0000893220-01-500697.txt : 20011008
0000893220-01-500697.hdr.sgml : 20011008
ACCESSION NUMBER: 0000893220-01-500697
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 3
CONFORMED PERIOD OF REPORT: 20010804
FILED AS OF DATE: 20010917
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: BON TON STORES INC
CENTRAL INDEX KEY: 0000878079
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311]
IRS NUMBER: 232835229
STATE OF INCORPORATION: PA
FISCAL YEAR END: 0131
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-19517
FILM NUMBER: 1738414
BUSINESS ADDRESS:
STREET 1: 2801 E MARKET ST
CITY: YORK
STATE: PA
ZIP: 17402-2406
BUSINESS PHONE: 7177577660
MAIL ADDRESS:
STREET 1: P O BOX 2821
CITY: YORK
STATE: PA
ZIP: 17405-2821
10-Q
1
w53266e10-q.txt
10-Q FOR BONTON FOR 08/04/2001
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter ended August 4, 2001 Commission File Number
0-19517
THE BON-TON STORES, INC.
2801 EAST MARKET STREET
YORK, PENNSYLVANIA 17402
(717) 757-7660
INCORPORATED IN PENNSYLVANIA IRS NO. 23-2835229
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
As of August 31, 2001 there were 12,487,456 shares of Common Stock, $0.01
par value, and 2,989,853 shares of Class A Common Stock, $0.01 par value,
outstanding.
2
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE BON-TON STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
August 4, February 3,
(In thousands except share and per share data) 2001 2001
----------------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 15,454 $ 14,067
Trade and other accounts receivable, net of allowance for doubtful accounts
of $2,574 and $3,445 at August 4, 2001 and February 3, 2001, respectively 24,540 24,052
Merchandise inventories 192,532 192,547
Prepaid expenses and other current assets 15,575 8,503
Deferred income taxes 2,025 2,318
--------- ---------
Total current assets 250,126 241,487
--------- ---------
PROPERTY, FIXTURES AND EQUIPMENT AT COST,
less accumulated depreciation and amortization 144,761 147,415
DEFERRED INCOME TAXES 2,689 1,163
OTHER ASSETS 14,412 14,973
--------- ---------
TOTAL ASSETS $ 411,988 $ 405,038
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 65,598 $ 57,184
Accrued payroll and benefits 8,316 8,588
Accrued expenses 19,265 21,919
Current portion of long-term debt 614 584
Current portion of obligations under capital leases 468 479
Income taxes payable 2,640 10,422
--------- ---------
Total current liabilities 96,901 99,176
--------- ---------
LONG-TERM DEBT, LESS CURRENT MATURITIES 115,240 97,805
OBLIGATIONS UNDER CAPITAL LEASES, LESS CURRENT MATURITIES 730 953
OTHER LONG-TERM LIABILITIES 9,913 8,242
--------- ---------
TOTAL LIABILITIES 222,784 206,176
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred Stock - authorized 5,000,000 shares at $0.01 par value; no shares issued -- --
Common Stock - authorized 40,000,000 shares at $0.01 par value; issued
and outstanding shares of 12,487,456 and 12,225,501 at August 4, 2001 and
February 3, 2001, respectively 125 122
Class A Common Stock - authorized 20,000,000 shares at $0.01 par value;
issued and outstanding shares of 2,989,853 30 30
Additional paid-in-capital 107,534 106,882
Deferred compensation (871) (347)
Accumulated other comprehensive income (1,668) --
Retained earnings 84,054 92,175
--------- ---------
Total shareholders' equity 189,204 198,862
--------- ---------
Total liabilities and shareholders' equity $ 411,988 $ 405,038
========= =========
The accompanying notes are an integral part of these consolidated statements.
2
3
THE BON-TON STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THIRTEEN TWENTY-SIX
WEEKS ENDED WEEKS ENDED
------------------------ ------------------------
(In thousands except per share data) August 4, July 29, August 4, July 29,
(Unaudited) 2001 2000 2001 2000
------------------------------------------ --------- --------- --------- ---------
NET SALES $ 150,867 $ 156,346 $ 300,586 $ 308,481
OTHER INCOME, NET 518 539 1,042 1,111
--------- --------- --------- ---------
151,385 156,885 301,628 309,592
--------- --------- --------- ---------
COSTS AND EXPENSES:
Costs of merchandise sold 95,637 98,150 194,377 198,599
Selling, general and administrative 54,112 54,175 107,218 108,200
Depreciation and amortization 4,484 4,121 8,934 8,242
Unusual expense -- 6,485 -- 6,485
--------- --------- --------- ---------
LOSS FROM OPERATIONS (2,848) (6,046) (8,901) (11,934)
INTEREST EXPENSE, NET 2,175 2,821 4,092 5,160
--------- --------- --------- ---------
LOSS BEFORE INCOME TAXES (5,023) (8,867) (12,993) (17,094)
INCOME TAX BENEFIT (1,884) (3,370) (4,873) (6,497)
--------- --------- --------- ---------
NET LOSS $ (3,139) $ (5,497) $ (8,120) $ (10,597)
========= ========= ========= =========
PER SHARE AMOUNTS:
BASIC:
Net loss $ (0.21) $ (0.37) $ (0.54) $ (0.72)
========= ========= ========= =========
BASIC SHARES OUTSTANDING 15,161 14,813 15,155 14,808
DILUTED:
Net loss $ (0.21) $ (0.37) $ (0.54) $ (0.72)
========= ========= ========= =========
DILUTED SHARES OUTSTANDING 15,161 14,813 15,155 14,808
The accompanying notes are an integral part of these consolidated statements.
3
4
THE BON-TON STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
TWENTY-SIX
WEEKS ENDED
------------------------
(In thousands) August 4, July 29,
(Unaudited) 2001 2000
--------------------------------------------------------------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (8,120) $ (10,597)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 8,934 8,242
Proceeds from sale of accounts receivable, net (13,100) (10,200)
Changes in operating assets and liabilities, net 2,369 (12,560)
--------- ---------
Net cash used in operating activities (9,917) (25,115)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (5,939) (6,132)
Proceeds from sale of property, fixtures and equipment 12 6
--------- ---------
Net cash used in investing activities (5,927) (6,126)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt and capital lease obligations (76,269) (125,942)
Proceeds from issuance of long-term debt 93,500 157,300
Exercised stock options -- 1
--------- ---------
Net cash provided by financing activities 17,231 31,359
Net increase in cash and cash equivalents 1,387 118
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 14,067 10,807
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,454 $ 10,925
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 3,454 $ 4,730
Income taxes paid $ 7,820 $ 7,596
The accompanying notes are an integral part of these consolidated statements.
4
5
THE BON-TON STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Bon-Ton Stores, Inc., a Pennsylvania corporation, was incorporated on
January 31, 1996 as successor of a company established on January 31, 1929 and
currently operates, as one business segment, 73 retail department stores located
in Pennsylvania, New York, New Jersey, Maryland, Connecticut, Massachusetts, New
Hampshire, Vermont and West Virginia.
1. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements include accounts of
The Bon-Ton Stores, Inc. and its wholly-owned subsidiaries (the "Company"). All
intercompany transactions and balances have been eliminated in consolidation.
The unaudited condensed consolidated financial statements have been prepared in
accordance with the instructions for Form 10-Q and do not include all
information and footnotes required by generally accepted accounting principles.
In the opinion of management, all adjustments (primarily consisting of normal
recurring accruals) considered necessary for a fair presentation of interim
periods have been included. The Company's business is seasonal in nature and the
results of operations for interim periods presented are not necessarily
indicative of results for the full fiscal year. It is suggested these
consolidated financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended February 3, 2001 (the "2000 Annual Report").
Certain prior year balances have been reclassified to conform with the current
year presentation.
2. PER SHARE AMOUNTS:
The presentation of earnings per share (EPS) requires a reconciliation of the
numerators and denominators used in basic and diluted EPS calculations. The
numerator, net loss, is identical in both calculations. The following table
presents a reconciliation of the shares outstanding for the respective
calculations for each period presented on the accompanying Consolidated
Statements of Operations:
THIRTEEN TWENTY-SIX
WEEKS ENDED WEEKS ENDED
------------------------- -------------------------
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
---------- ---------- ---------- ----------
Basic Calculation 15,161,000 14,813,000 15,155,000 14,808,000
Dilutive securities ---
Restricted Shares -- -- -- --
Options -- -- -- --
---------- ---------- ---------- ----------
Diluted Calculation 15,161,000 14,813,000 15,155,000 14,808,000
---------- ---------- ---------- ----------
Antidilutive shares and options ---
Restricted Shares 321,000 428,000 219,000 443,000
Options 929,000 1,367,000 928,000 1,401,000
Antidilutive shares and options, consisting of restricted shares and options to
purchase shares outstanding, were excluded from the computation of dilutive
securities due to the Company's net loss position in the thirteen weeks and
twenty-six weeks ended August 4, 2001 and July 29, 2000.
5
6
THE BON-TON STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
The following table reflects approximate dilutive securities calculated under
the treasury stock method had the Company reported profit for the thirteen and
twenty-six week periods ended August 4, 2001 and July 29, 2000:
THIRTEEN TWENTY-SIX
WEEKS ENDED WEEKS ENDED
-------------------- -------------------
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
------ ---- ------ ----
Approximate Dilutive Securities ---
Restricted Shares 20,000 -- 10,000 --
Options -- -- -- --
Antidilutive options, options to purchase shares with exercise prices greater
than average market price, were excluded from the above table.
3. ADOPTION OF SFAS NOS. 133 AND 138:
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities," and SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities - an amendment of FASB Statement No. 133," on February 5, 2001. SFAS
No. 133 requires the transition adjustment, net of the tax effect, resulting
from adopting these Statements to be reported in net income or other
comprehensive income, as appropriate, as the cumulative effect of a change in
accounting principle. In the first quarter of 2001, a $426,000 net-of-tax loss
transition adjustment was recorded in accumulated other comprehensive income as
a result of recognizing at fair value all derivatives designated as cash flow
hedging instruments.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company recognizes all derivatives on the balance sheet at fair value. On
the date the derivative instrument is entered into, the Company generally
designates the derivative as a hedge of a forecasted transaction or of the
variability of cash flows to be received or paid related to a recognized asset
or liability ("cash flow hedge"). Changes in the fair value of a derivative that
is designated as, and meets all the required criteria for, a cash flow hedge are
recorded in accumulated other comprehensive income and reclassified into
earnings as the underlying hedged item affects earnings. The portion of the
change in fair value of a derivative associated with hedge ineffectiveness or
the component of a derivative instrument excluded from the assessment of hedge
effectiveness is recorded currently in earnings. Also, changes in the entire
fair value of a derivative that is not designated as a hedge are recorded
immediately in earnings. The Company formally documents all relationships
between hedging instruments and hedged items, as well as its risk-management
objective and strategy for undertaking various hedge transactions. This process
includes relating all derivatives that are designated as cash flow hedges to
specific balance sheet assets and liabilities.
The Company also formally assesses, both at the inception of the hedge and on an
ongoing basis, whether each derivative is highly effective in offsetting changes
in fair values or cash flows of the hedged item. If it is determined that a
derivative is not highly effective as a hedge or if a derivative ceases to be a
highly effective hedge, the Company will discontinue hedge accounting
prospectively for the respective derivative.
6
7
THE BON-TON STORES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
DEBT PORTFOLIO MANAGEMENT
It is the policy of the Company to identify on a continuing basis the need for
debt capital and evaluate the financial risks inherent in funding the Company
with debt capital. Reflecting the result of this ongoing review, the debt
portfolio and hedging program of the Company is managed with the objectives and
intent to (1) reduce funding risk with respect to borrowings made or to be made
by the Company to preserve the Company's access to debt capital and provide debt
capital as required for funding and liquidity purposes, and (2) reduce the
aggregate interest rate risk of the debt portfolio in accordance with certain
debt management parameters. The Company enters into interest rate swap
agreements to change the fixed/variable interest rate mix of the debt portfolio
in order to maintain the percentage of fixed- and variable-rate debt within
parameters set by management. In accordance with these parameters, swap
agreements are used to reduce interest rate risks and costs inherent in the
Company's debt portfolio. Accordingly, the Company currently has interest rate
swap contracts outstanding to effectively convert variable-rate debt to
fixed-rate debt. These contracts entail the exchange of fixed- and floating-rate
interest payments periodically over the life of the agreements.
CASH FLOW HEDGES
Interest expense for the twenty-six weeks ended August 4, 2001 includes $50,000
of net losses related to hedge ineffectiveness. Changes in the fair value of
derivatives qualifying as cash flow hedges are reported in accumulated other
comprehensive income. Gains and losses are reclassified into earnings as the
underlying hedged item affects earnings, such as when quarterly settlements are
made on the hedged forecasted transaction. It is expected that approximately
$600,000 to $700,000 of net-of-tax losses in accumulated other comprehensive
income will be reclassified into earnings within the next twelve months. There
was no gain or loss reclassified from accumulated other comprehensive income
into earnings during the six month period ended August 4, 2001 as a result of
the discontinuance of a cash flow hedge due to the probability of the original
forecasted transaction not occurring. As of August 4, 2001, the maximum time
over which the Company is hedging its exposure to the variability in future cash
flows for forecasted transactions is 54 months.
4. ADOPTION OF SFAS NOS. 141 AND 142:
In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" (effective July 1, 2001) and SFAS No. 142, "Goodwill
and Other Intangible Assets" (effective for the Company on January 1, 2002).
SFAS No. 141 prohibits pooling-of-interests accounting for acquisitions. SFAS
No. 142 specifies that goodwill and some intangible assets will no longer be
amortized but instead will be subject to periodic impairment testing. The
Company is in the process of evaluating the financial statement impact of
SFAS No. 142 adoption.
7
8
THE BON-TON STORES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table summarizes changes in select operating indicators,
illustrating the relationship of various income and expense items expressed as a
percentage of net sales for the respective period presented:
THIRTEEN TWENTY-SIX
WEEKS ENDED WEEKS ENDED
--------------------- ---------------------
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
----------------------------------------- ------ ------ ------ ------
NET SALES 100.0 % 100.0 % 100.0 % 100.0 %
OTHER INCOME, NET 0.3 0.3 0.4 0.4
------ ------ ------ ------
100.3 100.3 100.4 100.4
------ ------ ------ ------
COSTS AND EXPENSES:
Costs of merchandise sold 63.4 62.8 64.7 64.4
Selling, general and administrative 35.9 34.7 35.7 35.1
Depreciation and amortization 3.0 2.6 3.0 2.7
Unusual expense -- 4.1 -- 2.1
------ ------ ------ ------
LOSS FROM OPERATIONS (1.9) (3.9) (3.0) (3.9)
INTEREST EXPENSE, NET 1.4 1.8 1.4 1.7
------ ------ ------ ------
LOSS BEFORE INCOME TAXES (3.3) (5.7) (4.3) (5.5)
INCOME TAX BENEFIT (1.2) (2.2) (1.6) (2.1)
------ ------ ------ ------
NET LOSS (2.1)% (3.5)% (2.7)% (3.4)%
------ ------ ------ ------
THIRTEEN WEEKS ENDED AUGUST 4, 2001 COMPARED TO THIRTEEN WEEKS ENDED JULY 29,
2000
For purposes of the following discussions, all references to "second quarter of
2001" and "second quarter of 2000" are to the Company's thirteen week period
ended August 4, 2001 and July 29, 2000, respectively.
NET SALES. Net sales for the second quarter of 2001 were $150.9 million,
reflecting a decrease of 3.5% from the same period last year. Comparable store
sales decreased 4.6% in the second quarter of 2001. Areas of business recording
sales increases for the second quarter of 2001 were coats and home.
OTHER INCOME, NET. Net other income, principally income from leased departments,
remained constant at 0.3% of net sales in the second quarter of 2001 compared to
the second quarter of 2000.
COSTS AND EXPENSES. Gross profit as a percentage of net sales decreased 0.6
percentage point to 36.6% for the thirteen week period ended August 4, 2001 from
37.2% for the comparable period last year, primarily reflecting an increased
markdown rate due to aggressive promotional programs. Gross margin in the second
quarter of 2001 decreased $3.0 million compared to the second quarter of 2000,
reflecting decreases in sales volume and gross profit percentage in the second
quarter of 2001.
8
9
THE BON-TON STORES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Selling, general and administrative expenses for the second quarter of 2001 were
slightly below prior year. The current year expense rate increased 1.2
percentage points to 35.9% of net sales, as compared to 34.7% of net sales in
the second quarter of 2000, reflecting the sales decrease in the second quarter
of 2001. The corporate expense rate decreased 0.8 percentage point, principally
due to a reduction in services purchased and increased finance charge income
from the Company's proprietary credit card. The stores' selling, general and
administrative rate increased 2.0 percentage points, primarily the result of
additional insurance and rent charges and an increased payroll rate due to lower
sales in the second quarter of 2001.
Depreciation and amortization increased to 3.0% of net sales in the second
quarter of 2001, from 2.6% in the second quarter of 2000. The increase was
primarily due to full-year depreciation on $29.6 million of fiscal 2000 fixed
asset additions.
Unusual expense of $6.5 million was incurred in the second quarter of 2000
relating to the early retirement of Mr. Heywood Wilansky as President and Chief
Executive Officer, realignment and elimination of certain senior management
positions and headcount reduction initiatives implemented by the Company.
LOSS FROM OPERATIONS. The loss from operations in the second quarter of 2001
amounted to $2.8 million, or 1.9% of net sales, compared to a loss from
operations of $6.0 million, or 3.9% of net sales, in the second quarter of 2000.
The Company sells receivables through its accounts receivable facility to
provide additional working capital. On a pro-forma basis, if the Company had
on-balance sheet financing, it would have reduced selling, general and
administrative expenses by $1.7 million in the second quarter of 2001 and $2.2
million in the second quarter of 2000. The lower selling, general and
administrative expenses would have been offset by a corresponding increase in
interest expense for both periods. The net result of the pro-forma
reclassification would reflect a loss from operations of $1.2 million in the
second quarter of 2001 and a loss from operations of $3.8 million for the second
quarter of 2000.
INTEREST EXPENSE, NET. Net interest expense decreased $646,000 to 1.4% of net
sales in the second quarter of 2001 from $2.8 million, or 1.8% of net sales, in
the second quarter of 2000. The interest savings reflect the impact of decreased
debt as a result of the Company's lower inventory levels and reduced average
rates on outstanding debt.
NET LOSS. The net loss in the second quarter of 2001 amounted to $3.1 million
compared to a net loss of $5.5 million in the second quarter of 2000.
Due to the seasonal nature of the Company's business, results for the current
period are not necessarily indicative of results that may be achieved for the
full fiscal year of 2001.
TWENTY-SIX WEEKS ENDED AUGUST 4, 2001 COMPARED TO TWENTY-SIX WEEKS ENDED JULY
29, 2000
For purposes of the following discussions, all references to "2001" and "2000"
are to the Company's twenty-six week period ended August 4, 2001 and July 29,
2000, respectively.
NET SALES. Net sales were $300.6 million for the twenty-six weeks ended August
4, 2001, a decrease of 2.6% from the same period last year. Comparable store
sales decreased 3.6% for the six-month period, with coats, home and juniors
achieving sales increases.
9
10
THE BON-TON STORES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
OTHER INCOME, NET. Net other income, principally income from leased departments,
remained constant at 0.4% of net sales in 2001 and 2000.
COSTS AND EXPENSES. Gross margin in 2001 decreased $3.7 million compared to
2000, principally reflecting the decrease in 2001 sales. 2001 gross profit as a
percentage of net sales decreased 0.3 percentage point to 35.3%, from 35.6% for
the comparable period last year.
Selling, general and administrative expenses decreased $1.0 million to $107.2
million in 2001 from $108.2 million in 2000. The expense rate increased 0.6
percentage point to 35.7% of net sales, principally due to decreased sales in
2001. The corporate expense rate decreased 0.9 percentage point due to a
reduction in services purchased and increased finance charge income from the
Company's proprietary credit card. The stores expense rate increased 1.5
percentage points during the six-month period, primarily the result of
additional insurance and rent charges and an increased payroll rate due to lower
sales.
Depreciation and amortization increased to 3.0% of net sales in 2001 from 2.7%
of net sales in 2000. The increase was primarily due to full-year depreciation
on $29.6 million of fiscal 2000 fixed asset additions.
Unusual expense of $6.5 million was incurred in 2000 relating to the early
retirement of Mr. Heywood Wilansky as President and Chief Executive Officer,
realignment and elimination of certain senior management positions and headcount
reduction initiatives implemented by the Company.
LOSS FROM OPERATIONS. The loss from operations in the current year amounted to
$8.9 million, or 3.0% of net sales, compared to a loss from operations of $11.9
million, or 3.9% of net sales, in 2000.
The Company sells receivables through its accounts receivable facility to
provide additional working capital. On a pro-forma basis, if the Company had
on-balance sheet financing, it would have reduced selling, general and
administrative expenses by $3.8 million in 2001 and $4.4 million in 2000. The
lower selling, general and administrative expenses would have been offset by a
corresponding increase in interest expense for both periods. The net result of
the pro-forma reclassification would reflect a loss from operations of $5.1
million in 2001 and a loss from operations of $7.5 million in 2000.
INTEREST EXPENSE, NET. Net interest expense decreased $1.1 million to $4.1
million, or 1.4% of net sales, in 2001 from $5.2 million, or 1.7% of net sales,
in 2000. The decrease was primarily attributable to lower inventory levels and
reduced average rates on outstanding debt.
NET LOSS. The net loss in 2001 amounted to $8.1 million compared to a net loss
of $10.6 million in 2000.
Due to the seasonal nature of the Company's business, results for the current
period are not necessarily indicative of results that may be achieved for the
full fiscal year of 2001.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital requirements are currently met through a
combination of cash, borrowings under its revolving credit facility and proceeds
from its accounts receivable facility.
10
11
THE BON-TON STORES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The following table summarizes the Company's liquidity and capital resources:
August 4, July 29,
(Dollars in millions) 2001 2000
-------------------------------------------------------------------------------
Working capital $ 153.2 $ 163.3
Current ratio 2.58:1 2.64:1
Funded debt to total capitalization 0.38:1 0.43:1
Unused availability under lines of credit $ 37.3 $ 23.0
For the twenty-six weeks ended August 4, 2001, net cash used in operating
activities amounted to $9.9 million as compared to net cash used of $25.1
million for the comparable period last year. The decrease in net cash used in
2001 as compared to 2000 was primarily attributable to a decrease in the
Company's working capital requirements. Specifically, merchandise inventories
remained flat in 2001 compared to an increase of $5.3 million in 2000. Accounts
payable and accrued expenses increased $5.0 million compared to a decrease of
$11.4 million in 2000, principally a reflection of lower beginning-of-year
balances in 2001 as compared to 2000.
Net cash used in investing activities remained relatively flat at $5.9 million
in 2001 compared to $6.1 million for the comparable period last year.
Net cash provided by financing activities amounted to $17.2 million for 2001
compared to $31.4 million for the comparable period of 2000. The decrease in
cash provided by financing activities in 2001 was primarily attributable to
decreased advances from the Company's revolving credit facility on lower working
capital needs.
The Company anticipates its cash flow from operations, supplemented by
borrowings under its revolving credit facility and proceeds from its accounts
receivable facility, will be sufficient to satisfy its operating cash
requirements.
"SAFE HARBOR" STATEMENT
Certain information included in this report and other materials filed or to be
filed by the Company with the Securities and Exchange Commission contains
statements that are forward-looking within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements, which may be
identified by words such as "may," "will," "plan," "expect," "anticipate,"
"estimate," "project," "intend" or other similar expressions, involve important
risks and uncertainties that could significantly affect anticipated results in
the future and, accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of the Company. These risks and
uncertainties include, but are not limited to, uncertainties affecting retail in
general, such as consumer confidence and demand for soft goods; risks relating
to leverage and debt service; competition within markets in which the Company's
stores are located; and the need for, and costs associated with, store
renovations and other capital expenditures.
11
12
THE BON-TON STORES, INC. AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not believe its interest rate risks, as described in the 2000
Annual Report, have changed materially other than as described in Note 3.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments in any legal proceedings since the
Company's disclosure in its 2000 Annual Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 19, 2001, the Company held its Annual Meeting of Shareholders. The
following matter was submitted for vote:
1. The following individuals were nominated and elected to serve as the
directors of the Company:
M. Thomas Grumbacher For: 40,481,731
Withhold Authority: 962,431
Samuel J. Gerson For: 41,311,348
Withhold Authority: 132,814
Michael L. Gleim For: 40,489,881
Withhold Authority: 954,281
Lawrence J. Ring For: 41,311,548
Withhold Authority: 132,614
Robert C. Siegel For: 41,311,348
Withhold Authority: 132,814
Leon D. Starr For: 40,789,603
Withhold Authority: 654,559
Frank Tworecke For: 41,010,723
Withhold Authority: 433,439
Leon F. Winbigler For: 41,285,448
Withhold Authority: 158,714
Thomas W. Wolf For: 40,790,281
Withhold Authority: 653,881
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THE BON-TON STORES, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed pursuant to the requirements of Item 601 of
Regulation S-K:
Exhibit No. Description
10.1 Amended and Restated Receivables Purchase Agreement
10.2 Supplemental Executive Retirement Plan
(b) Reports on Form 8-K filed during the quarter:
None.
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THE BON-TON STORES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE BON-TON STORES, INC.
DATE: September 13, 2001 BY: /s/ Tim Grumbacher
--------------------- ------------------------
Tim Grumbacher
Chairman of the Board and
Chief Executive Officer
DATE: September 13, 2001 BY: /s/ James H. Baireuther
--------------------- ----------------------------
James H. Baireuther
Executive Vice President and
Chief Financial Officer
14
EX-10.1
3
w53266ex10-1.txt
AMENDED AND RESTATED RECEIVABLES PURCHASE AGRMT
1
EXHIBIT 10.1
EXECUTION COPY
AMENDMENT
Dated as of June 27, 2001
to
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT
Dated as of June 12, 1995
THIS AMENDMENT ("Amendment") dated as of June 27,
2001 is entered into among THE BON-TON RECEIVABLES PARTNERSHIP, L.P.
(the "Seller"), BTRGP, INC. ("BTRGP"), FALCON ASSET SECURITIZATION
CORPORATION ("Falcon"), certain financial institutions (the
"Investors"), and BANK ONE, NA (formerly known as The First National
Bank of Chicago) ("Bank One"), as Agent ("Agent") and as a "Swap
Counterparty."
PRELIMINARY STATEMENT. The Seller, BTRGP, Falcon, Bank One (as
the initial Investor thereunder), and the Agent have entered into an Amended and
Restated Receivables Purchase Agreement dated as of June 12, 1995 (as heretofore
amended, the "Agreement", the terms defined therein being used herein as therein
defined unless otherwise defined herein). Reference is also made to that certain
Intercreditor Agreement dated as of April 15th, 1997, among the Seller, the
Agent, The Bon-Ton Department Stores, Inc., General Electric Capital
Corporation, as "Administrative Agent" and The First National Bank of Boston, as
a "Collateral Agent". The parties hereto have agreed to amend the Agreement on
the terms and conditions herein set forth.
SECTION 1. Amendments to the Agreement. The parties hereto,
effective the date hereof and subject to the satisfaction of the conditions
precedent set forth in Section 2 hereof, agree as follows:
1.1 Bank One, NA, shall become a party to the Agreement in its
separate capacity as a Swap Counterparty.
1.2 Section 1.4 of the Agreement is hereby amended to add the
following immediately after paragraph (b):
(c) If any reduction of any Receivable Interest hereunder
affects a reduction in Capital, and if such reduction in Capital reduces
aggregate Capital below the aggregate "Notional Amounts" of the Interest Rate
Swap Agreements, then at the discretion of Bank One, NA, in its role as a Swap
Counterparty, or such other Swap Counterparty as may from time to time be party
to an Interest Rate Swap Agreement, any such Interest Rate Swap Agreement shall
be deemed terminated pursuant to Section 6 thereof, and any Interest Rate Swap
Obligations
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(including Breakage Fees), Swap Fees or any other amounts due under such
Interest Rate Swap Agreement shall immediately be due and owing; provided that,
at the discretion of such Swap Counterparty, the Seller may enter into a
replacement Interest Rate Swap Agreement allocated to such reduced Receivable
Interest with a "Notional Amount" less than or equal to such reduced Capital.
1.3 Section 1.9(c) of the Agreement is hereby amended to
delete in its entirety such Section and to substitute the following therefor:
(c) All amounts to be paid or deposited by any Person
hereunder shall be paid or deposited in accordance with the terms hereof no
later than 12:00 noon (Chicago time) on the day when due in immediately
available funds; if such amounts are payable to a Purchaser, they shall be paid
to the Agent, for the account of such Purchaser, at 1 Bank One Plaza, Chicago,
Illinois, 60670 until otherwise notified by the Agent. Upon notice to the
Seller, the Agent may debit the Facility Account or, solely in the case of
Interest Rate Swap Obligations owing to Bank One, NA, the Swap Cash Collateral
Account held in the name of Bank One, NA, as Swap Counterparty, for all amounts
then due and payable hereunder. In the case of Interest Rate Swap Obligations
owing to a Swap Counterparty other than Bank One, NA, upon notice to the Seller,
such Swap Counterparty is authorized to debit the Swap Cash Collateral Account
held by it for all amounts then due and payable under the Interest Rate Swap
Obligations owing to it. All computations of Discount and per annum fees
hereunder and under the Fee Letter shall be made on the basis of a year of 360
days for the actual number of days elapsed (including the first but excluding
the last day). All per annum fees shall be payable monthly in arrears on the
first day of each month. On each Interest Rate Swap Settlement Date, the
Collection Agent shall direct each Swap Counterparty to make all payments due
under each corresponding Interest Rate Swap Agreement directly to the Collection
Account. If any amount hereunder shall be payable on a day which is not a
Business Day, such amount shall be payable on the next succeeding Business Day.
1.4 Section 1.10 of the Agreement is hereby amended to delete
in its entirety such Section and to substitute the following therefor:
Section 1.10. Seller Interest. The Seller shall ensure that
the aggregate Receivable Interests of the Purchasers shall at no time exceed
100%. If on the Liquidation Day of a Receivable Interest, the aggregate
Receivable Interests of the Purchasers exceeds 100%, the Seller shall pay to the
Agent not later than the earlier of (i) the one Business Day following the
Seller having knowledge of the existence of any such excess, and (ii) the fifth
Business Day following the occurrence of the existence of any such excess, an
amount to be applied to reduce the Capital of the Receivable Interests, such
that after giving effect to such payment the aggregate Receivable Interest
equals or is less than 100%. Such amount shall be applied ratably to the
reduction of the Capital of the Receivable Interests. Any amounts received by
the Investors pursuant to the preceding sentence shall be applied ratably in
accordance with their Pro Rata Shares. The Seller hereby grants (i) to the Agent
for the ratable benefit of the Purchasers a security interest in all of its
interest in the Receivables, Related Security, Collections and proceeds thereof
to secure payment of the Aggregate Unpaids, including its indemnity obligations
under Article VIII and all other obligations owed hereunder to the Purchasers,
(ii) to the Agent on behalf of Bank One, NA, as a Swap Counterparty, a security
interest in all of its
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interest in the Swap Cash Collateral Account held by Bank One, NA, and all
proceeds thereof to secure the Interest Rate Swap Obligations owing to Bank One,
NA, as Swap Counterparty, and (iii) to each Swap Counterparty other than Bank
One, NA, a security interest in all of its interest in the Swap Cash Collateral
Account held by such Swap Counterparty and all proceeds thereof to secure the
Interest Rate Swap Obligations owing to such Swap Counterparty.
1.5 Section 1.11(b) of the Agreement is hereby amended to
delete in its entirety such Section and to substitute the following therefor:
(b) If the conveyance by the Seller to the Purchasers of
interests in Receivables hereunder shall be characterized as a secured loan and
not a sale, it is the intention of the parties hereto that this Agreement shall
constitute a security agreement under applicable law, and that the Seller shall
have granted to the Agent, for the ratable benefit of the Purchasers, a duly
perfected security interest in all of the Seller's right, title and interest in,
to and under the Receivables, the Collections, each Collection Account, each
Interest Rate Swap Agreement, all Related Security, all payments on or with
respect to such Receivables, all other rights relating to and payments made in
respect of the Receivables, and all proceeds of any thereof prior to all other
liens on and security interests therein, and after a Termination Event, the
Agent, the Purchasers, and each Swap Counterparty (with respect to the
corresponding Swap Cash Collateral Account) shall have, in addition to the
rights and remedies which they may have under this Agreement, all other rights
and remedies provided to a secured creditor after default under the UCC and
other applicable law, which rights and remedies shall be cumulative.
1.6 Article 2 of the Agreement is hereby amended to add the
following immediately after Section 2.6:
2.7. Swap Cash Collateral Account. Any amounts on deposit in a
Swap Cash Collateral Account in excess of the Required Minimum Balance related
to the applicable Interest Rate Swap Agreement shall be remitted to the Seller
by the Collateral Agent (if both the Collateral Agent and the Swap Counterparty
are Bank One, NA) or otherwise by such Swap Counterparty in each instance, upon
the Seller's request therefor. In addition, the Seller may from time to time
make deposits into the Swap Cash Collateral Accounts in the amount necessary to
maintain funds in such Swap Cash Collateral Accounts in an aggregate amount at
least equal to the applicable Required Minimum Balance for all Interest Rate
Swap Agreements at such time.
1.7 Section 3.1(h) of the Agreement is hereby amended to
delete in its entirety such Section and to substitute the following therefor:
(h) Good Title; Perfection. Immediately prior to each purchase
hereunder, the Seller shall be the legal and beneficial owner of the Receivables
and Related Security with respect thereto, free and clear of any Adverse Claim,
except as created by this Agreement and the documents entered into in connection
herewith. This Agreement is effective to (i) create a valid and perfected first
priority interest in each Swap Cash Collateral Account in favor of the
corresponding Swap Counterparty (or Collateral Agent on behalf thereof), and
(ii) is effective to, and shall, upon each purchase hereunder, transfer to the
relevant Purchaser or Purchasers (and such Purchaser or Purchasers shall acquire
from the Seller) a valid and perfected first priority
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undivided percentage ownership interest in each Receivable existing or hereafter
arising and in the Related Security and Collections with respect thereto, free
and clear of any Adverse Claim, in each case except as created by this Agreement
and the documents entered into in connection herewith.
1.8 Section 5.2(c) of the Agreement is hereby amended to
delete in its entirety such Section and to substitute the following therefor:
(c) Sales, Liens, Etc. Except as otherwise provided herein,
the Seller shall not sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, or create or suffer
to exist any Adverse Claim upon (including, without limitation, the filing of
any financing statement) or with respect to, any Receivable or Related Security
or Collections in respect thereof, or upon or with respect to any Contract under
which any Receivable arises, or any Collection Account or assign any right to
receive income in respect thereof, or any Swap Cash Collateral Account, and the
Seller shall defend the right, title and interest of the Purchasers in, to and
under any of the foregoing property, against all claims of third parties
claiming through or under the Seller or the Originator.
1.9 Section 5.2(g) of the Agreement is hereby amended to
delete in its entirety such Section and to substitute the following therefor:
(g) Other Agreements. The Seller shall not enter into or be a
party to any agreement or instrument other than this Agreement, the Transfer
Agreement, the "Revolving Note" (as defined in the Transfer Agreement), and the
Interest Rate Swap Agreements and other than to incur ordinary operating
expenses in the conduct of, or in order to qualify to do business for purposes
of, its limited business affairs as expressly contemplated in Section 5.1(k).
1.10 Section 5.2(i) of the Agreement is hereby amended to
delete in its entirety such Section and to substitute the following therefor:
(i) Indebtedness. The Seller shall not create, incur,
guarantee, assume or suffer to exist any indebtedness or other liabilities,
whether direct or contingent, other than (i) as a result of the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business, (ii) the incurrence of obligations under this
Agreement or the Transfer Agreement between the Seller and the Originator to
make payment for the purchase of Receivables under such Transfer Agreement,
(iii) the incurrence of operating expenses in the ordinary course of business of
the type otherwise contemplated in this Agreement, and (iv) the Interest Rate
Swap Agreements.
1.11 Section 9.1 of the Agreement is hereby amended to delete
in its entirety such Section and to substitute the following therefor:
Section 9.1. Authorization and Action. Each Purchaser hereby
designates and appoints Bank One, NA to act as its agent hereunder and under
each other Transaction Document, and authorizes the Agent to take such actions
as agent on its behalf and to exercise such powers as are delegated to the Agent
by the terms of this Agreement and the other Transaction Documents together with
such powers as are reasonably incidental thereto. The Agent shall not have any
duties or responsibilities, except those expressly set forth herein or in
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any other Transaction Document, or any fiduciary relationship with any
Purchaser, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities on the part of the Agent shall be read into this
Agreement or any other Transaction Document or otherwise exist for the Agent. In
performing its functions and duties hereunder and under the other Transaction
Documents, the Agent shall act solely as agent for the Purchasers and does not
assume nor shall be deemed to have assumed any obligation or relationship of
trust or agency with or for the Seller, or any of its successors or assigns, or
any Swap Counterparty, or any of its successors or assigns. The Agent shall not
be required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement, any other Transaction Document or
applicable law. The appointment and authority of the Agent hereunder shall
terminate upon the indefeasible payment in full of all Aggregate Unpaids and all
Interest Rate Swap Obligations owing to Bank One, NA, as Swap Counterparty. Each
Purchaser hereby authorizes the Agent to execute each of the Uniform Commercial
Code financing statements on behalf of such Purchaser (the terms of which shall
be binding on such Purchaser).
1.12 Section 11.1(a) of the Agreement is hereby amended to
delete in its entirety such Section and to substitute the following therefor:
(a) No failure or delay on the part of the Agent, any
Purchaser, any Swap Counterparty, or the Seller in exercising any power, right
or remedy under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or remedy preclude any other
further exercise thereof or the exercise of any other power, right or remedy.
The rights and remedies herein provided shall be cumulative and nonexclusive of
any rights or remedies provided by law. Any waiver of this Agreement shall be
effective only in the specific instance and for the specific purpose for which
given.
1.13 Section 11.1(b) of the Agreement is hereby amended to
delete in its entirety such Section and to substitute the following therefor:
(b) No provision of this Agreement may be amended,
supplemented, modified or waived except in writing in accordance with the
provisions of this Section 11.1(b). Falcon, the Seller and the Agent, at the
direction of the Required Investors, may enter into written modifications or
waivers of any provisions of this Agreement, provided, however, that no such
modification or waiver shall:
(i) without the consent of each affected Purchaser, (A) extend
the Liquidity Termination Date or the date of any payment or deposit of
Collections by the Seller or the Collection Agent, (B) reduce the rate
or extend the time of payment of Discount (or any component thereof),
(C) reduce any fee payable to the Agent for the benefit of the
Purchasers, (D) except pursuant to Article X hereof, change the amount
of the Capital of any Purchaser, an Investor's Pro Rata Share or an
Investor's Commitment, (E) amend, modify or waive any provision of the
definition of Required Investors or this Section 11.1(b), (F) consent
to or permit the assignment or transfer by the Seller of any of its
rights and obligations under this Agreement, (G) change the definition
of "Eligible Receivable," "Loss Reserve," or "Loss Percentage," or (H)
amend or modify any defined term (or any defined term used directly or
indirectly in such defined term) used in clauses
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(A) through (G) above in a manner which would circumvent the intention
of the restrictions set forth in such clauses; or
(ii) without the written consent of the then Agent, amend,
modify or waive any provision of this Agreement if the effect thereof
is to affect the rights or duties of such Agent; or
(iii) without the written consent of a Swap Counterparty,
amend, modify or waive any provision of this Agreement if the effect
thereof is to adversely affect the rights or duties of such Swap
Counterparty; or
(iv) without the written consent of GP, Inc., amend or modify
any provision set forth in Section 1.12, 5.3, or 5.5.
Notwithstanding the foregoing, (i) without the consent of the Investors or any
Swap Counterparty, the Agent may, with the consent of the Seller, amend this
Agreement solely to add additional Persons as Investors hereunder and (ii)
without the consent of the Seller, the Agent, the Required Investors, any Swap
Counterparty and Falcon may enter into amendments to modify any of the terms or
provisions of Article II, Article IX (other than Section 9.8 therein), Article
X, Section 11.13 or any other provision of this Agreement, provided that such
amendment has no negative impact upon TBTR Corp., TBTR Partnership or GP, Inc.
Any modification or waiver made in accordance with this Section 11.1 shall apply
to each of the Purchasers equally and shall be binding upon each party hereto.
1.14 Section 11.4(a) of the Agreement is hereby amended to
delete in its entirety such Section and to substitute the following therefor:
(a) The Seller agrees that from time to time, at its expense,
it will promptly execute and deliver all instruments and documents, and take all
actions, that may be necessary, or that the Agent may reasonably request, to
perfect, protect or more fully evidence the Receivable Interests, or to enable
the Agent, the Purchasers, or any Swap Counterparty to exercise and enforce
their rights and remedies hereunder in respect of the Receivables, the Related
Security and the Collections. The Agent may, or the Agent may direct the Seller
to, notify the Obligors of Receivables, at any time and at the Seller's expense,
of the ownership interests of the Purchasers under this Agreement and may also
direct that payments of all amounts due or that become due under any or all
Receivables be made directly to the Agent or its designee. The Seller shall, at
any Purchaser's request, withhold the identity of such Purchaser in any such
notification.
1.15 Section 11.6 of the Agreement is hereby amended to delete
in its entirety such Section and to substitute the following therefor:
Section 11.6. Bankruptcy Petition. TBTR Corp., TBTR
Partnership, GP, Inc., the Agent, each Swap Counterparty and each Investor
hereby covenants and agrees that, prior to the date which is one year and one
day after the payment in full of all outstanding senior Indebtedness of Falcon,
it will not institute against, or join any other Person in instituting against,
Falcon any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United States or
any state of the United States.
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1.16 Section 11.7 of the Agreement is hereby amended to delete
in its entirety such Section and to substitute the following therefor:
Section 11.7. Limitation of Liability. Except with respect to
any claim arising out of the willful misconduct, gross negligence or bad faith
of Falcon, the Agent, any Swap Counterparty or any Investor, no claim may be
made by the Seller, the Collection Agent or any other Person against Falcon, the
Agent, any Swap Counterparty or any Investor or their respective Affiliates,
directors, officers, employees, attorneys or agents for any special, indirect,
consequential or punitive damages in respect of any claim for breach of contract
or any other theory of liability arising out of or related to the transactions
contemplated by this Agreement, or any act, omission or event occurring in
connection therewith; and the Seller hereby waives, releases, and agrees not to
sue upon any claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in its favor.
1.17 Section 11.10 of the Agreement is hereby amended to
delete in its entirety such Section and to substitute the following therefor:
SECTION 11.10. WAIVER OF JURY TRIAL. THE AGENT, TBTR CORP.,
TBTR PARTNERSHIP, GP, INC., EACH SWAP COUNTERPARTY AND EACH PURCHASER HEREBY
WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT
EXECUTED BY TBTR CORP., TBTR PARTNERSHIP OR GP, INC. PURSUANT TO THIS AGREEMENT
OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
1.18 Section 11.11(a) of the Agreement is hereby amended to
delete in its entirety such Section and to substitute the following therefor:
(a) This Agreement, the Collection Notices, the Fee Letter,
and each Interest Rate Swap Agreement contain the final and complete integration
of all prior expressions by the parties hereto with respect to the subject
matter hereof and shall constitute the entire agreement among the parties hereto
with respect to the subject matter hereof superseding all prior oral or written
understandings.
1.19 Exhibit I to the Agreement is hereby amended to add the
following new definitions thereto:
" `Aggregate Independent Amount' " means the sum of the
Independent Amounts for all outstanding "Transactions" (as such term is defined
in the Interest Rate Swap Agreement).
" `Breakage Fees' " means any amounts payable by the Seller
pursuant to Section 6(e) of each Interest Rate Swap Agreement.
" `Collateral Agent' " means Bank One, NA, in its capacity as
depositary of a Swap Cash Collateral Account for the benefit of Bank One, NA, as
a Swap Counterparty.
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" `Exposure' " means for any Business Day the amount, if any,
that the relevant Swap Counterparty determines would be payable to it by the
Seller (expressed as a positive number) or by it to the Seller (expressed as a
negative number) pursuant to Section 6(e)(ii)(2)(A) of the relevant Interest
Rate Swap Agreement as if all "Transactions" thereunder had been terminated as
of close of business, New York City time, on the preceding Business Day;
provided that "Market Quotation" for all Interest Rate Swap Agreements will be
determined by such Swap Counterparty using its estimates at mid-market of the
amounts that would be paid for "Replacement Transactions" (each term within
quotes having the meaning given to it in the Interest Rate Swap Agreement).
" `Independent Amount' " means the amount specified as such in
the "Confirmation" for each "Transaction" (as such terms are defined in the
Interest Rate Swap Agreement.
" `Interest Rate Swap Agreement' " means any ISDA Master
Agreement (including all "Schedules" and "Confirmations" constituting a part
thereof) between the entity acting as Swap Counterparty and the Seller under
which the transactions governed thereby provide for either (i) the Seller to
make fixed rate payments to such Swap Counterparty and for such Swap
Counterparty to make floating rate payments to the Seller, or (ii) such Swap
Counterparty to make fixed rate payments to the Seller and for the Seller to
make floating rate payments to such Swap Counterparty.
" `Interest Rate Swap Obligations' " means all amounts owing
by the Seller under an Interest Rate Swap Agreement, including without
limitation the net amount owing by the Seller under such Interest Rate Swap
Agreement on an Interest Rate Swap Settlement Date, and Breakage Fees.
" `Interest Rate Swap Settlement Date' " means the first
Business Day of each calendar month.
" `Required Minimum Balance' " means, for each Interest Rate
Swap Agreement and for the related Swap Cash Collateral Account, as of any date
of determination, the amount equal to the sum of the Exposure plus the Aggregate
Independent Amount; provided that if the Required Minimum Balance is a negative
number, it shall be deemed to be zero.
" `Swap Cash Collateral Account' " means (i) with respect to
Bank One, NA, as a Swap Counterparty, a deposit account held at Bank One, NA, in
the name of the Collateral Agent, identified by account number 1590308, which
deposit account secures the Interest Rate Swap Obligations owing to Bank One,
NA, as Swap Counterparty, and (ii) with respect to each Swap Counterparty other
than Bank One, NA, each deposit account held at such other bank as is acting as
Swap Counterparty, in the name of such Swap Counterparty, which deposit account
secures Interest Rate Swap Obligations owing to such Swap Counterparty.
" `Swap Counterparty' " means (i) Bank One, NA, or its
successors or assigns, in its role as swap counterparty under any Interest Rate
Swap Agreement, or (ii) any other financial institution from time to time party
to an Interest Rate Swap Agreement with the Seller as swap counterparty, or such
institution's successors or assigns, provided that (a) such institution is rated
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at least A-1 by Standard & Poors and P-1 by Moody's, and which swap
counterparty, together with the related Interest Rate Swap Agreement, has been
approved by the Agent, in its sole discretion, and (b) such swap counterparty
has executed an assumption agreement in form and substance acceptable to the
Agent, pursuant to which such swap counterparty becomes a party to this
Agreement as a "Swap Counterparty."
1.20 Exhibit I of the Agreement is hereby amended to delete in
its entirety the definition of "Related Security" and to substitute the
following therefor:
"Related Security" means, with respect to any Receivable:
(i) all of the Seller's interest in the inventory and goods
(including returned or repossessed inventory and goods), if any, the
sale or lease of which gave rise to such Receivable, and all insurance
contracts with respect thereto,
(ii) all other security interests or liens and property
subject thereto from time to time, if any, purporting to secure payment
of such Receivable, whether pursuant to the Contract related to such
Receivable or otherwise, together with all financing statements signed
by an Obligor describing any collateral securing such Receivable,
(iii) all guaranties, insurance and other agreements or
arrangements of whatever character from time to time supporting or
securing payment of such Receivable whether pursuant to the Contract
related to such Receivable or otherwise,
(iv) all of the Seller's right, title and interest in, to and
under the Transfer Agreement,
(v) all service contracts and other contracts and agreements
associated with such Receivables,
(vi) all Records related to such Receivables,
(vii) all of the Seller's rights and interests under each of
the Interest Rate Swap Agreements, and
(viii) all proceeds of any of the foregoing.
SECTION 2. Conditions Precedent and Consent. This Amendment
shall become effective upon receipt by the Agent of (i) counterparts of this
Amendment executed by each of the Seller, BTRGP, Falcon, Bank One and each of
the Investors or, as to any Investor, advice satisfactory to the Agent that such
Investor has executed this Amendment and (ii) a secretary's certificate of BTRGP
certifying (a) the constitutional documents of each of BTRGP and the Seller,
each as amended to permit the Seller to execute this Amendment and enter into
the Interest Rate Swap Agreement with Bank One, NA, as Swap Counterparty (to
which Amendment the Agent, BTRGP, and each Investor hereby consent), (b) a
resolution of the Board of Directors of BTRGP, authorizing (i) both the Seller
and BTRGP to execute this Amendment,
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(ii) the Seller to enter into the Interest Rate Swap Agreement with Bank One,
NA, as Swap Counterparty, and (iii) certain officers to execute this Amendment
and the Interest Rate Swap Agreement with Bank One, NA, as Swap Counterparty,
and (c) evidence of the incumbency and authority of the signatory of the
Amendment and the Interest Rate Swap Agreement with Bank One, NA, as Swap
Counterparty.
SECTION 3. Covenants, Representations and Warranties of the
Seller and BTRGP.
3.1 Upon the effectiveness of this Amendment, each of the
Seller and BTRGP hereby reaffirms all covenants made by such party in the
Agreement as amended hereby and agrees that all such covenants shall be deemed
to have been re-made as of the effective date of this Amendment, and represents
that all representations and warranties made by Seller and BTRGP in the
Agreement are true and correct in all material respects as of the date hereof.
3.2 Each of the Seller and BTRGP hereby represents and
warrants that (i) this Amendment constitutes a legal, valid and binding
obligation of such party, enforceable against such party in accordance with its
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws relating to or limiting
creditors rights generally, and (ii) before and after giving effect to this
Amendment, no Termination Event or Potential Termination Event shall have
occurred and then be continuing.
SECTION 4. Reference to and Effect on the Agreement.
4.1 Upon the effectiveness of this Amendment, each reference
in the Agreement to "this Agreement", "hereunder", "hereof", "herein" or words
of like import shall mean and be a reference to the Agreement, as amended
hereby, and each reference to the Agreement in any other document, instrument or
agreement executed and/or delivered in connection with the Agreement shall mean
and be a reference to the Agreement as amended hereby.
4.2 Except as specifically amended above, the Agreement and
all other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed.
4.3 The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of any
Investor or the Agent under the Agreement or any other document, instrument or
agreement executed in connection therewith, nor constitute a waiver of any
provision contained therein, except as specifically set forth herein.
SECTION 5. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
SECTION 6. Governing Law. This Amendment shall be governed by
and construed in accordance with the internal laws (and not the law of
conflicts) of the State of Illinois.
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SECTION 7. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose.
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized
as of the date first above written.
THE BON-TON RECEIVABLES
PARTNERSHIP, L.P.
By: BTRGP, INC.
Its General Partner
By: /s/ Todd Dissinger
Title: Treasurer
BTRGP, INC.
By: /s/ Todd Dissinger
Title: Treasurer
FALCON ASSET SECURITIZATION
CORPORATION
By: /s/ Andrew Leszczynski
Authorized Signor
BANK ONE, NA (formerly known as First
National Bank of Chicago), as an
Investor, as Agent, and as
a Swap Counterparty
By: /s/ Andrew Leszczynski
Authorized Signor
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PNC BANK, NATIONAL ASSOCIATION,
as an Investor
By: /s/ Eric G. Erickson
Title: Vice President
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EX-10.2
4
w53266ex10-2.txt
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1
EXHIBIT 10.2
EXHIBIT A
THE BON-TON STORES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Article 1. Establishment and Purpose
1.1 Establishment. The Bon-Ton Stores, Inc. (the "Company") hereby
establishes a defined benefit pension plan known as The Bon-Ton Stores, Inc.
Supplemental Executive Retirement Plan (the "Plan") effective as of February 3,
2001 (the "Effective Date").
1.2 Purpose. The principal purposes of the Plan are to provide
certain executives, as defined in Article 3, with competitive retirement
benefits, protect against reductions in retirement benefits due to tax law
limitations on qualified plans, and encourage the continued employment of such
employees with the Company.
Article 2. Definitions
2.1 Actuarially Equivalent. "Actuarially Equivalent" or "Actuarial
Equivalent" means the equivalence in present value between two or more forms
and/or times of payment based upon a determination by an actuary chosen by the
Board, using reasonable actuarial assumptions as of the date of any such
determination.
2.2 Affiliate. "Affiliate" means a corporation or other entity
controlled by the Company and designated by the Board from time to time as such.
2.3 Board. "Board" means the Board of Directors of the Company.
2.4 Cause. "Cause" means conduct by the Participant consisting of
gross negligence, wanton or willful disregard of duties, conviction of a crime
involving moral turpitude or any other act or omission determined by the Board
to be inimical to the best interests of the Company. The determination of cause
shall be made by the Board, solely in its discretion, and its determination
shall be final and binding.
2.5 Change of Control. "Change of 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 Exchange Act, who is not an Affiliate of the Company on
the date hereof, becomes a "beneficial owner", as such term is used in Rule
13d-3 under the Exchange Act, of a majority of the Company's voting stock;
b) the Company adopts any plan of liquidation providing
for the distribution of all or substantially all of its assets; or
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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.
2.6 Employment. "Employment" means the period or periods during
which a Participant is an employee of the Company.
2.7 ERISA. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and any successor act thereto.
2.8 Participant. "Participant" means an eligible employee of the
Company selected to receive benefits under the Plan as provided in Article 3 of
this Plan.
2.9 Top Hat Plan. "Top Hat Plan" means a nonqualified, unfunded
plan maintained primarily to provide deferred compensation benefits to a
Participant who falls within a select group of "management or highly compensated
employees" within the meaning of Section 201, 301 and 401 of ERISA.
Article 3. Retirement
3.1 Eligibility. Only those employees who comprise a select group
of management or highly compensated employees will be eligible to be selected to
participate in the Plan, as provided below.
3.2 Participation. The Board, or such person or entity designated
by the Board, acting in its discretion, may designate any eligible employee as a
Participant under this Plan, and may designate any conditions applicable to any
such Participant. Such designation shall be in writing and shall be effective as
of the date contained therein. Participation in the Plan is terminable by the
Board, in its discretion, upon written notice to the Participant, and
termination shall be effective as of the date contained therein, but in no event
earlier than the date of such notice, provided that no such termination shall in
any material manner reduce or adversely affect any Participant's rights to
vested benefits hereunder without the consent of the Participant.
3.3 Noncompetition. Notwithstanding any other provisions hereof,
neither a Participant nor a Participant's spouse nor any other beneficiary of a
Participant shall receive any further benefits hereunder if the Participant,
without prior written consent of the Board, prior to attaining age 65, engages
in (as a principal, partner, director, officer, agent, employee, consultant,
owner, independent contractor of otherwise), or becomes financially interested
in, any retail department store business: (a) that is a direct competitor of the
Company (i.e. competitive lines generate at least 30% of the Company's revenues
and at least 30% of the
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competitor's revenues); (b) with at least $250 million in gross annual sales;
and (c) operating a store or stores within a 15 mile radius of any Company store
which is in existence or which is under contract to be acquired or constructed
by the Company at such time, and which competing store or stores have total
gross annual sales in excess of 15% of the Company's gross annual sales for the
prior year, including owned and leased businesses.
Article 4. Amount, Form, and Payment of Supplemental Benefit
4.1 Normal Retirement Benefit. Subject to the terms of this Plan,
a Participant who retires from Employment shall be entitled to receive a monthly
benefit payable for such Participant's lifetime, commencing on the first day of
the month coinciding with or next following the date of such retirement (the
"Normal Retirement Benefit"). A Participant's Normal Retirement Benefit is
calculated according to the benefit formula determined by the Board with respect
to the Participant, and set forth in the appendix hereto which applies to the
Participant (the "Applicable Appendix").
4.2 Form of Benefit. Unless the Board determines otherwise, or as
otherwise specified herein, a Participant who is not married as of the date on
which benefit payments commence shall receive his benefit hereunder in the form
of a Normal Retirement Benefit. A Participant who is married as of the date on
which benefit payments commence shall receive his benefits in the same form as
an unmarried Participant; provided however, that if such Participant dies prior
to the tenth anniversary of the date as of which his benefits commenced, and if
such Participant is survived by his spouse, such surviving spouse shall receive
monthly benefit payments in the same amount as previously paid to the
Participant until such tenth anniversary or until her death, whichever is
earlier. No actuarial adjustment shall be made to the monthly benefit payable to
a married participant by reason of his marital status. However, the Board
reserves the right to authorize lump sum benefit distributions that are the
Actuarial Equivalent of the forms of benefit otherwise provided for in this
Paragraph 4.2, in lieu thereof.
4.3 Death Benefit. If a Participant dies before such Participant
retires and is survived by a spouse, then such spouse shall be entitled to
receive from the Company a death benefit in the form of a lump sum payable in
cash within 60 days after such Participant's death equal to the Actuarial
Equivalent of the Normal Retirement Benefit that would have been payable to such
Participant had he retired on his date of death (without taking into account the
value of the additional benefits payable to a surviving spouse as provided in
Paragraph 4.2).
Article 5. Administration
5.1 Authority of the Board. This Plan shall be administered by the
Board or any committee designated by the Board to administer the Plan. Subject
to the provisions of the Plan, the Board or applicable committee shall have the
authority to make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of this Plan and to decide or
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4
resolve any and all questions, including interpretations of this Plan, as may
arise in connection with this Plan. Notwithstanding the foregoing, the Company
shall act as the plan administrator for purposes of any filings with any
governmental entity or in the event claims for benefits are made by any
Participant.
5.2 Agents. In the administration of this Plan, the Board may,
from time to time, employ agents and delegate to such agents such administrative
duties as it deems advisable and allowable under the terms of the Plan.
5.3 Decisions Binding. The decision or action of the Board with
respect to any question arising out of or in connection with the administration,
interpretation, and application of this Plan and any rules or guidelines made in
connection with this Plan shall be final and conclusive, and shall be binding
upon all persons and entities having any interest in this Plan.
5.4 Indemnity of Board. The Company shall indemnify and hold
harmless the Board and its individual members along with any other committee
that may be established to administer the Plan pursuant to Paragraph 5.1 and any
members thereof, against any and all claims, loss, damage, expense, or liability
arising from any action or failure to act with respect to this Plan.
5.5 Cost of Administration. The Company shall bear all expenses of
administration of this Plan.
5.6 Claims.
A Participant or a Participant's beneficiary for benefits under the
Plan may file a written claim for benefits under the Plan with the Plan
Administrator, if he believes that he is entitled to receive benefits under the
Plan but is not receiving benefits under the Plan or if he is receiving benefits
under the Plan, but disputes the amount and/or form of benefits received. Such
written claim for benefits shall set forth the nature of the claim and/or
dispute, and set forth all facts and circumstances which are relevant to the
claim.
If, pursuant to the provisions of the Plan, the Company denies the
claim of the Participant or the Participant's beneficiary for benefits under the
Plan, the Company shall provide written notice, within ninety (90) days after
receipt of the claim, setting forth in a manner calculated to be understood by
the claimant:
a) the specific reasons for such denial;
b) the specific reference to the Plan provisions on
which the denial is based;
c) a description of any additional material or
information necessary to perfect the claim and an explanation of why such
material or information is needed; and
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d) an explanation of the Plan's claim review procedure
and the time limitations of this subsection applicable thereto.
The Participant or the Participant's beneficiary whose claim for benefit has
been denied may request review by the Company of the denied claim by notifying
the Company in writing within sixty (60) days after receipt of the notification
of claim denial. As part of said review procedure, the claimant or the
claimant's authorized representative may review pertinent documents and submit
issues and comments to the Company in writing. The Company shall render its
decision to the claimant in writing in a manner calculated to be understood by
the claimant not later than sixty (60) days after receipt of the request for
review, unless special circumstances require an extension of time, in which case
decision shall be rendered as soon after the sixty-day period as possible, but
not later than one hundred and twenty (120) days after receipt of the request
for review. The decision on review shall state the specific reasons therefor and
the specific Plan reference on which it is based.
Article 6. Amendment and Termination
The Company hereby reserves the right to amend, modify, or terminate
the Plan at any time by action of a majority of the members of the Board. Except
as described below in this Article 6, no such amendment or termination shall in
any material manner reduce or adversely affect any Participant's rights to
benefits hereunder without the consent of the Participant.
The Board may terminate the Plan and commence termination payout for
all Participants, or remove certain employees as Participants, if it is
determined by the United States Department of Labor or a court of competent
jurisdiction that the Plan constitutes an employee pension benefit plan within
the meaning of Section 3(2) of ERISA which is not exempt from the provisions of
Parts 2, 3 and 4 of Title I of ERISA; provided, however, that if the Plan is
terminated pursuant to this sentence, then all Participants shall be deemed to
be fully vested in the benefits described in Article 4 as of the date
immediately preceding such termination. If payout is commenced pursuant to the
operation of this Article 6, the payment of such amounts shall be made in the
manner and at the times selected by the Board; provided, however, that such
payment shall not be extended for a longer period of time than would have been
the case had the payment of benefits occurred as scheduled immediately prior to
such accelerated payout.
Article 7. Miscellaneous
7.1 Unfunded Plan. This Plan is intended to be a Top Hat Plan and
therefore exempt from the provisions of Parts 2, 3, and 4 of Title I of ERISA.
Such status shall not be adversely affected by the establishment of any trust
pursuant to Paragraph 7.4 below.
7.2 Unsecured General Creditor. Each Participant and his or her
beneficiaries, heirs, successors, and assigns shall have no secured legal or
equitable rights, interests, or claims in any
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property or assets of the Company, nor shall any such persons have any rights,
interests or claims in any life insurance policies, annuity contracts, or the
proceeds therefrom owned or which may be acquired by the Company. Except as
provided in Paragraph 7.4, such policies, annuity contracts, or other assets of
the Company shall not be held under any trust for the benefit of a Participant,
his or her beneficiaries, heirs, successors or assigns, or held, in any way, as
collateral security for the fulfilling of any obligations of the Company under
this Plan. Any and all of the Company's assets and policies shall be, and shall
remain for purposes of this Plan, the general, unpledged, unrestricted assets of
the Company. The Company's obligation under this Plan shall be that of an
unfunded and unsecured promise to pay money in the future.
7.3 Exclusive Supplemental Retirement Benefit.
As of the Effective Date, the Plan is the intended to be the sole
source of Company paid supplemental retirement benefits for Participants. In the
event a Participant is entitled to any other supplemental retirement benefit
payable by the Company, the benefit payable hereunder shall be reduced by an
amount that is the Actuarial Equivalent of such other supplemental retirement
benefits, except where such other supplemental retirement benefits are paid
under an arrangement that explicitly negates the operation of this Paragraph.
7.4 Trust Fund.
a) At its discretion, the Company may establish one or
more grantor trusts, with such trustees as the Board may approve, for the
purpose of providing for the payment of benefits under this Plan. Such trust or
trusts may be irrevocable, but the assets thereof shall be subject to the claims
of the Company's general creditors. To the extent any benefits provided under
this Plan are actually paid from any such trust, the Company shall have no
further obligation with respect thereto, but to the extent not so paid, such
benefits shall remain the obligation of, and shall be paid by, the Company.
b) At its discretion, the Company may, in addition to or
in lieu of establishing one or more grantor trusts as described in clause (a)
above, take other actions to fund the benefits provided for under this Plan, but
in no event shall the Company establish any funding mechanism which would result
in the Plan failing to qualify as a Top Hat Plan exempt from the provisions of
Parts 2, 3, and 4 of Title I of ERISA.
7.5 Nonassignability. Neither a Participant nor any other person
shall have any right to sell, assign, transfer, pledge, anticipate, mortgage, or
otherwise encumber, hypothecate or convey in advance of actual receipt the
amounts, if any, payable hereunder, or any part thereof, which are, and all
rights to which are, expressly declared to be nonassignable and nontransferable,
provided that a Participant may assign the right to receive such amounts to
trusts or limited partnerships established for the benefit of the Participant's
spouse or children. No part of the amount payable shall, prior to actual
payment, be subject to seizure or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by a Participant or any
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other person, nor shall such amounts or rights to such amounts be transferable
by operation of law in the event of a Participant's or any other person's
bankruptcy or insolvency.
7.6 Not a Contract of Employment. The terms and conditions of this
Plan shall not be deemed to constitute a contract of employment between the
Company and any Participant, and Participants (and Participants' beneficiaries)
shall have no rights against the Company except as may otherwise be specifically
provided herein. Moreover, nothing in this Plan shall be deemed to give a
Participant the right to be retained in the service of the Company or to
interfere with the right of the Company to discipline or discharge any
Participant at any time.
7.7 Validity. If any provision of this Plan shall be held illegal
or invalid for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as if such
illegal and invalid provision had never been inserted herein.
7.8 Successors. The provisions of this Plan shall bind and inure
to the benefit of the Company and its successors and assigns, and the Company
shall require all its successors and assigns to expressly assume its obligations
hereunder. The term "successors," as used herein, shall include any corporate or
other business entity which shall, whether by merger, consolidation, purchase or
otherwise, acquire all or substantially all of the business and assets of the
Company.
7.9 Tax Withholding. The Company shall have the right to require
Participants to remit to the Company an amount sufficient to satisfy federal,
state, and local tax withholding requirements, or to deduct from payments made
pursuant to the Plan amounts sufficient to satisfy such tax withholding
requirements.
7.10 Governing Law. The provisions of this agreement shall be
construed and interpreted according to the laws of the State of Pennsylvania
except as preempted by Federal law.
7.11 Change of Control.
a) If a Change of Control of the Company occurs, all
benefits shall be fully accelerated and be payable to the extent and in the
manner provided for in the Applicable Appendix.
b) Notwithstanding the foregoing, in the event any
benefits payable hereunder are treated as "excess parachute payments" (as that
term is defined in Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), or any successor statute), the benefits payable hereunder shall be
reduced, if possible, to the extent necessary so that no portion of such
benefits shall be subject to the excise tax imposed on excess parachute payments
pursuant to Code Section 4999 (or any successor statute).
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7.12 Acceleration. The Board, in its sole and absolute discretion,
may waive all vesting requirements and/or permit accelerated vesting
arrangements.
7.13 Forfeiture. All benefits hereunder shall be subject to
forfeiture in their entirety in the event that Participant is terminated for
Cause.
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APPENDIX A
Amount of Supplemental Benefit for Jim Baireuther
If Jim Baireuther ("Baireuther") remains continuously employed with the
Company through the date that he attains sixty (60) years of age, he will become
eligible for and vest in a benefit in the amount of $30,000 a year. Baireuther's
entitlement to this benefit shall terminate and the benefit will be forfeited if
he is terminated for Cause.
Vesting upon Change of Control
If a Change of Control (as defined in Paragraph 2.5) occurs and
Baireuther is "Terminated in Connection with the Change of Control" (as this
term is defined below), he will immediately become eligible for and vest in a
benefit in an amount equal to a percentage of the benefit amount indicated above
($30,000), such percentage to be determined in accordance with the following
chart.
Years of Continuous Employment with the Company
Upon the Occurrence of a Change of Control Percentage
1 20
2 40
3 60
4 80
5 100
If a Change of Control occurs and Baireuther is not "Terminated in
Connection with the Change of Control," he shall be entitled to receive a Normal
Retirement Benefit pursuant to Paragraph 4.1, without regard to the Change of
Control.
"Terminated in Connection with the Change of Control" means: (1) the
termination of Baireuther's employment with the Company by the Company, for any
reason other than for Cause (as defined in Paragraph 2.4) within three (3) years
of the date on which a Change of Control occurs, or (2) the termination of
Baireuther's employment with the Company by Baireuther, in connection with a
demotion (i.e., the Company offers Baireuther a lower position or a comparable
position with lower compensation), within three (3) years of the date on which
the Change of Control occurs.
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APPENDIX B
Amount of Supplemental Benefit for Michael Gleim
If Michael Gleim ("Gleim") remains continuously employed with the
Company through January 31, 2002, he will become eligible for and vest in a
benefit in the amount of $50,000 a year. Gleim's entitlement to this benefit
shall terminate and the benefit will be forfeited if he is terminated for Cause.
Vesting upon Change of Control
If a Change of Control (as defined in Paragraph 2.5) occurs and Gleim
is "Terminated in Connection with the Change of Control" (as this term is
defined below), he will immediately become eligible for and vest in a benefit in
an amount equal to a percentage of the benefit amount indicated above ($50,000),
such percentage to be determined in accordance with the following chart.
Years of Continuous Employment with the Company
Upon the Occurrence of a Change of Control Percentage
1 20
2 40
3 60
4 80
5 100
If a Change of Control occurs and Gleim is not "Terminated in
Connection with the Change of Control," he shall be entitled to receive a Normal
Retirement Benefit pursuant to Paragraph 4.1, without regard to the Change of
Control.
"Terminated in Connection with the Change of Control" means: (1) the
termination of Gleim's employment with the Company by the Company, for any
reason other than for Cause (as defined in Paragraph 2.4) within three (3) years
of the date on which a Change of Control occurs, or (2) the termination of
Gleim's employment with the Company by Gleim, in connection with a demotion
(i.e., the Company offers Gleim a lower position or a comparable position with
lower compensation), within three (3) years of the date on which the Change of
Control occurs.
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APPENDIX C
Amount of Supplemental Benefit for Ryan Sattler
If Ryan Sattler ("Sattler") remains continuously employed with the
Company through the date that he attains sixty (60) years of age, he will become
eligible for and vest in a benefit in the amount of $10,000 a year. Sattler's
entitlement to this benefit shall terminate and the benefit will be forfeited if
he is terminated for Cause.
Vesting upon Change of Control
If a Change of Control (as defined in Paragraph 2.5) occurs and Sattler
is "Terminated in Connection with the Change of Control" (as this term is
defined below), he will immediately become eligible for and vest in a benefit in
an amount equal to a percentage of the benefit amount indicated above ($10,000),
such percentage to be determined in accordance with the following chart.
Years of Continuous Employment with the Company
Upon the Occurrence of a Change of Control Percentage
1 20
2 40
3 60
4 80
5 100
If a Change of Control occurs and Sattler is not "Terminated in
Connection with the Change of Control," he shall be entitled to receive a Normal
Retirement Benefit pursuant to Paragraph 4.1, without regard to the Change of
Control.
"Terminated in Connection with the Change of Control" means: (1) the
termination of Sattler's employment with the Company by the Company, for any
reason other than for Cause (as defined in Paragraph 2.4) within three (3) years
of the date on which a Change of Control occurs, or (2) the termination of
Sattler's employment with the Company by Sattler, in connection with a demotion
(i.e., the Company offers Sattler a lower position or a comparable position with
lower compensation), within three (3) years of the date on which the Change of
Control occurs.
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APPENDIX D
Amount of Supplemental Benefit for Steve Evans
If Steve Evans ("Evans") remains continuously employed with the Company
through the date that he attains sixty (60) years of age, he will become
eligible for and vest in a benefit in the amount of $10,000 a year. Evans's
entitlement to this benefit shall terminate and the benefit will be forfeited if
he is terminated for Cause.
Vesting upon Change of Control
If a Change of Control (as defined in Paragraph 2.5) occurs and Evans
is "Terminated in Connection with the Change of Control" (as this term is
defined below), he will immediately become eligible for and vest in a benefit in
an amount equal to a percentage of the benefit amount indicated above ($10,000),
such percentage to be determined in accordance with the following chart.
Years of Continuous Employment with the Company
Upon the Occurrence of a Change of Control Percentage
1 20
2 40
3 60
4 80
5 100
If a Change of Control occurs and Evans is not "Terminated in
Connection with the Change of Control," he shall be entitled to receive a Normal
Retirement Benefit pursuant to Paragraph 4.1, without regard to the Change of
Control.
"Terminated in Connection with the Change of Control" means: (1) the
termination of Evans' employment with the Company by the Company, for any reason
other than for Cause (as defined in Paragraph 2.4) within three (3) years of the
date on which a Change of Control occurs, or (2) the termination of Evans'
employment with the Company by Evans, in connection with a demotion (i.e., the
Company offers Evans a lower position or a comparable position with lower
compensation), within three (3) years of the date on which the Change of Control
occurs.
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APPENDIX E
Amount of Supplemental Benefit for John Farrel
If John Farrel ("Farrel") remains continuously employed with the
Company through the date that he attains sixty (60) years of age, he will become
eligible for and vest in a benefit in the amount of $10,000 a year. Farrel's
entitlement to this benefit shall terminate and the benefit will be forfeited if
he is terminated for Cause.
Vesting upon Change of Control
If a Change of Control (as defined in Paragraph 2.5) occurs and Farrel
is "Terminated in Connection with the Change of Control" (as this term is
defined below), he will immediately become eligible for and vest in a benefit in
an amount equal to a percentage of the benefit amount indicated above ($10,000),
such percentage to be determined in accordance with the following chart.
Years of Continuous Employment with the Company
Upon the Occurrence of a Change of Control Percentage
1 20
2 40
3 60
4 80
5 100
If a Change of Control occurs and Farrel is not "Terminated in
Connection with the Change of Control," he shall be entitled to receive a Normal
Retirement Benefit pursuant to Paragraph 4.1, without regard to the Change of
Control.
"Terminated in Connection with the Change of Control" means: (1) the
termination of Farrel's employment with the Company by the Company, for any
reason other than for Cause (as defined in Paragraph 2.4) within three (3) years
of the date on which a Change of Control occurs, or (2) the termination of
Farrel's employment with the Company by Farrel, in connection with a demotion
(i.e., the Company offers Farrel a lower position or a comparable position with
lower compensation), within three (3) years of the date on which the Change of
Control occurs.
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APPENDIX F
Amount of Supplemental Benefit for Frank Tworecke
If Frank Tworecke ("Tworecke") completes five (5) consecutive years of
employment with the Company, he will become eligible for and vest in a
supplemental retirement benefit in the amount of $50,000 a year. For each full
year that Tworecke remains in the Company's employ after the completion of the
first five (5) years, the amount of the annual supplemental retirement benefit
which Tworecke shall receive shall increase by $15,000 per year. The maximum
supplemental retirement benefit Tworecke can receive is $125,000 per year. The
supplemental retirement benefit shall be payable in equal monthly installments
commencing with the month Tworecke's employment with the Company ceases (after
the benefit vests) through the month of the date of Tworecke's death at age
sixty-five (65) or greater. If Tworecke dies after the supplemental benefit
described in this Appendix F becomes vested but before he reaches age sixty-five
(65), whether he is still employed with the Company, the Company will pay
Tworecke's estate the amount of the vested benefit, until the date of his 65th
birthday. Tworecke's entitlement to this supplemental retirement benefit shall
terminate and the benefit will be forfeited if (a) Tworecke ceases employment
with the Company at any time prior to vesting for any reason; (b) Tworecke
violates any portion of the November 1999 Employment Agreement between Tworecke
and the Company (the "Employment Agreement") or any subsequent agreement between
him and the Company (even after vesting); or (c) the Board determines at any
time before or after termination of employment that Tworecke is guilty of
dishonesty or other unlawful acts causing injury or damage to the Company, its
employees or customers (even after vesting).
In all respects, Tworecke's benefit under the Plan shall be subject to
and limited by the provisions of the Employment Agreement which govern his right
to receive a supplemental retirement benefit from the Company, including, but
not limited to, Paragraph 9 of the Employment Agreement. To the extent that the
terms of the Plan provide for a benefit which is inconsistent in amount or form
with the applicable provisions of the Employment Agreement (including, but not
limited to, the form of benefit provided under Paragraph 4.2 of the Plan, the
death benefit provided under Paragraph 4.3 of the Plan, and accelerated vesting
upon a Change of Control as provided under Paragraph 7.11 of the Plan), the
terms of the Employment Agreement shall govern.
14