EXHIBIT 10.1
EMPLOYMENT AGREEMENT
     THIS AGREEMENT is by and between THE BON-TON STORES, INC., a Pennsylvania
corporation (the “Company”), and JAMES ZAMBERLAN (“Employee”).
W I T N E S S E T H:
     WHEREAS, the Employee has been employed by the Company as Executive Vice
President, Stores under an Employment Agreement which provides for a Termination
Payment upon termination of employment (“Prior Employment Agreement”); and
     WHEREAS, the Company desires to provide Employee with an incentive to
remain in its employ; and
     WHEREAS, the Employee wishes to continue his employment with the Company;
     NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein and intending to be legally bound hereby, the Company and
Employee agree as follows:
     1. Position and Responsibilities.
          (a) The Company hereby employs Employee and Employee hereby accepts
employment as Executive Vice President, Bon-Ton and Elder-Beerman Stores.
Employee shall have responsibilities for the Company’s Bon-Ton and Elder-Beerman
Stores and Visual matters and/or such other responsibilities commensurate with
those of the Company’s Executive Vice President, Stores and shall report to the
Chief Executive Officer of the Company or such other senior officers whom the
Chief Executive Officer may designate.
          (b) Throughout the term of this Agreement, Employee shall devote his
entire working time, energy, attention, skill and best efforts to the affairs of
the Company and to the

 

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performance of his duties hereunder in a manner that will faithfully and
diligently further the business and interests of the Company. Employee may not,
directly or indirectly, do any work for or on behalf of a competitor or any
other company while employed by the Company, without the approval of the Board
of Directors. However, nothing herein contained shall be deemed to prevent or
limit the right of Employee to invest any of his personal funds in less than one
percent of any class or series of the equity securities of any entity provided
such equity securities are traded on a national securities exchange or quoted in
an automated inter-dealer quotation system, nor shall this clause be construed
as preventing Employee from investing his assets in such other form or manner as
will not require any services on the part of the Employee in, and will not
permit the control by the Employee of any aspect of, the operation or the
affairs of entities (or affiliates of such entities) in which such investments
are made. Approval of board memberships and participation in lectures and
teaching activities will be at the discretion of the Chief Executive Officer;
however, such approval will not be unreasonably withheld, provided that such
activities do not significantly interfere with Employee’s duties under this
Agreement.
          (c) Employee shall not obtain goods or services or otherwise deal on
behalf of the Company with any business or entity in which Employee or a member
of his immediate family has a financial interest or from which Employee or a
member of his immediate family may derive a financial benefit as a result of
such transaction, except that this prohibition shall not apply to any entity
whose equity securities are traded on a national securities exchange or quoted
in an automated inter-dealer quotation system provided that neither Employee nor
any member of his immediate family owns one percent or more of any class or
series of the outstanding capital stock or other securities of such entity.

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     2. Term of Agreement. This Agreement, and Employee’s employment hereunder,
shall commence immediately upon execution by both the Company and Employee (the
“Effective Date”), and shall continue through and terminate on February 28, 2008
(“the Term”), unless sooner terminated in accordance with Paragraph 11 below. It
is understood that the Company’s execution of this Agreement is conditioned upon
the approval of its terms by the Human Resources and Compensation Committee
(“HRCC”) of the Company’s Board of Directors and that the Agreement shall not be
executed by the Company until such approval has been obtained.
     3. Place of Performance. Employee shall be based at the regular executive
offices of the Company (currently in York, Pennsylvania) except for travel
required for Company business. Employee has already received compensation in
lieu of a relocation allowance and will not be eligible for any expenses of
relocating to York, should he elect to do so. Employee shall continue to receive
reimbursement for business travel from his permanent residence in Ohio or his
temporary residence in York in accordance with the Company’s business expense
policy.
     4. Compensation.
          (a) Salary. Effective April 30, 2006, Employee shall receive a Base
Salary (“Base Salary”) at the annual rate of $425,000. This Base Salary, less
taxes and normal deductions, shall be paid to Employee in substantially equal
installments in accordance with the Company’s regular executive payroll
practices in effect from time to time. The Base Salary and Employee’s
performance may be reviewed from time to time during the term of this Agreement
by the Company to ascertain whether, in the Company’s sole discretion, such Base
Salary should be increased, and once increased, such Base Salary shall not be
decreased. The first such salary and performance review shall occur in 2007.

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          (b) Annual Bonus. Employee will participate in The Bon-Ton Stores,
Inc. Cash Bonus Plan (“Cash Bonus Plan”) in accordance with its terms and
conditions as it may be amended in accordance with its provisions or such other
annual bonus plan as may be established by the Company. For each of the fiscal
years of the Company during the Term, Employee shall be eligible to earn a
bonus, with the following parameters: a threshold bonus of 33.75% of Employee’s
Base Salary; a target bonus of 45% of Employee’s Base Salary; and a maximum
bonus of 67.5% of Employee’s Base Salary. If earned, one bonus will be paid
depending on the level of achievement with respect to performance measures
determined for each of the Company’s fiscal years by the HRCC. The HRCC shall
retain discretion with respect to this bonus as is provided under the terms of
the Cash Bonus Plan. To the extent reasonably practicable, the annual bonus
shall be computed within 90 days following the close of the Company’s fiscal
year and paid within 30 days of its computation. Employee must be employed on
the last day of the Company’s fiscal year to receive a bonus.
     5. Signing Bonus. On the Effective Date, Employee shall receive a signing
bonus of $55,000.
     6. Payment of Termination Pay From Prior Employment Agreement. Employee
shall receive payment of the Termination Pay From Prior Employment Agreement
(“Termination Pay From Prior Employment Agreement”) as follows:
     (a) a payment of $400,000 on January 2, 2007; and
     (b) a payment of $639,367 on March 1, 2008.
In the event that Employee resigns his employment (with or without Good Reason)
or that Employee’s employment is terminated by the Company during the Term, any
scheduled payment of Termination Pay From Prior Employment which has not been
received or which is not due to

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be received within six months of his termination date will be paid on the date
which is six months from the termination date.
     7. Allowance. The Company will continue payment of Employee’s monthly
automobile lease and automobile expenses on the same basis as it did so under
the terms of his Prior Employment Agreement. The Company shall reimburse
Employee on a one-time basis for up to $7,500 in attorneys fees incurred for
review and negotiation of this Agreement.
     8. Medical Insurance. Employee and his eligible dependents shall be
eligible to participate in the Company’s group medical, dental and vision plans
in accordance with the terms of such plans and subject to the restrictions and
limitations contained in the applicable insurance or agreements. The Company
shall pay Employee up to $2,300 per year for medical expenses that are not
covered by the Company’s medical plan.
     9. Other Benefits. Employee shall be eligible to participate in the The
Bon-Ton Retirement Contribution Plan, deferred compensation plan, discount
program, vacation plan, long-term disability plan and employee benefit plans
generally made available to other employees of the Company, subject to their
respective generally applicable eligibility requirements, terms, conditions and
restrictions; provided however, that severance payments and other benefits under
this Agreement shall be in lieu of any severance benefits otherwise provided by
the Company. Nothing in this Agreement shall preclude the Company from amending
or terminating any such insurance, benefit, program or plan so long as the
amendment or termination is applicable generally to the Company’s executives
participating in such insurance, benefit, program or plan. Moreover, the
Company’s obligations under this provision shall not apply to any insurance,
benefit, program or plan made available on an individual basis to one or more
select executive employees by contract if such insurance, benefit, program or
plan is not

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made available to all executive employees. With respect to Employee’s
participation in the Company’s vacation plan, Employee shall be eligible for
four weeks vacation per calendar year, which vacation entitlement shall be
pro-rated in any calendar year in which the Employee does not work the entire
calendar year.
     10. Business Expenses. The Company shall pay or reimburse Employee for
reasonable entertainment and other expenses incurred by Employee in connection
with the performance of Employee’s duties under this Agreement upon receipt of
vouchers therefor and in accordance with the Company’s regular reimbursement
procedures and practices in effect from time to time.
     11. Termination of Employment.
          (a) Termination by the Company. Notwithstanding any other provision of
this Agreement, the Company may terminate Employee’s employment and all of the
Company’s obligations or liabilities under this Agreement immediately, excluding
any obligations the Company may have under Paragraph 12, below in any of the
following circumstances:
               (i) Disability or Incapacity. In the event of Employee’s physical
or mental inability to perform his essential duties hereunder, with or without
reasonable accommodation, for a period of 13 consecutive weeks or for a
cumulative period of 26 weeks during the term of this Agreement.
               (ii) Death of Employee. In the event of Employee’s death.
               (iii) Discharge for Cause. Company may discharge Employee at any
time for “Cause,” which shall be limited to: Employee’s material and serious
breach or neglect of Employee’s responsibilities; willful violation or disregard
of standards of conduct established by law; willful violation or disregard of
standards of conduct established by Company policy as

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may from time to time be communicated to Employee; fraud, willful misconduct,
misappropriation of funds or other dishonesty; conviction of a crime of moral
turpitude; any misrepresentation made by Employee in this Agreement; or any
material breach by Employee of any provision of this Agreement (including,
without limitation, acceptance of employment with another company or performing
work or providing advice to another company, as an employee, consultant or in
any other similar capacity while still an employee of the Company).
               (iv) Discharge without Cause. Notwithstanding any other provision
of this Agreement, Employee’s employment and any and all of the Company’s
obligations under this Agreement (excluding any obligations the Company may have
under Paragraph 12 below) may be terminated by the Company at any time without
Cause.
          (b) Resignation.
               (i) Resignation for Good Reason. Employee may resign for “Good
Reason,” defined below, upon 30 days’ written notice by Employee to the Company
except as set forth in Paragraph 11(c) below. The Company may waive Employee’s
obligation to work during this 30 day notice period and terminate his employment
immediately, but if the Company takes this action in the absence of agreement by
Employee, Employee shall receive the salary that otherwise would be due through
the end of the notice period. For purposes of this Agreement, “Good Reason”
shall mean any of the following violations of this Agreement by the Company:
causing Employee, without Employee’s consent to cease to have duties and
responsibilities commensurate with those of Executive Vice President, Bon-Ton
and Elder-Beerman Stores; any reduction in the Employee’s Base Salary; any
reduction in the Employee’s potential bonus eligibility amount; any required
relocation of his principal office from the York, Pennsylvania area; and any
substantial breach of any material provision of this Agreement. Notwithstanding

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the foregoing, the acts or omissions described above shall not constitute “Good
Reason” unless the Employee provides the Company with written notice detailing
the matters he asserts to be “Good Reason” that the Company does not cure within
thirty (30) days of receiving the written notice.
               (ii) Resignation Without Good Reason. Notwithstanding any other
provision of this Agreement, Employee’s employment and any and all of the
Company’s obligations under this Agreement (excluding any obligations the
Company may have under Paragraph 12 below) may be terminated by Employee without
Good Reason.
          (c) Change of Control. In the event of a Change of Control of the
Company, the Employee shall be prohibited from resigning for Good Reason for a
period of six months following the Change of Control (unless Employee is
required during this six (6) month period to relocate from his principal office
from York, Pennsylvania area). For purposes of this Agreement, a Change of
Control shall be deemed to occur if:
               (i) any “person,” as such term is defined under Sections 3(a)(9)
and 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), who is not an affiliate of Company on the date hereof, becomes a
“beneficial owner,” as such term is used in Rule 13d-3 under the Exchange Act,
of a majority of the outstanding voting power of the Company’s capital stock;
               (ii) the Company adopts any plan of liquidation providing for the
distribution of all or substantially all of its assets;
               (iii) the Company is party to a merger, consolidation, other form
of business combination or a sale of all or substantially all of its assets,
unless the business of the Company is continued following any such transaction
by a resulting entity (which may be, but

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need not be, the Company) and the shareholders of the Company immediately prior
to such transaction hold, directly or indirectly immediately after such
transaction, a majority of the voting power of the resulting entity in
substantially the same relative percentages as prior to such transaction.
          (d) Group Medical Insurance Following Employee’s Termination of
Employment. Following Employee’s termination of employment for reasons other
than Discharge for Cause, Employee may elect to participate, at his sole
expense, in one of the following plans:
Option 1: the Company’s group medical plan for which he had been eligible at the
time of his termination of employment, in accordance with the provisions of
COBRA; or
Option 2: the Company’s retiree medical plan, subject to its generally
applicable eligibility requirements, terms, conditions and restrictions as then
in effect or as may be modified thereafter.
               This election of programs will not be applicable until Employee
ceases to participate in the Company’s group medical plan in accordance with
Paragraph 12(a)(ii) below, in the event that Employee is discharged without
Cause or resigns for Good Reason and continues to participate in the group
medical plan in accordance with that paragraph. If Employee should elect to
participate in the Company’s group medical plan in accordance with COBRA (Option
1 above), Employee shall be ineligible thereafter to participate in the
Company’s retiree medical plan (Option 2 above).
     12. Payments and Benefits Upon Termination.
          (a) Discharge Without Cause, or Resignation for Good Reason. If
Employee is Discharged Without Cause or Resigns for Good Reason:

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  (i)   Employee shall receive severance pay at his then current rate of Base
Salary at the time of termination, less taxes and normal deductions, for a
period of fifty-two (52) weeks (payable in equal installments in accordance with
the Company’s regular payroll practices);     (ii)   the Company shall provide
for Employee’s continued participation in the Company’s group medical insurance
plan for employees (in accordance with the plan’s provisions, subject to its
generally applicable eligibility requirements, terms, conditions and
restrictions as then in effect or as it may be modified thereafter) for a one
year (1) year period following Employee’s discharge without Cause or resignation
for Good Reason on the same basis as though Employee had continued to be
employed by the Company during that one (1) year period (so that Employee shall
be obligated to contribute for such coverage no more than the amount that
Employee would have contributed as an active employee participating in the
plan);     (iii)   Employee shall be entitled to vest in a pro rata percentage
of the 4,000 shares of restricted stock granted on November 28, 2005, based on a
fraction, the numerator of which shall be the number of calendar days between
November 28, 2005 and the date of his discharge without Cause or resignation for
Good Reason, and the denominator of which shall be 730; and

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  (iv)   Employee shall receive payment of any Termination Pay From Prior
Employment Agreement due him pursuant to Paragraph 6 above;

provided (for receipt of the severance pay set forth in Paragraph 12(a)(i) above
and/or the Company’s undertakings set forth in Paragraphs 12(a)(ii) and/or
12(a)(iii) above) that Employee signs and does not timely revoke a general
release of claims (including, without limitation, contractual, common law and
statutory claims) against the Company and its officers, directors, employees and
agents in a form acceptable to the Company (“General Release”). These payments
shall be in lieu of any bonus or other Company paid benefits to which Employee
is or may be entitled after Employee’s termination of employment with the
Company for any reason whatsoever, whether by Employee or the Company, including
any severance payments to which Employee is or may be entitled by reason of any
severance plan sponsored by the Company, or any other agreement, policy or
practice. The Company’s obligations under this Paragraph 12(a) shall, as
applicable:

  (i)   cease in the event that Employee breaches any of Employee’s obligations
under this Agreement; and/or     (ii)   be offset by any disability insurance
benefits and/or workers compensation benefits received by Employee during the
period covered by the severance payments.

          (b) Death or Disability/Incapacity.
               (i) On death, Employee’s estate’s sole entitlement will be to:
                    (A) his then current rate of Base Salary for any days worked
prior to his death;

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                    (B) amounts payable on account of Employee’s death under any
insurance or benefit plans or policies maintained by the Company;
                    (C) any vested benefits to which Employee is entitled under
the Company’s employee benefit or other plans in accordance with, to the extent
provided in, and subject to the restrictions and payout schedules contained in
those plans;
                    (D) payment of any Termination Pay From Prior Employment
Agreement due him pursuant to Paragraph 6 above.
               (ii) On termination for disability or incapacity, Employee’s sole
entitlement will be to:
                    (A) his then current rate of Base Salary for any days worked
prior to the date of termination;
                    (B) amounts payable on account of disability or incapacity
under any insurance or benefit plans or policies maintained by the Company;
                    (C) any vested benefits to which Employee is entitled under
the Company’s employee benefit or other plans in accordance with, to the extent
provided in, and subject to the restrictions and payout schedules contained in
those plans; and
                    (D) payment of any Termination Pay From Prior Employment
Agreement due him pursuant to Paragraph 6 above.
          (c) Discharge for Cause or Resignation without Good Reason. If
Employee is discharged for Cause or resigns without Good Reason, Employee’s sole
entitlement will be to:
               (i) the then current rate of Base Salary for any days worked
through the date of termination;

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               (ii) any vested benefits to which Employee is entitled under the
Company’s employee benefit or other plans in accordance with, to the extent
provided in, and subject to the restrictions and payout schedules contained in
those plans; and
               (iii) payment of any Termination Pay From Prior Employment
Agreement due him pursuant to Paragraph 6 above.
          (d) Change of Control. Notwithstanding any other provision of this
Agreement, if the aggregate present value of the “parachute payments” to the
Employee, determined under Section 280G(b) of the Internal Revenue Code of 1986,
as amended (the “Code”), would be at least three times the “base amount”
determined under Code Section 280G, then the “280G Permitted Payment” shall be
the maximum amount that may be paid as a Change of Control Payment under this
Paragraph 12(d) such that the aggregate present value of such “parachute
payments” to the Employee is less than three times his “base amount.” In
addition, in the event the aggregate present value of the parachute payments to
the Employee would be at least three times his base amount even after a
reduction of the Change of Control Payment to $0 (all as determined for purposes
of Code Section 280G), compensation otherwise payable under this Agreement and
any other amount payable hereunder or any other severance plan, program, policy
or obligation of the Company or any other affiliate thereof shall be reduced so
that the aggregate present value of such parachute payments to the Employee, as
determined under Code Section 280G(b) is less than three times his base amount.
Any decisions regarding the requirement or implementation of such reductions
shall be made by such tax counsel as may be selected by the Company and
reasonably acceptable to the Employee.
     13. Company Property. All advertising, sales, manufacturers’ and other
materials or articles or information, including without limitation data
processing reports, customer sales

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analyses, invoices, price lists or information or any other materials or data of
any kind furnished to Employee by the Company or developed by Employee on behalf
of the Company or at the Company’s direction or for the Company’s use or
otherwise in connection with Employee’s employment with the Company, are and
shall remain the sole and confidential property of the Company.
     14. Non-Competition and Confidentiality. To the maximum extent permissible
by law:
          (a) During his employment with the Company and for a period of one
year after the termination of his employment with the Company for any reason
whatsoever, whether by Employee or by the Company and whether during the term of
this Agreement or subsequent to the expiration or termination of this Agreement,
Employee shall not, directly or indirectly:
               (i) Induce or intentionally influence any customer, employee,
consultant, independent contractor or supplier of the Company to change its
business relationship with or terminate employment with the Company.
               (ii) Engage in (as a principal, partner, director, officer,
agent, employee, consultant, owner, independent contractor or otherwise) or be
financially interested in the retail department store business of any Competitor
of the Company. For purposes of this Agreement, a Competitor means each of
Federated Department Stores, Dillard’s Inc., Kohl’s Corporation, Belk, Inc.,
Limited Brands, Inc., Target Corporation, Boscov’s, Inc., Sears Holdings
Corporation, J. C. Penney Company, Inc. or the affiliates and successors of each
of them.
          (b) During his employment with the Company and at all times
thereafter, and except as required by law, Employee shall not use for his
personal benefit, or disclose, communicate or divulge to, or use for the direct
or indirect benefit of, any person, firm, association or company other than the
Company, any Confidential Information (defined below)

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of the Company that Employee acquires in the course of his employment, unless
such Confidential Information is lawfully known by and readily available to the
general public, was received from a third party who was not under any
restriction to disclose such information, or is independently developed without
the use of the Company’s Confidential Information. This Confidential Information
includes, but is not limited to: any material referred to in Paragraph 13 and
any non-public information regarding the business, marketing, legal or
accounting methods, policies, plans, procedures, strategies or techniques;
research or development projects or results; trade secrets or other knowledge or
processes of or developed by the Company; names and addresses of employees,
suppliers or customers (“Confidential Information”). Employee confirms that such
information is confidential and constitutes the exclusive property of the
Company, and agrees that, immediately upon his termination, whether by Employee
or by the Company and whether during the term of this Agreement or subsequent to
the expiration of this Agreement, Employee shall deliver to Company all
correspondence, documents, books, records, lists, computer programs and other
writings relating to Company’s business; and Employee shall retain no copies,
regardless of where or by whom said writings were kept or prepared.
          (c) Both during his employment with the Company and following his
termination for any reason, whether by Employee or by the Company and whether
during the term of this Agreement or following the expiration of the Agreement,
Employee shall, upon reasonable notice, furnish to the Company such information
pertaining to his employment with the Company as may be in his possession. The
Company shall reimburse Employee for all reasonable expenses incurred by him in
fulfilling his obligations under this subparagraph (c).

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          (d) The provisions of subparagraphs (a), (b) and (c) shall survive the
cessation of Employee’s employment for any reason, as well as the expiration or
termination of this Agreement at the end of its term or at any time prior
thereto.
          (e) Employee acknowledges that the restrictions contained in this
Paragraph 14, in view of the nature of the business in which the Company is
engaged and the Employee’s position with the Company, are reasonable and
necessary to protect the legitimate interests of the Company, and that any
violation of those restrictions would result in irreparable injury to the
Company. Employee therefore agrees that, in the event of his violation of any of
those restrictions, the Company shall be entitled to obtain from any court of
competent jurisdiction preliminary and permanent injunctive relief against
Employee, in addition to damages from Employee and an equitable accounting of
all commissions, earnings, profits and other benefits arising from such
violation, which rights shall be cumulative and in addition to any other rights
or remedies to which the Company may be entitled.
          (f) Employee agrees that if any or any portion of the foregoing
covenants, or the application thereof, is construed to be invalid or
unenforceable, the remainder of such covenant or covenants or the application
thereof shall not be affected and the remaining covenant or covenants will then
be given full force and effect without regard to the invalid or unenforceable
portions. If any covenant is held to be unenforceable because of the area
covered, the duration thereof, or the scope thereof, Employee agrees that the
Court making such determination shall have the power to reduce the area and/or
the duration, and/or limit the scope thereof, and the covenant shall then be
enforceable in its reduced form. If Employee violates any of the restrictions
contained in subparagraph (a), the period of such violation (from the
commencement of any such violation until such time as such violation shall be
cured by

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Employee to the satisfaction of the Company) shall not count toward or be
included in the one year (or such longer period as may be prescribed by such
section) restrictive period contained in subparagraph (a).
          (g) Employee represents and warrants that the knowledge, skill and
abilities he possesses at the time of his execution of this Agreement are
sufficient to permit him to earn a living by working for a non-competitor of the
Company for the restrictive period set forth in subparagraph (a) above.
          (h) For purposes of Paragraphs 13 and 14 of this Agreement, the term
“Company” shall include not only The Bon-Ton Stores, Inc., but also any of its
successors, assigns, subsidiaries or affiliates.
     15. Taxes. Employee agrees that he is responsible for paying any and all
federal, state and local income taxes assessed with respect to any money,
benefits or other consideration received from the Company and that the Company
is entitled to withhold any tax payments from amounts otherwise due Employee to
the extent required by applicable statutes, rulings or regulations.
     16. Prior Agreements.
          (a) Employee represents that there are no restrictions, agreements or
understandings whatsoever to which Employee is a party that could impact upon
his employment under the Agreement or would prevent or make unlawful his
execution of this Agreement or his employment hereunder.
          (b) Employee agrees that he will not use or disclose any confidential
or proprietary information of any of his prior employers during the course of
his employment under this Agreement.

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     17. Indemnification. Employee shall be entitled to indemnification against
claims by third parties arising out of his acts and omissions within the scope
of his employment pursuant to the terms of the Company’s by-laws.
     18. Entire Understanding. This Agreement contains the entire understanding
between the Company and Employee with respect to the subject matter hereof and
supersedes all prior and contemporary employment and severance agreements and
understandings, inducements or conditions, express or implied, written or oral,
between the Company and Employee except as herein contained. The express terms
hereof control and supersede any course of performance and/or usage of the trade
inconsistent with any of the terms hereof.
     19. Modifications. This Agreement may not be modified orally but only by
written agreement signed by Employee and the Company’s Chief Executive Officer
or such other person as the Company’s Board of Directors may designate
specifically for this purpose.
     20. Provisions Separable. The provisions of this Agreement are independent
of and separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be invalid or unenforceable in whole or in part.
     21. Compliance With Code Section 409A.
          (a) Notwithstanding anything to the contrary herein, no payment
otherwise required to be made hereunder that the Company determines constitutes
a payment of nonqualified deferred compensation for purposes of Section 409A of
the Code shall be paid to Employee at a time or in a manner that will be treated
as a violation of the distribution rules of Code Section 409A(a)(2) and no
alternative form of payment of such amount(s) shall be permitted to be made
hereunder if such alternative benefit form would violate any of the

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requirements of Code Section 409A(a)(3) or (4) relating to acceleration of
benefits and changes in time and form of distribution (taking into account any
regulations or other guidance issued by Treasury or the Internal Revenue Service
with regard to these Code provisions as may be in effect from time to time).
          (b) The intent of this provision is to ensure that no additional tax
liabilities are imposed on any payments or benefits provided hereunder pursuant
to Code Section 409A, and may require, for example, a delay in commencement of
payments until six months after Employee’s termination of employment with the
Company. In the event any payment is delayed by reason of this Paragraph 21,
such payment shall, when made, be increased by an amount representing “interest”
from the date payment would otherwise have been made, through the date payment
is actually made, calculated using the Company’s cost of borrowing as the
interest rate, as determined by the Company at its discretion.
     22. Consolidation, Merger or Sale of Assets. Nothing in this Agreement
shall preclude the Company from consolidating or merging into or with, or
transferring all or a substantial portion of its assets to, another entity that
assumes this Agreement and all obligations and undertakings of the Company
hereunder. Under such a consolidation, merger or transfer of assets and
assumption, the term “Company” as used herein, shall mean such other entity and
this Agreement shall continue in full force and effect.
     23. Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received when delivered (personally, by
courier service such as Federal Express, or by messenger) or when deposited in
the United States mails, registered or certified mail, postage pre-paid, return
receipt requested, addressed as set forth below:

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          (a) If to the Company:
The Bon-Ton Stores, Inc.
2801 East Market Street
York, PA 17402
Attention: Chief Executive Officer

with a copy to:

Henry F. Miller, Esquire
Wolf, Block, Schorr and Solis-Cohen LLP
1650 Arch Street
22nd Floor
Philadelphia, PA 19103-2097
          (b) If to Employee:
James M. Zamberlan
5746 Chestnut Ridge Drive
Cincinnati, OH 45401
     In addition, notice by mail shall be by air mail if posted outside of the
continental United States. Any party may alter the address to which
communications or copies are to be sent by giving notice of such change of
address in conformity with the provisions of this paragraph for the giving of
notice.
     24. No Attachment. Except as required by law, no right to receive payments
under this Agreement shall be subject to anticipation, commutation, alienation,
sale, assignment, encumbrance, charge, pledge, or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
     25. Binding Agreement. This Agreement shall be binding upon, and shall
inure to the benefit of the Company and its successors, representatives, and
assigns and shall be binding upon Employee, his heirs, executors and legal
representatives.

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     26. Assignment by Employer. Employee consents to the assignment of this
Agreement to any purchaser of the Company or a substantial portion of its
assets.
     27. No Assignment by Employee. Employee acknowledges that the services to
be rendered by him are unique and personal. Accordingly, Employee may not assign
or delegate any of his rights or obligations hereunder, except that he may
assign certain rights hereunder if agreed to in writing by the Chief Executive
Officer.
     28. Indulgences. Neither the failure nor any delay on the part of either
party to exercise any right, remedy, power or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy, power or privilege preclude any other or further exercise of
the same or of any other right, remedy, power or privilege, nor shall any waiver
of any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to
any other occurrence. No waiver shall be effective unless it is in writing and
is signed by the party asserted to have granted such waiver.
     29. Paragraph Headings. The paragraph headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
     30. Controlling Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement, (including, without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania,
notwithstanding any conflict-of-laws doctrines of such state or any other
jurisdiction to the contrary, and without the aid of any canon, custom or rule
of law requiring construction against the draftsman.

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     31. Chief Employee Officer. In the absence of the Chief Executive Officer,
the decisions of Chief Executive Officer hereunder may be made by such other
person as designated by the Company’s Board of Directors.
     32. Execution in Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding when
any number of counterparts hereof, individually or taken together, shall bear
the signatures of all of the parties hereto.
     IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
duly executed and delivered, in Pennsylvania, this Agreement as of the date
first above written.

         
THE BON-TON STORES, INC.
       
 
       
By: /s/ Byron Bergren
 
Byron Bergren
      Date: September 13, 2006
Chief Executive Officer
       
 
       
EMPLOYEE
       
 
       
/s/ James M. Zamberlan_
 
James M. Zamberlan
      Date: September 12, 2006

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