensation of such other
executive officers and may accept, reject or modify, in its discretion, the
Executive Committee's recommendations.
17
The basic forms of executive compensation are annual compensation, in the
form of salary and bonus, and long-term incentives, currently consisting
primarily of stock options and restricted stock. The Compensation Committee
seeks to achieve a mix of these to properly compensate and motivate the
Company's executives. In doing so, the Compensation Committee considers various
aspects of the Company's operating results as well as its financial condition,
and considers each executive's role in such achievement.
ANNUAL COMPENSATION -- SALARY AND BONUS
Annual compensation is comprised of a base salary and a possible bonus.
The base salaries of James H. Baireuther and Frank Tworecke for 2002 were
established pursuant to employment agreements executed in prior years which had
been approved by the Compensation Committee. The base salaries for these
executives were based on a variety of factors, including the general level of
executive compensation in the industry, the general level of executive
compensation at The Bon-Ton and an evaluation of the importance of the executive
to The Bon-Ton. The base salaries of the remainder of the Company's senior
executives are approved annually by the Compensation Committee upon
recommendations from the Executive Committee based on such subjective factors as
individual and Company performance.
The Compensation Committee believes it appropriate that a portion of the
potential annual compensation for these senior executives be in the form of an
annual bonus which is dependent upon The Bon-Ton's performance. The bonus for
2002 earned by each of the named executives is indicated in the Summary
Compensation Table.
A cash bonus award or option grant may, in addition, be made at the
discretion of the Compensation Committee without regard to whether any specified
criteria are met.
LONG-TERM INCENTIVES -- STOCK OPTIONS AND RESTRICTED SHARE AWARDS
The Compensation Committee administers The Bon-Ton Stores, Inc. 2000
Stock Incentive Plan, which provides for the grant of stock options and
restricted share awards. These options and awards are intended to help align the
executive officers' interests with those of shareholders by increasing such
officers' stake in The Bon-Ton.
Stock options and restricted share awards generally vest over a number of
years. Any vested options are usually forfeited 90 days after termination of the
recipient's employment, and any unvested restricted share awards lapse upon
termination of employment. Such options and awards, therefore, are also intended
to encourage recipients to remain in the employ of The Bon-Ton over a
substantial period of time.
There were no stock options or restricted share awards granted in 2002.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Compensation Committee set the annual base salary at $550,000 for Tim
Grumbacher in 2002, based on a variety of factors, including the general level
of executive compensation in the industry, the general level of executive
compensation at The Bon-Ton and the evaluation of the importance of Mr.
Grumbacher's services to The Bon-Ton. Mr. Grumbacher also received a bonus of
$270,000 based upon the Company's performance in 2002. Mr. Grumbacher did not
receive any stock options or restricted share awards in 2002.
NO INSIDER PARTICIPATION
No member of the Compensation Committee during 2002 was a former or
current officer or employee of the Company or any affiliate of the Company or
received compensation from the Company in any capacity other than as a director
of the Company or as a member of a Board committee.
18
QUALIFYING EXECUTIVE COMPENSATION FOR DEDUCTIBILITY UNDER PROVISIONS OF THE
INTERNAL REVENUE CODE
The Internal Revenue Code provides that a publicly-held corporation may
not generally deduct compensation for its chief executive officer and certain
other executive officers to the extent that compensation for the executive
exceeds $1,000,000 unless such compensation is "performance based" as defined in
the Code. If any executive's compensation exceeds that threshold, the
Compensation Committee will take such actions as are appropriate to qualify, to
the extent it determines such actions are in the best interests of the Company,
compensation paid to executives for deductibility under the Code. Nevertheless,
the Compensation Committee has in the past, and may in the future, recommend or
approve payment of compensation that may not be deductible under these
provisions if the Compensation Committee has determined that such payments are
in the best interests of the Company.
Members of the Human Resources and Compensation Committee:
Robert C. Siegel, Chair
Robert B. Bank
Shirley A. Dawe
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is comprised solely of independent directors, as
defined in the Marketplace Rules of the NASDAQ Stock Market, and it operates
under a written charter adopted by the Board of Directors, a copy of which is
attached to this proxy statement as Exhibit A. The Committee reviews and
assesses the adequacy of its charter on an annual basis.
The role of the Audit Committee is to assist the Board of Directors in
its general oversight of (i) the integrity of the Company's financial
statements, (ii) the Company's compliance with legal and regulatory
requirements, (iii) the qualifications and independence of the Company's
independent auditor, (iv) the performance of the independent auditor, and (v)
the Company's management of credit, liquidity and other financial and
operational risks; and to prepare this report. Management is responsible for the
preparation, presentation and integrity of the Company's financial statements,
accounting and financial reporting principles, internal controls and procedures
designed to ensure compliance with accounting standards, applicable laws and
regulations. KPMG LLP, the company's independent auditing firm, is responsible
for performing an independent audit of the consolidated financial statements in
accordance with generally accepted auditing standards. The independent auditor
has free access to the Audit Committee to discuss any matter it deems
appropriate.
The Audit Committee serves a board-level oversight role in which it
provides advice, counsel and direction to management and the independent auditor
on the basis of the information it receives, discussions with management and the
auditors and the experience of the Committee's members in business, financial
and accounting matters.
Among other matters, the Audit Committee monitors the activities and
performance of the Company's independent auditor, including the audit scope,
audit fees, auditor independence matters and the extent to which the independent
auditor may be retained to perform non-audit services. The Audit Committee has
ultimate authority and responsibility to select, evaluate and, when appropriate,
replace the Company's independent auditor. The Audit Committee also reviews the
results of the external audit work with regard to the adequacy and
appropriateness of the Company's financial, accounting and internal controls.
Management and independent auditor presentations to and discussions with the
Audit Committee also cover various topics and events that may have significant
financial impact or are the subject of discussions between management and the
independent auditor.
19
The Committee has reviewed and discussed the consolidated financial
statements with management and the independent auditor; management represented
to the Committee that the Company's consolidated financial statements were
prepared in accordance with generally accepted accounting principles; and the
independent auditor represented that its presentations included the matters
required to be discussed with the independent auditor by Statement on Auditing
Standards No. 61, as amended, "Communication with Audit Committees."
The Company's independent auditor also provided the Committee with the
written disclosures required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," and the Committee discussed
with the independent auditor that firm's independence.
Following the Committee's discussions with management and the independent
auditor, the Committee recommended that the Board of Directors include the
audited consolidated financial statements in the Annual Report on Form 10-K for
the year ended February 1, 2003.
Members of the Audit Committee:
Philip M. Browne, Chair
Robert B. Bank
Robert E. Salerno
INDEPENDENT AUDITOR'S FEES
During 2002 we retained KPMG LLP, and during 2001 we retained Arthur
Andersen LLP, to provide services in the following categories and amounts:
<Table>
<Caption>
2002 2001
- ---------------------------------------------------------------------------------
Audit Fees $307,000 $243,400
Audit-Related Fees -- 129,600(1)
Tax Fees 338,000(2) 62,000
All Other Fees 23,000(3) 85,000(4)
</Table>
(1) Services for contract internal audit, pension benefit analysis and financing
analysis.
(2) Includes $250,000 for cost segregation services with respect to tax
treatment of fixed assets.
(3) Consulting services in connection with an information technology project.
(4) Services in connection with study of changes to corporate structure.
The Audit Committee also considered whether the provision of non-audit
services by KPMG LLP, our independent auditor, is compatible with maintaining
auditor independence.
RELATIONSHIP WITH INDEPENDENT AUDITOR
Arthur Andersen LLP ("Andersen") was the Company's independent auditor at
the beginning of 2002. Effective June 13, 2002, the Company, upon recommendation
of the Audit Committee, dismissed Andersen and retained KPMG LLP as the
Company's independent auditor. Andersen's reports on the Company's financial
statements during the last two fiscal years did not contain an adverse opinion
or a disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope, or accounting principles. Further, during the Company's two most
recent fiscal years, there were no disagreements with Andersen on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Andersen, would have caused it to make a reference to the subject matter of the
disagreement in connection with its report.
20
KPMG LLP audited our 2002 financial statements.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Executive officers, directors and persons who own more than 10% of the
Company's common stock are required to file reports of their holdings and
transactions in Company stock with the Securities and Exchange Commission. Based
on our records and on written representations from those who are subject to
these requirements, we believe that all 2002 filing requirements were timely
made except that William T. Harmon filed a Form 4 with respect to the purchase
of 1,440 shares of common stock 30 days late.
CERTAIN TRANSACTIONS
The Company leases its Oil City, Pennsylvania store from Nancy T.
Grumbacher, Trustee of the 2002 Indenture of Trust of M. Thomas Grumbacher,
pursuant to a lease entered into on January 1, 1981. The rental payments during
2002 under this lease were $223,500. The Oil City lease terminates on July 31,
2006 and the Company has five five-year renewal options.
During fiscal 2002, the Company purchased approximately $2,193,000 of
merchandise from OshKosh B'Gosh, Inc., approximately $811,000 of merchandise
from The Pfaltzgraff Co., and approximately $4,128,000 of merchandise from
Nautica Enterprises, Inc. Robert C. Siegel and Shirley A. Dawe, directors of the
Company, are also directors of OshKosh B'Gosh, Inc., Marsha M. Everton, a
director of the Company, is President and CEO of The Pfaltzgraff Co., and Robert
B. Bank, a director of the Company, is a director of Nautica Enterprises, Inc.
The transactions noted above were on substantially the same terms as comparable
transactions with other vendors of merchandise to the Company.
SHAREHOLDER PROPOSALS
Shareholder proposals for the 2004 Annual Meeting of Shareholders must be
received by the Company by January 10, 2004 in order to be considered for
inclusion in the Company's proxy statement and form of proxy relating to that
meeting.
A shareholder may wish to have a proposal presented at the 2004 Annual
Meeting of Shareholders but not included in the Company's proxy statement and
form of proxy for that meeting. If notice of any such proposal is received by
the Company after March 25, 2004, such proposal shall be deemed "untimely" for
purposes of Rule 14a-4(c) under the Securities Exchange Act and, therefore, the
Company will have the right to exercise discretionary voting authority with
respect to such proposal.
21
EXHIBIT A
THE BON-TON STORES, INC.
AUDIT COMMITTEE CHARTER
This Charter has been adopted by the Board of Directors (the "Board") of
The Bon-Ton Stores, Inc. (the "Company") to govern its Audit Committee (the
"Committee"), which shall have the authority, responsibility and specific powers
described below.
PURPOSES
The Committee shall be directly responsible for the appointment,
compensation and oversight over the Company's independent auditors (the
"Auditors").
The Committee shall monitor (1) the integrity of the financial statements
of the Company, (2) the Company's compliance with legal and regulatory
requirements, (3) the Auditors' qualifications and independence, (4) the
performance of the Company's internal audit function, and (5) the performance of
the Auditors.
The Committee shall prepare the report required by the rules of the
Securities and Exchange Commission to be included in the Company's annual proxy
statement.
ORGANIZATION
The Committee shall be composed of three or more directors who shall meet
the independence and experience requirements of the Nasdaq National Market
("Nasdaq"). At least one member of the Committee shall be a "financial expert,"
as such term is defined by applicable regulations of the Securities and Exchange
Commission and Nasdaq.
The members of the Committee shall be appointed and removed by the Board.
A member of the Committee shall be selected by the Board to serve as the
Committee's chairperson.
MEETINGS
The Committee shall meet at least quarterly, or more frequently as
circumstances dictate. The Committee shall meet at least annually with
management and the Auditors in separate executive sessions to discuss any
matters that the Committee or either of these groups believe should be discussed
privately. In addition, the Committee will meet with the Auditors and management
to review the Company's financial statements as provided under the sub-heading
"Document Review" below. Minutes or other records of meetings and activities of
the Committee shall be maintained.
RESPONSIBILITIES
The Committee shall have the sole authority to appoint or replace,
determine funding for, and oversee the Auditors, including the authority to
resolve disagreements between management and the Auditors regarding financial
reporting. The Auditors shall report directly to the Committee.
The Committee shall pre-approve (i) all audit engagement fees and terms
and (ii) all non-audit services provided by the Auditors which are not
proscribed by applicable law. The Committee may delegate pre-approval
responsibilities to a member of the Committee, and the decisions of any
Committee member to whom pre-approval authority is delegated must be presented
to the full Committee at each of its scheduled meetings.
The Committee shall, at least annually, obtain and review a report by the
Auditors describing the following: (1) the Auditors' internal quality-control
procedures; (2) any material issues raised by the most recent internal
quality-control review, or peer review, of the Auditors, or by any
A-1
inquiry or investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits carried out by
the Auditors, and any steps taken to deal with any such issues; and (3) in order
to assess the Auditors' independence, all relationships between the Auditors and
the Company.
The Committee shall have the authority to engage and determine funding
for outside legal, accounting or other consultants to advise the Committee and
shall, as appropriate, obtain advice and assistance from such advisors. The
Committee may request any officer or employee of the Company or the Company's
outside counsel or the Auditor to attend a meeting of the Committee or to meet
with any members of, or consultants to, the Committee.
The Committee shall make regular reports to the Board. The Committee
shall review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval. The Committee shall annually
review the Committee's own performance.
The Committee shall (1) discuss the annual audited financial statements
and quarterly financial statements with management and the Auditors, including
the Company's disclosures under "Management's Discussion and Analysis of
Financial Condition and Results of Operations;" (2) discuss earnings press
releases, as well as financial information and earnings guidance provided to
analysts and rating agencies; (3) discuss policies with respect to risk
assessment and risk management; (4) review with the Auditors any audit problems
or difficulties and management's response; and (5) set clear hiring policies for
the Company concerning employees or former employees of the Auditors.
In carrying out its duties and responsibilities, the Committee, to the
extent it deems necessary or appropriate, will:
Document Review
1. Review with management and the Auditors the financial statements and
disclosures under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" to be included in the Company's Annual Report on Form
10-K (or the annual report to shareholders if distributed prior to the filing of
Form 10-K), including their judgment about the quality, not just the
acceptability, of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements. Also,
the Committee shall discuss the results of the annual audit and any other
matters required to be communicated to the Committee by the Auditors under
generally accepted auditing standards.
2. Review the interim financial statements and disclosures under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" with management and the Auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. Also, the Committee shall discuss the
results of the quarterly review and any other matters required to be
communicated to the Committee by the Auditors under generally accepted auditing
standards.
Auditors
3. Review the proposed scope of the audit, the proposed staffing of the
audit to ensure adequate coverage, as well as appropriate coverage consistent
with Sections 203 and 206 of the Sarbanes-Oxley Act of 2002, and the fees
proposed to be charged for such audit.
4. Select the Auditors, considering independence and effectiveness, and
approve the fees and other compensation to be paid the Auditors. On an annual
basis, the Committee should review the Auditors' formal written statement
regarding all significant relationships the Auditors have with the Company to
determine the Auditors' independence. In addition, the Committee shall discuss
with the Auditors their independence from management and the Company and the
matters included in the written disclosures required by the Independence
Standards Board.
A-2
5. Review the performance of the Auditors and approve any proposed
discharge of the Auditors when circumstances warrant.
6. Discuss with the Auditors any communications with the Auditors'
national office respecting auditing or accounting issues presented by the
engagement.
7. Review and evaluate the lead partner on the audit team. Ensure the
rotation of the lead partner having primary responsibility for the audit and the
partner responsible for reviewing the audit.
8. Periodically consult with the Auditors, without management present,
regarding the Company's internal controls and the fullness and accuracy of the
Company's financial statements.
9. Receive and review regular reports from the Auditors with respect to:
- - the critical accounting policies and practices of the Company,
- - all alternative treatments of financial information within generally accepted
accounting principles that have been discussed with management, ramifications
of the use of such alternative disclosures and treatments, and the treatment
preferred by the Auditors, and
- - other material written communications between the Auditors and management,
such as any management letter or schedule of unadjusted differences.
Financial Reporting Processes
10. Review with the Auditors (i) the Company's financial and accounting
personnel, (ii) the adequacy and effectiveness of the accounting and financial
controls of the Company, and (iii) elicit any recommendations for the
improvement of such internal controls or particular areas where new or more
detailed controls or procedures are desirable.
11. Review management's assertion on its assessment of the effectiveness
of internal controls as of the end of the most recent fiscal year and the
Auditors' report on management's assertions.
12. Review reports from management on material weaknesses or
deficiencies in the design or operation of internal controls and on any fraud
that involves personnel having a significant role in the internal controls.
13. In consultation with the Auditors, review the integrity of the
financial reporting processes, both internal and external.
14. Consider the Auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
15. Inquire of management and the Auditors about significant risks or
exposures and assess the steps management has taken to minimize such risks to
the Company.
16. Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the Auditors or
management.
Process Improvement
17. Following completion of the annual audit, review separately with
management and with the Auditors any significant difficulties encountered during
the course of the audit, including any restrictions on the scope of the work or
access to required information.
18. Review any significant disagreement between management and the
Auditors in connection with the preparation of the financial statements.
A-3
19. Review with the Auditors and with management the extent to which
changes or improvements in financial or accounting practices, as approved by the
Committee, have been implemented. (This review should be conducted at an
appropriate time subsequent to implementation of changes or improvements, as
determined by the Committee.)
Ethical and Legal Compliance
20. Review and approve all related-party transactions.
21. Review and update periodically the Company's Code of Ethical
Standards and Business Practices and the Company's Code of Conduct for Financial
Executives and ensure that management has established a system to enforce such
codes.
22. Review management's monitoring of the Company's compliance with such
codes and periodically determine that management has the proper review system in
place to ensure that the Company's financial statements, reports and other
financial information disseminated to governmental organizations and the public
satisfy legal requirements.
23. Review legal compliance matters, including corporate securities
trading policies, with Company counsel.
24. Review with Company counsel any legal matter that could have a
significant impact on the financial statements.
25. Review and update periodically the Company's procedures for the
receipt, retention, and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing matters, and the
confidential, anonymous submission by employees of the Company of concerns
regarding questionable accounting or audit matters.
26. Review annually the travel and entertainment expenses of the
Company's Chief Executive Officer and a summary of all other executive officers'
travel and entertainment expenses.
27. Perform any other activities consistent with this Charter, the
Company's By-laws and governing law, as the Committee or the Board deems
necessary or appropriate.
LIMITATION OF COMMITTEE'S ROLE
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statements and disclosures are complete
and accurate and are in accordance with generally accepted accounting principles
and applicable rules and regulations. These activities are the responsibility of
management and the Auditors.
A-4
ANNUAL MEETING OF STOCKHOLDERS OF
THE BON-TON STORES, INC.
JUNE 17, 2003
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
-- Please detach and mail in the envelope provided. --
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSALS 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
1. Election of Directors:
NOMINEES
[ ] FOR ALL NOMINEES O Tim Grumbacher
O Robert B. Bank
[ ] WITHHOLD AUTHORITY O Philip M. Browne
FOR ALL NOMINEES O Shirley A. Dawe
O Marsha M. Everton
[ ] FOR ALL EXCEPT O Samuel J. Gerson
(See instructions below) O Michael L. Gleim
O Robert E. Salerno
O Robert C. Siegel
O Leon D. Starr
O Thomas W. Wolf
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you
wish to withhold, as shown here: (X)
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that [ ]
changes to the registered name(s) on the account may not be submitted via
this method.
FOR AGAINST ABSTAIN
2. Amendment of The Bon-Ton Stores, Inc. 2000 Stock [ ] [ ] [ ]
Incentive Plan.
3. Ratification of appointment of KPMG LLP as the [ ] [ ] [ ]
Company's independent auditor.
Signature of Stockholder Date:
---------------------------------- --------------
Signature of Stockholder Date:
---------------------------------- --------------
NOTE: This proxy must be signed exactly as the name appears hereon. When shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
THE BON-TON STORES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of THE BON-TON-STORES, INC. (the "Company") hereby
appoints Tim Grumbacher and James H. Baireuther, or either of them, with full
power of substitution, to act as attorneys and proxies for the undersigned and
to vote all shares of stock of the Company which the undersigned is entitled to
vote if personally present at the Annual Meeting of Shareholders of the Company,
to be held at Heritage Hills Conference Center, 2700 Mount Rose Avenue, York, PA
17402 on June 17, 2003, at 9:00 a.m., provided that said proxies are authorized
and directed to vote as indicated with respect to matters set forth on the
opposite side of this proxy.
UNLESS OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED "FOR" THE ELECTION OF ALL
NOMINATED DIRECTORS, "FOR" AMENDMENT OF THE BON-TON STORES, INC. 2000 STOCK
INCENTIVE PLAN AND "FOR" RATIFICATION OF APPOINTMENT OF KPMG LLP AS THE
COMPANY'S INDEPENDENT AUDITOR. THIS PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY
TO VOTE WITH RESPECT TO ANY OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE
MEETING.
(TO BE SIGNED ON REVERSE SIDE)
ANNUAL MEETING OF STOCKHOLDERS OF
THE BON-TON STORES, INC.
JUNE 17, 2003
PROXY VOTING INSTRUCTIONS
MAIL - Date, sign and mail your proxy card in the envelope provided as soon as
possible.
- OR -
TELEPHONE - Call toll-free 1-800-PROXIES from any touch-tone telephone and
follow the instructions. Have your control number and proxy card available when
you call.
- OR -
INTERNET - Access "WWW.VOTEPROXY.COM" and follow the on-screen instructions.
Have your control number available when you access the web page.
COMPANY NUMBER
--------------------------
ACCOUNT NUMBER
--------------------------
CONTROL NUMBER
--------------------------
-- Please detach and mail in the envelope provided IF you are not
voting via telephone or the Internet. --
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSALS 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE (x)
1. Election of Directors:
NOMINEES
[ ] FOR ALL NOMINEES O Tim Grumbacher
O Robert B. Bank
[ ] WITHHOLD AUTHORITY O Philip M. Browne
FOR ALL NOMINEES O Shirley A. Dawe
O Marsha M. Everton
[ ] FOR ALL EXCEPT O Samuel J. Gerson
(See instructions below) O Michael L. Gleim
O Robert E. Salerno
O Robert C. Siegel
O Leon D. Starr
O Thomas W. Wolf
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you
wish to withhold, as shown here: (X)
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this
method. [ ]
FOR AGAINST ABSTAIN
2. Amendment of The Bon-Ton Stores, Inc. 2000 Stock [ ] [ ] [ ]
Incentive Plan.
3. Ratification of appointment of KPMG LLP as the [ ] [ ] [ ]
Company's independent auditor.
Signature of Stockholder Date:
---------------------------------- --------------
Signature of Stockholder Date:
---------------------------------- --------------
NOTE: This proxy must be signed exactly as the name appears hereon. When shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.