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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
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