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EXHIBIT 10.1
EXECUTION COPY
EXECUTIVE TRANSITION AGREEMENT
AGREEMENT made effective as of the 1st day of February, 2005,
between The Bon-Ton Stores, Inc., a
Pennsylvania corporation (the "Company"),
and Mr. M. Thomas Grumbacher (the
"Executive").
RECITALS
The Executive has provided extraordinary leadership to the
Company for more than forty (40) years,
including in his position as the chief
executive officer of the Company.
The Company recognizes that the Executive's talents and
abilities are unique and have been integral
to the success of the Company and
the Company wishes to continue to retain
the services of the Executive.
In connection with the leadership transition process, a new
chief
executive officer has been hired and the
Executive's role as executive chairman
(the "Executive Chairman") of the Board of
Directors of the Company (the
"Board") has been defined.
In furtherance of implementing an orderly transition process,
the
Company desires to retain the Executive as
the Executive Chairman of the Board
and to enter into transitional arrangements
that will reinforce and encourage
the Executive's continued attention and
dedication to the Company and his
continued substantial contribution to the
Company's growth and success
(including, in particular, encouraging his
continued focus on strategic issues
which will create additional shareholder
value).
The Executive is willing to commit himself to continue to serve
the
Company, on the terms and conditions herein
provided.
Accordingly, in consideration of the agreements of the parties
set forth herein, the parties agree as
follows:
AGREEMENT
I.
Term. The
term of the Executive's service hereunder shall commence
as of February 1, 2005 (the "Effective
Date") and shall remain in effect through
the first day of the Company's fiscal year
commencing on or about February 1,
2010, or until such earlier time at which
the Executive ceases to serve as
Chairman of the Board (the "Term").
II.
Position and
Duties. From the Effective Date through January 31,
2008 (the "Executive Term"), the Executive
shall serve as Executive Chairman of
the Board and as a member of the Executive
Committee of the Board. It is
understood that
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Executive's duties, authority and
responsibilities in such role (as well as in
his role as non-Executive Chairman of the
Board, as hereinafter described) shall
be governed by and subject to the
applicable provisions of the Company's
"Governance Policies and Procedures"
adopted by the Board, as the same may be in
effect from time to time. For the remainder
of the Term following the Executive
Term, the Executive shall continue to serve
as Chairman and in such other
capacity as the Board and Executive may
agree.
III.
Compensation.
A. Base
Salary. For each fiscal year of the Company during the
Executive
Term, i.e., the fiscal years commencing on
or about February 1, 2005, February
1, 2006 and February 1, 2007 (each, a
"Fiscal Year"), the Executive shall
receive a base salary of $650,000 per year,
payable in accordance with the
Company's normal payroll practices. In the
event the Executive continues to
serve as Executive Chairman or in some
other capacity (other than non-Executive
Chairman) following the Executive Term, the
Executive's base salary for
subsequent years shall be determined by the
Board based upon its review of the
Executive's role in the Company at that
time. The Executive's base salary, as in
effect at any time, is hereinafter referred
to as the "Base Salary."
B. Annual
Bonus. For each Fiscal Year, the Executive shall be eligible to
earn a cash bonus (a "Bonus") pursuant to
the Company's Cash Bonus Plan in
accordance with its terms and conditions.
For the Fiscal Year of the Company
beginning on or about February 1, 2005, the
Executive shall be eligible for a
target bonus of 75% of Base Salary and a
maximum bonus equal to 150% of Base
Salary. For the Fiscal Year of the Company
beginning on or about February 1,
2006, the Executive shall be eligible for a
target bonus of 50% of Base Salary
and a maximum bonus equal to 100% of Base
Salary. For the Fiscal Year of the
Company beginning on or about February 1,
2007, the Executive shall be eligible
for a target bonus of 40% of Base Salary
and a maximum bonus equal to 80% of his
Base Salary. Bonuses shall be determined
and awarded in accordance with
objectives to be determined in accordance
with the Company's Governance Policies
and Procedures applicable to the Company's
Cash Bonus Plan and communicated to
the Executive each year during the
Executive Term. In the event the Executive
continues to serve as Executive Chairman or
in some other capacity (other than
non-Executive Chairman) following the
Executive Term, the Executive's
entitlement to participate in the Company's
bonus plan for senior executives for
subsequent years, and the amount of his
target bonus, if any, shall be
determined by the Board based upon the
Executive's role in the Company at that
time. For purposes of calculating a Bonus,
the Base Salary to be used in such
calculation shall be the Base Salary in
effect on January 31 of such Fiscal
Year.
C.
Long-Term Incentive Compensation. As of the Effective Date, the
Executive shall be granted 365,205
restricted shares of the Company's common
stock (each, a "Restricted Share") pursuant
to the terms of the Company's 2000
Stock Incentive Plan (the "Equity Plan").
Subject to the provisions hereof, such
Restricted Shares shall vest on the first
day of the Company's fiscal year
commencing on or about February 1, 2010.
Executive shall not be entitled to any
further awards under any long-term equity
or incentive plan of the Company. In
all other respects not prescribed by this
Agreement,
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the Restricted Share grant shall be
governed by the terms and conditions of the
Equity Plan and the form of award agreement
issued thereunder, a copy of which
is annexed hereto as Exhibit I.
1.
Accelerated Vesting; Forfeiture. In the event that (i) a
Change in Control (defined below) of the Company occurs during
the
Term, (ii) the Executive ceases to serve the Company during the
Term
as a result of his Disability (defined below) or death or (iii)
prior to the end of the Term, the Executive and the Board
mutually
agree that the Executive shall cease to serve as Chairman of
the
Board, all such Restricted Shares then held by the Executive
shall
fully vest and any forfeiture restrictions with respect thereto
shall immediately lapse. Except as provided in the preceding
sentence, in the event that, prior to the end of the Term, the
Executive ceases to serve as Chairman of the Board and such
cessation of service is not the result of a breach of this
Agreement
by the Company, then the Executive shall forfeit to the Company
all
outstanding Restricted Shares.
2.
Definitions. For purposes of this Section 3(c):
(1) "Change in Control." A Change in Control shall be deemed
to occur if:
(A) any "person," as such term is defined under Sections
3(a)(9) and 13(d) of the Securities Exchange Act of 1934 ("the
Exchange Act"), who is not an Affiliate of Company as defined in
the
Exchange Act 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 stock;
(B) the Company adopts any plan of liquidation providing for
the distribution of all or substantially all of its assets; or
(C) 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 the Company is continued
following any such transaction by a resulting entity (which may
be,
but need not be, the Company) and the shareholders of the
Company
immediately prior to such transaction hold, directly or
indirectly,
a majority of the voting power of the resulting entity; and
(2) "Disability" shall mean that as a result of the
Executive's incapacity due to physical or mental illness, the
Executive shall have been absent from his duties hereunder on a
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full-time basis for the entire period of twenty-six (26)
consecutive weeks.
D. Change
in Control. If during the Executive Term, the Executive shall
cease to serve as Executive Chairman by
reason of the occurrence of a Change in
Control of the Company, then the Executive
shall be entitled to receive, as soon
as practicable following the cessation of
such service a lump sum cash payment
equal to the sum of (i) any accrued but
unpaid compensation and reimbursement
for any Business Expenses, (ii) the
remainder of his Base Salary for the
Executive Term and (iii) the amount of any
target Bonus in respect of any Fiscal
Year not commenced or completed prior to
such Change in Control. Notwithstanding
the foregoing, to the extent any payment to
be made to the Executive under this
Section 3(D) is determined to constitute a
payment of nonqualified deferred
compensation for purposes of Section 409A
of the Internal Revenue Code of 1986,
as amended (the "Code"), such payment shall
be delayed until the date that is
six months after the date of the
Executive's separation from service with the
Company, so as to comply with the special
rule for certain "specified employees"
set forth in Code Section 409A(a)(2)(B)(i),
unless it is determined that
immediate distribution is permissible (and
does not trigger any additional tax
liabilities pursuant to Code Section
409A(a)(1)) pursuant to Code Section
409A(a)(2)(A)(v) by reason of being payable
in connection with a change in the
ownership or effective control of the
Company or in the ownership of a
substantial portion of the assets of the
Company.
IV.
Employee
Benefits During and Following the Executive Term.
A. Medical
Insurance. During the period in which the Executive serves as
Executive Chairman, the Executive 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
plans or applicable insurance or
agreements. Following the cessation of the
Executive's service as Executive Chairman
for any reason, the Executive (for the
duration of his lifetime) and his wife
Nancy Grumbacher (for the duration of her
lifetime) shall continue to participate in
the Company's group medical plan for
active employees at no cost to them,
provided however that such benefits shall
be coordinated with whatever benefits the
Executive and Mrs. Grumbacher are
entitled to receive from the United States
Government, or if the Executive
and/or his wife are unable to participate
in the active employee plan, he and/or
she shall either (i) receive cash
payment
