EXHIBIT 10.7

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is entered into on the date first set
forth below by and between THE BON-TON STORES, INC., a Pennsylvania corporation
(the “Company”), and LUIS FERNANDEZ (the “Employee”) (collectively referred to
as the “Parties”).

 

INTRODUCTION

 

WHEREAS, the Company desires to employ Employee as its Chief Marketing Officer
subject to the terms and conditions of this Agreement;

 

WHEREAS, Employee agrees to accept employment with the Company subject to the
terms and conditions of this Agreement; and

 

NOW THEREFORE, in consideration of the mutual promises and covenants contained
herein, the adequacy of which are acknowledged by both the Company and Employee,
and intending to be legally bound hereby, the Parties agree as follows:

 

SECTION ONE

POSITION AND RESPONSIBILITIES

 

A.                                The Company hereby agrees to employ Employee
subject to the general supervision, orders, advice and direction of the Company,
and subject to the terms of this Agreement.  Employee hereby accepts employment
by the Company as the Company’s Executive Vice-President, Chief Marketing
Officer.  Employee will perform duties as determined by the Chief Executive
Officer of the Company.  Employee shall report directly to the Chief Executive
Officer or such other senior executive officer of the Company designated by the
Chief Executive Officer or the person performing the duties of the Chief
Executive Officer.  In addition, Employee shall be a member of the Management
Committee and the Operating Committee.

 

B.                                    Throughout the term of this Agreement (as
defined below), Employee shall devote his entire working time, energy,
attention, skill and best efforts to the affairs of the Company and to the
performance of his duties hereunder in a manner that will faithfully and
diligently further the business and interests of the Company.  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 comply with the Company’s
Code of Ethical Standards and Business Practices and all employment policies of
general applicability.  Employee further agrees that he will maintain the
Company’s high standards in dealing with vendors, customers, consultants and
employees in an ethical, honest, courteous and respectful manner.

 

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SECTION TWO

TERM

 

This Agreement shall become effective on May 7, 2012, provided that this
Agreement has been signed by Employee and the Company and the terms set forth
herein are approved by the Human Resources and the Compensation Committee
(“HRCC”) of the Company’s Board of Directors.  The Term of this Agreement shall
be from May 7, 2012 until May 6, 2015, unless sooner terminated in accordance
with Section Five (5), below.

 

SECTION THREE

PLACE OF PERFORMANCE

 

Employee shall be based at the office of the Company in Milwaukee, Wisconsin,
except for travel required for Company business.

 

SECTION FOUR

COMPENSATION AND BENEFITS

 

A.                                    Base Salary.  Employee shall receive a
Base Salary at the annual rate of $370,000.00 commencing May 7, 2012.  This Base
Salary, less taxes and normal deductions, shall be paid to Employee in bi-weekly
installments in accordance with the Company’s regular executive payroll
practices.  The Base Salary and Employee’s performance may be reviewed from time
to time during the Term by the Company. Should the Base Salary be increased,
such Base Salary shall not be decreased other than for “cause” (as defined
below).

 

B.                                    Signing Bonus.  Upon execution of this
Agreement and approval by the HRCC, Employee will be eligible for a Signing
Bonus in the total amount of $60,000.00.  This amount shall be paid to Employee
as soon as administratively possible following his employment date. In the event
Employee is Discharged with Cause, Resigns without Good Reason, dies or the
Agreement terminates as a result of Employee’s disability or incapacity (as
those terms are defined in Section Five (5), below) prior to two (2) years from
the effective date of this Agreement, Employee understands and agrees that he
will reimburse the Company a pro-rata share of the Signing Bonus.  The Signing
Bonus payment shall be paid to Employee in a lump sum, less applicable taxes,
deductions and withholdings.

 

C.                                    Annual Bonus.  Employee will participate
in The Bon-Ton Stores, Inc. Cash Bonus Plan (the “Cash Bonus Plan”) in
accordance with its present terms and conditions or as amended in the Company’s
discretion. During the Term, for each fiscal year of the Company beginning with
fiscal year 2012, Employee shall be eligible to earn a target Annual Bonus of
50% of Employee’s Base Salary in effect on the last day of the relevant fiscal
year.  A threshold bonus and a maximum bonus shall be as determined from time to
time by the Company consistent with other similar senior executives under the
Cash Bonus Plan.  The HRCC shall retain discretion with respect to the Annual
Bonus as is provided under the terms of the Cash Bonus Plan.  The performance
measures and weighting of these performance measures shall be determined by the
HRCC consistent with its determinations for other senior executives under the
Cash Bonus Plan.

 

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Nothing herein is a guarantee that an Annual Bonus will be paid.  To the extent
reasonably practicable, the Annual Bonus shall be computed within 90 days
following the close of the Company’s relevant Fiscal Year and paid within 30
days of its computation.  Employee must be employed on the last day of the
Company’s 2012 Fiscal Year to be eligible to receive a Cash Bonus.

 

D.                                    Stock Awards.  Upon the effective date of
this Agreement, Employee shall be granted 10,000 shares of common stock of the
Company and 10,000 performance-based restricted shares of common stock of the
Company.  The terms and conditions of the performance-based restricted shares
are governed by the terms of The Bon-Ton Stores, Inc. Restricted Stock
Agreement- Performance Shares, attached hereto as Attachment A. (the “Stock
Agreement”).

 

E.                                     Benefits.  During the Term, 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 insurance
contract(s) or agreement(s).  Employee shall be eligible to participate in the
Company’s retirement contribution plan, deferred compensation plan, discount
program, vacation plan, long-term disability plan and employee benefit programs
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 Payment under this Agreement for
which Employee may be eligible, shall be in lieu of any severance benefits
otherwise provided by the Company pursuant to any policy, plan or practice of
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 to the Company’s executives participating
in such insurance, benefit, program or plan generally.  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 made available to all executive employees.  With respect to Employee’s
participation in the Company’s vacation plan, Employee shall be eligible for
four (4) weeks of vacation per calendar year, or greater if pursuant to Company
policy, which vacation entitlement shall be pro-rated in any calendar year in
which Employee does not work the entire calendar year.

 

F.                                      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.

 

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SECTION FIVE

TERMINATION OF EMPLOYMENT

 

Notwithstanding any other provision of this Agreement, Employee’s employment
under this Agreement may be terminated immediately in any of the following
circumstances:

 

A.                                    Disability or Incapacity.  In the event of
Employee’s physical or mental inability to perform his essential duties and/or
functions as defined by the Company, 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.

 

B.                                    Death of Employee.

 

C.                                    Resignation for Good Reason.  Employee may
resign for “Good Reason” (as defined below) upon 30 days’ written notice by
Employee to the Company.  The Company, in its discretion, may waive Employee’s
obligation to work during this 30-day notice period and terminate his employment
immediately.  In the event that the Company’s chooses to waive the 30-day notice
period, the Employee shall be paid his salary that would otherwise 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: (i) any reduction in Employee’s
Base Salary during the Term; except as provided in this Agreement; (ii) any
reduction in Employee’s potential bonus target percentage amounts; (iii) any
required relocation of Employee from Milwaukee, Wisconsin; and (iv) any
substantial breach by the Company of any material provision of this Agreement
(unrelated to a change of position/title, duties, responsibilities and/or
supervisor); and (v) any reduction in the Employee’s officer level.

 

Notwithstanding the foregoing, the acts or omissions described above shall not
constitute “Good Reason” unless Employee: (i) provides the Company with written
notice, within ninety (90) days of learning of such acts or omissions that he
asserts constitute “Good Reason,” detailing the matters he asserts to be “Good
Reason” and notifying the Company of his intention to resign for Good Reason if
the Company does not cure them within thirty (30) days of receiving the written
notice; and (ii) actually resigns thereafter (and within sixty (60) days of the
end of the cure period) assuming the Company has not cured them.

 

D.                                    Resignation without Good Reason. 
Notwithstanding any other provision of this Agreement, Employee’s employment
under this Agreement may be terminated by Employee without Good Reason.

 

E.                                     Discharge for Cause.  The Company may
discharge Employee at any time for “Cause,” which shall be limited to:
(i) Employee’s material and serious breach or neglect of Employee’s
responsibilities; (ii) willful violation or disregard of standards of conduct
established by law; (iii) willful violation or disregard of the standards of
conduct set forth in the Company’s Code of Ethical Standards and Business
Practices and all Company employment policies of general applicability;
(iv) fraud, willful misconduct, misappropriation of funds or other

 

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dishonesty; (v) disclosure of the Company’s confidential information;
(vi) conviction of a crime of moral turpitude; (vii) any misrepresentation made
in this Agreement or any employment documentation; or (viii), 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).

 

F.                                  Discharge without Cause.  Notwithstanding
any other provision of this Agreement, Employee’s employment under this
Agreement may be terminated by the Company at any time without Cause.

 

G.                                    Change in Control.  In the event of a
Change of Control of the Company, provided the Company or Surviving Company (as
defined below) continues to pay Employee his Base Salary and provide materially
comparable benefits, Employee shall be prohibited from resigning for Good Reason
for a period of six (6) months following the Change in Control.  For purposes of
this Agreement, a Change of Control shall be deemed to occur if:

 

1.                                      any person who is not an affiliate of
the Company on the date hereof becomes a beneficial owner of a majority of the
outstanding voting power of the Company’s capital stock;

 

2.                                      the shareholders of the Company approve
and there is consummated any plan of liquidation providing for the distribution
of all or substantially all of the Company’s assets;

 

3.                                      there is consummated a merger,
consolidation or other form of business combination involving the Company, or,
in one transaction or a series of related transactions, a sale of all or
substantially all of the assets of the Company, unless, in any such case:

 

(a)                                 the business of the Company is continued
following such transaction by a resulting entity (which may be, but need not be,
the Company) (the “Surviving Company”); and

 

(b)                                 persons who were the beneficial owners of a
majority of the outstanding voting power of the Company immediately prior to the
completion of such transaction beneficially own, by reason of such prior
beneficial ownership, a majority of the outstanding voting power of the
Surviving Company (or a majority of the outstanding voting power of the direct
or indirect parent of the Surviving Company, as the case may be) immediately
following the completion of such transaction; or

 

4.                                      any person beneficially owns shares of
the Company’s capital stock possessing a greater voting power than held in the
aggregate by M. Thomas Grumbacher, any member of his family, any trust for the
primary benefit or

 

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M. Thomas Grumbacher or any member of his family, and any charitable foundation
of which M. Thomas Grumbacher is a founder or co-founder with his wife
(collectively, the “Grumbacher Affiliates”), or if the Grumbacher Affiliates
control less than twenty percent (20%) of the outstanding voting power of the
Company’s capital stock.

 

For purposes of this Section, the terms “person,” “beneficial owner,”
“beneficial ownership,” “affiliate” and “control” shall have the meanings
ascribed to such terms under Sections 13(d) and 3(a)(9) and Rule 13d-3 under the
Securities Exchange Act of 1934 as amended, and Rule 501 under the Securities
Act of 1933 as amended, as applicable.

 

SECTION SIX

PAYMENTS UPON TERMINATION

 

A.                                    Discharge Without Cause or Resignation for
Good Reason.  If Employee is Discharged without Cause or resigns for Good Reason
during the Term, Employee shall receive:

 

1.                                      severance pay equal one (1) times his
annual Base Salary (the “Severance Payment”) in effect at the time of
termination, less applicable taxes, withholdings and deductions; and

 

2.                                      be paid a stipend equal to an amount
that represents the amount Employee pays to the Company as a monthly COBRA
premium for the insurance coverage for the group medical and dental plans as
would be applicable to Employee at the date of termination of employment for one
(1) year from the date of termination, which stipend shall be paid in the same
time and manner as the Severance Payment (“the Stipend”). This Stipend is
taxable income to the Employee and is subject to taxes and withholdings as
required.

 

The Severance Payment and Stipend shall be payable in bi-weekly installments in
accordance with the Company’s payroll practices commencing as soon as
practicable after Employee has signed, 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 (the “Release”).  All payments shall be made as though payments had
commenced as of the payroll period immediately following the date of Employee’s
separation from service; provided, however, that any payments that would have
been made prior to the date the Release becomes irrevocable shall be paid as
soon as practicable following such date; and provided, further, that in the
event any payments under this Section Six (6).A. that are determined to be
payments of nonqualified deferred compensation that are subject to Code
Section 409A that would be in violation of Code
Section 409A(a)(2)(B)(i) (regarding payments upon separation from service of a
“specified employee”) if paid when otherwise payable shall be deferred to the
date which is six (6) months following the Employee’s separation from service.

 

If, during the course of the time period during which the Severance Payment is
paid, Employee becomes associated with any other person, firm, or corporation,
whether as a principal,

 

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agent, employee, consultant, stockholder, partner, officer, member, director,
sole proprietor, or otherwise, for which he receives any remuneration, the
Severance Payment will be reduced by the amount of salary, wages, consulting
fees or any other remuneration received by Employee from his new association. 
In the event that the remuneration received by Employee equals or exceed the
amount of the Severance Payment, the Severance Payment shall cease immediately.

 

In the event that Employee becomes associated with any other person, firm, or
corporation, whether as a principal, agent, employee, consultant, stockholder,
partner, officer, member, director, sole proprietor, or otherwise, and as a
result becomes entitled to receive healthcare coverage, the Company’s
reimbursement of the Stipend shall cease immediately.  Employee understands and
agrees that if he does become eligible for healthcare coverage under any plan,
he will enroll in such plan, and will not decline such coverage.

 

In the event the Employee is eligible for the Severance Payment and Stipend
pursuant to this Section, the Severance Payment and Stipend shall be paid in
lieu of any other severance or separation payments to which Employee may be
entitled by reason of any other policy or agreement with the Company.  Any
Annual Bonus to which Employee may be entitled shall be paid in strict
accordance with the terms and conditions of the Cash Bonus Plan.

 

B.                                    Death.  In the event of his death prior to
the expiration of the Term, Employee’s estate shall be entitled only to
Employee’s Base Salary for any days worked prior to his death, amounts payable
on account of Employee’s death under any insurance or benefit plans or policies
maintained by the Company, and any vested benefits to which Employee is entitled
under the Company’s stock option and employee benefit plans in accordance with,
to the extent provided in, and subject to the restrictions and payout schedules
contained in those plans.  Employee acknowledges specifically that, upon his
death prior to the expiration of the Term, the Company is not obligated to his
estate for, and he is not entitled to, the Severance Payment and Stipend.  Any
Annual Bonus to which Employee may be entitled shall be paid in strict
accordance with the terms and conditions of the Cash Bonus Plan.

 

C.                                    Disability or Incapacity.  On termination
for disability or incapacity, Employee’s estate shall be entitled only to his
Base Salary for any days worked prior to the date of termination, amounts
payable on account of disability or incapacity under any insurance or benefit
plans or policies maintained and any vested benefits to which Employee is
entitled under the Company’s stock option and employee benefit plans in
accordance with, to the extent provided in, and subject to the restrictions and
payout schedules contained in those plans.  Employee acknowledges specifically
that, upon his termination for disability or incapacity, he is not entitled to,
the Severance Payment and Stipend.  Any Annual Bonus to which Employee may be
entitled shall be paid in strict accordance with the terms and conditions of the
Cash Bonus Plan.

 

D.                                    Discharge for Cause.  If Employee is
Discharged for Cause or resigns without Good Reason, Employee shall be entitled
only to his Base Salary for any days worked through the date of termination and
any vested benefits to which Employee is entitled under the Company’s stock
option and employee benefit plans in accordance with, to the extent provided in,
and subject to the restrictions and payout schedules contained in those plans. 
Employee acknowledges specifically that, upon his termination for Cause or his
resignation without Good Reason, he is not

 

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entitled to the Severance Payment and Stipend.  Any Annual Bonus to which
Employee may be entitled shall be paid in strict accordance with the terms and
conditions of the Cash Bonus Plan.

 

E.                                     Change in Control.  In lieu of the
Section Six (6).A., above, the provisions of this Section (6).E. shall be
applicable if Employee (i) is discharged without Cause following and within two
(2) years of the Change of Control; or (ii) resigns from the Company with Good
Reason after the expiration of six (6) months following the Change of Control
and within two (2) years following the Change of Control (unrelated to a
discharge with Cause).

 

1.                                      Options and Restricted Shares.  To the
extent that they have not previously vested, Employee’s options and restricted
stock shall vest in the event that Employee: (i) is discharged without Cause
following and within two (2) years of the Change of Control; or (ii) resigns
from the Company with Good Reason after the expiration of six (6) months
following the Change of Control and within two (2) years following the Change of
Control (unrelated to a discharge with Cause).

 

Exception: Employee’s options and restricted shares shall vest immediately upon
a Change of Control in the event that it is contemplated that the Company’s
common stock will not remain in existence or be converted to equity in the
Surviving Company upon the Change of Control.

 

2.                                      Change of Control Payment.  Employee
shall receive a “Change of Control Payment,” pursuant to the terms and
conditions set forth in Section 6.E.4., below, in the event that Employee:
(i) is discharged without Cause following and within two (2) years of the Change
of Control; or (ii) resigns from the Company with Good Reason after the
expiration of six (6) months following the Change of Control and within two
(2) years following the Change of Control (unrelated to a discharge with Cause).

 

The Change of Control Payment shall be equal to the lesser of:

(a)         One and one-half (1 ½) times the sum of the following:

i.                  Employee’s average Base Salary paid over the most recently
completed three (3) W-2 tax years prior to the Employee’s termination; plus

ii.               the average Cash Bonus (from the Cash Bonus Plan) paid to the
Employee over the Employee’s most recently completed three (3) W-2 tax years
prior to the Employee’s termination; or

 

(b)         The 280(G) Permitted Payment as described in Paragraph E.3 below.

 

3.                                      280(G) Permitted Payment. 
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 Code, would be at least three (3) times the “base amount”
determined under Code Section 280G, then the “280G Permitted Payment” shall be
the maximum amount

 

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that may be paid as a Change of Control Payment under this Section such that the
aggregate present value of such “parachute payments” to the Employee is less
than three (3) 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
(3) 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 (3) 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 acceptable to
the Employee.

 

4.                                      Terms and Conditions of Change of
Control Payment or 280G Permitted Payment.  The Change in Control Payment or
280G Permitted Payment shall be payable in bi-weekly equal installments in
accordance with the Company’s payroll practices commencing as soon as
practicable after the employee has signed, 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 (the “Release”).  All payments shall be made as though payments had
commenced as of the payroll period immediately following the date of Employee’s
separation from service; provided, however, that any payments that would have
been made prior to the date the Release becomes irrevocable shall be paid as
soon as practicable following such date; and provided, further, that in the
event any payments under this Section Six (6).E. that are determined to be
payments of nonqualified deferred compensation that is subject to Code
Section 409A that would be in violation of Code
Section 409A(a)(2)(B)(i) (regarding payments upon separation from service of a
“specified employee”) if paid when otherwise payable shall be deferred to the
date which is six (6) months following the Employee’s separation from service.

 

In the event that Employee is eligible for the Change in Control Payment or 280G
Permitted Payment pursuant to this Section (6).E., such payment shall be paid in
lieu of any other bonus or severance or separation payments to which Employee
may be entitled by reason of any other provision of this Agreement, or policy or
agreement with the Company.

 

Any Annual Bonus to which Employee may be entitled shall be paid in strict
accordance with the terms and conditions of the Cash Bonus Plan.

 

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F.                                      Vested Benefits.  Nothing in this
Section Six (6) shall be deemed to limit or release Employee’s right to any
vested benefits to which he is otherwise entitled under the Company’s stock
options and employee benefit plans in accordance with, to the extent provided
in, and subject to the restrictions and payout schedules contained in these
plans.

 

SECTION SEVEN

TRADE SECRETS, CONFIDENTIAL INFORMATION AND EMPLOYEE WORKS

 

In the course of Employee’s employment with the Company, Employee has had access
to and developed the Company’s sensitive and valuable trade secrets and
confidential information, the misuse, misapplication and/or disclosure of which
may cause substantial and possibly irreparable damage to the business and asset
value of the Company.  Employee further recognizes and acknowledges that the
Company is engaged in activities which involve, and will in the future continue
to involve, the use of skilled experts and the expenditure of substantial
amounts of time and money.  As a result of such investments of skill, time, and
money, the Company has developed certain Trade Secrets and Confidential
Information which give the Company significant advantages over its competitors. 
Due to the nature of Employee’s employment with the Company, Employee will
continue to have access to and/or will participate in the development of Trade
Secrets and Confidential Information.  These constitute valuable, special and
unique assets of the Company.  Accordingly, by signing below, Employee accepts
and agrees to be bound by the following:

 

A.                                    For purposes of this Section Seven (7),
the following definitions shall apply:

 

1.                                      “Trade Secrets” shall mean information,
without regard to form, including, but not limited to, technical or
non-technical data, a formula, a pattern, a compilation, a program, a device, a
method, a technique, a drawing, a process, procedures, financial data, financial
plans, product plans, or a list of actual or potential customers, consultants,
or vendors which is not commonly known by or available to the public and which
information (i) derives economic value, actual or potential, from not being
generally known to and not being readily ascertainable by proper means by other
persons who can obtain economic value from its disclosure or use; and (ii) is
the subject of efforts that are reasonable under the circumstances to maintain
its secrecy.  Trade Secrets also shall include, without limitation, any
information described in this Section (7)A.1. which the Company obtains from
another party which the Company treats as proprietary or designates as Trade
Secrets, whether or not owned or developed by the Company.  Trade Secrets may
include (to the extent that they otherwise comport with the definition set forth
herein), information with respect to the Company’s customers, consultants or
vendors; the fees it obtains or has obtained from services rendered; its manner
of operations; its plans, procedures and/or processes; customer, consultant or
vendor lists; information regarding the Company’s employees, accounts, loans,
sales, marketing methods, financial condition, systems, software; accounting
methods, policies, plans, procedures, strategies or techniques; research or
development projects or results; and/or other confidential and proprietary data.

 

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2.                                      “Confidential Information” shall mean
any data or information, other than Trade Secrets, that is of value to the
Company and is not generally known to competitors of the Company.  To the extent
it is consistent with the foregoing, Confidential Information includes, but is
not limited to, lists of any information about the Company’s business methods,
and contracts and contractual relations with the Company’s customers, vendors,
consultants and employees to the extent any of the foregoing information is not
considered a Trade Secret under Section (7)A.1., above.  Confidential
Information also shall include, without limitation, any information described in
this Section which the Company obtains from another party which the Company
treats as proprietary or designates as confidential information whether or not
owned or developed by the Company.  Confidential Information may include (to the
extent that they otherwise comport with the definition set forth herein),
information with respect to the Company’s customers or vendors; the fees it
obtains or has obtained from services rendered; its manner of operations; its
plans, procedures and/or processes; customer, consultant or vendor lists;
information regarding the Company’s employees, accounts, loans, sales, marketing
methods, financial condition, systems, software; marketing and sales promotion
plans and strategies; accounting methods, policies, plans, procedures,
strategies or techniques; research or development projects or results; and/or
other confidential and proprietary data.

 

3.                                      “Employee Works” shall mean any and all
works of authorship, code, inventions, discoveries, business methods,
compilations and work product, whether or not patentable or eligible for
copyright, and in whatever form, which Employee creates, makes or develops
during the time that he is employed by the Company, whether (i) on or outside of
the premises of any Company office, (ii) during or outside regular business
hours with the Company, and/or (iii) using the Company’s resources or equipment
or his own personal equipment, that relate in any way to services and/or works
being provided by the Company during the time that Employee is employed by the
Company and/or relate in any way to services and/or works that the Company is in
the process of developing during the time that Employee is employed by the
Company.

 

4.                                      Notwithstanding the foregoing, Trade
Secrets and Confidential Information shall not include any materials or
information to the extent that is (i) is or becomes publicly known or generally
utilized by others engaged in the same business or activities in which the
Company utilized, developed, or otherwise acquired such information other than
by any unauthorized disclosure; or (ii) is known to Employee prior to his
employment with the Company having been lawfully received from parties other
than the Company; or (iii) is furnished to others by the Company with no
restrictions on disclosure.  Failure to mark any of the Trade Secrets or
Confidential Information as confidential shall not affect their status as Trade
Secrets or Confidential Information under this Agreement.

 

B.                                    For the reasons set forth above, Employee
covenants and agrees to all of the following:

 

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1.                                      During the term of Employee’s employment
with the Company, and any time after the termination of that employment
relationship, whether such termination is voluntary or involuntary, Employee
will not, except as expressly authorized or directed by the Company, use, copy,
duplicate, transfer, transmit, disclose, or permit any unauthorized person
access to, any Trade Secrets or Confidential Information belonging to the
Company, any of the Company’s customers or vendors, and/or any related third
party.

 

2.                                      Upon request of the Company, and in any
event upon Employee’s termination of employment with the Company, whether such
termination is voluntary or involuntary, Employee agrees to deliver to the
Company all materials, including, but not limited to, memoranda, notes, records,
tapes, documentation, discs, manuals, files, other documents, and all copies
thereof in any form (“the Company Property”) that belongs to the Company or that
concerns or contains Trade Secrets, Confidential Information, or Employee Works
that are in his possession, whether made or compiled by Employee, furnished to
Employee or otherwise obtained by him or in his possession or control.

 

3.                                      All Employee Works shall be the sole and
exclusive property of the Company.  Employee will promptly disclose to the
Company any such Employee Works and shall execute and deliver such confirmatory
assignments, instruments, or documents as the Company deems necessary or
desirable without requiring the Company to provide any further consideration
therefore.  Employee agrees to and hereby does assign to the Company all right,
title, and interest in and to any and all Employee Works, including all
worldwide copyrights, patent rights, and all Trade Secrets and all Confidential
Information embodied therein.  Employee waives any and all rights that he may
have in any Employee Works, including, but not limited to, the right to
acknowledgment as author.

 

C.                                    The intent of this Section Seven (7) is to
provide the Company with all remedies afforded to it under applicable law,
including, but not limited to, those remedies available under the Uniform Trade
Secrets Act.

 

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SECTION EIGHT

NON-COMPETITION AND NON-SOLICITATION

 

Employee acknowledges and agrees that during his employment with the Company, he
will be, and has been, introduced to and otherwise have contact with the
Company’s customers, consultants, independent contractors and vendors.  Employee
acknowledges and agrees that the Company’s relationship with its vendors,
consultants, independent contractors and customers (hereinafter referred to as
the “Company Contacts”) is of tremendous value to the Company, and that the
Company is allowing Employee access to these Company Contacts for the single and
sole purpose of furthering the Company’s business relationship with these
Company Contacts.  Accordingly, in addition to any other limitation imposed by
law and/or this Agreement, Employee agrees as follows:

 

A.                                    During the course of Employee’s employment
with the Company, and for a period of eighteen (18) months following the
termination of his employment with the Company (whether such termination is
voluntary or involuntary), Employee will not, either on his own behalf or on
behalf of any other person, firm, or corporation, whether as a principal, agent,
employee, consultant, independent contractor, stockholder, partner, officer,
member, director, sole proprietor, or otherwise, contact or solicit (either
directly or indirectly) any of the Company’s Contacts for the purpose of
providing services to the Company’s Contacts that are the same or similar to any
services provided by the Company.

 

B.                                    During the course of Employee’s employment
with the Company, and for a period of eighteen (18) months following the
termination of Employee’s employment with the Company (whether such termination
is voluntary or involuntary), Employee will not, either on his own behalf or on
behalf of any other person, firm, or corporation, whether as a principal, agent,
consultant , independent contractor, employee, stockholder, partner, officer,
member, director, sole proprietor, or otherwise, provide services (either
directly or indirectly) to any of the Company’s Contacts that are the same or
similar to any services provided by the Company.

 

C.                                    For a period of eighteen (18) months
following the termination of Employee’s employment with the Company (whether
such termination is voluntary or involuntary), Employee will not, either on his
own behalf or on behalf of any other person, firm, or corporation, whether as a
principal, stockholder, partner, consultant, employee, independent contractor,
or sole proprietor provide services on behalf of, 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 Macy’s, Dillard’s Inc.,
Kohl’s Corporation, Belk, Inc. and J.C. Penney, Inc. or the affiliates and
successors of each of them.

 

D.                                    Employee acknowledges specifically that he
has been provided adequate and reasonable consideration for the promises made by
him within Section Eight (8).  The provisions of this Section Eight (8) shall
survive the cessation of Employee’s employment for any reason, as well as the
expiration of this Agreement at the end of its term or at any time prior
thereto.

 

E.                                     Definition.  For purposes of this within
Section Eight (8), the term “the Company Contacts” means any individual or
entity (a) from whom or which the Company received, prior to

 

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the termination of Employee’s employment with the Company, a monetary fee or
other payment in exchange for services rendered;  (b) for whom or which the
Company agreed prior to the termination of Employee’s employment to perform
services in exchange for a monetary fee; (c) with whom or which Employee
personally met during the course of his employment with the Company for the
purpose of soliciting business on behalf of the Company; (d) and/or who or which
was being actively solicited by any Company employee during the twelve (12)
month period immediately preceding the termination of Employee’s employment.

 

SECTION NINE

RECRUITMENT OF EMPLOYEES

 

Employee acknowledges and agrees that, as a result of his employment with the
Company, he has been, and will be, introduced to and otherwise have contact with
the Company’s employees.  Employee acknowledges and agrees that the Company’s
relationship with its employees is of tremendous value to the Company, and that
the Company allows Employee access to these employees for the single and sole
purpose of furthering its business objectives.  Accordingly, in addition to any
other limitation imposed by law and/or this Agreement, Employee agrees that
during the period of his employment with the Company and for a period of
eighteen (18) months following the termination of his employment with the
Company (whether voluntary or involuntary), Employee will not recruit or
otherwise encourage any of the Company’s employees (including temporary
employees) to seek employment with any other entity.  For purposes of this
Section Nine (9), the term “employees” includes individuals who were employed by
the Company within six (6) months prior to the date of his termination.

 

SECTION TEN

REASONABLENESS

 

Employee acknowledges that he has carefully read and considered Sections Seven
(7), Eight (8) and Nine (9), above and, having done so, agrees that the
restrictions set forth in these Sections are fair and reasonable, and are
legitimately required for the protection of the Company’s business interests and
goodwill.  In the event that any part or portion of Sections Seven (7), Eight
(8) and/or Nine (9) is deemed by a court of competent jurisdiction to be
overbroad or otherwise invalid, Employee authorizes said court to enforce the
Section(s) at issue to the fullest extent possible to protect the interests of
the Company.

 

SECTION ELEVEN

COMPANY’S REMEDIES FOR BREACH

 

A.                                    Employee recognizes and agrees that
damages in the event of a breach by him of Sections Seven (7), Eight (8) and/or
Nine (9), above, would be difficult, if not impossible, to ascertain, and
Employee therefore agrees that, if such breach occurs, the Company, in addition
to and without limiting any other remedy or right it may have, shall have the
right to an injunction or other equitable relief, in any court of competent
jurisdiction, enjoining any such breach, and Employee hereby waives any and all
defenses he may have on the grounds of lack of jurisdiction or competence of the
court to grant such an injunction or other equitable relief.  Employee also

 

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agrees that the Company shall not be required to post any bond or surety in
order to obtain such injunction or relief.  The existence of this right shall
not preclude any other rights and remedies at law or in equity which the Company
may possess, including, but not limited 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.  Further, in
the event that Employee breaches any provision of Sections Seven (7), Eight
(8) and/or Nine (9), above, and the Company successfully seeks to obtain
compliance therewith and/or damages, Employee will be responsible for the
reasonable costs incurred thereby by the Company, including reasonable
attorneys’ fees.

 

B.                                    If Employee violates Sections Eight
(8) and/or Nine (9), above, and the Company brings legal action for injunctive
or other relief, the Company shall not, as a result of the time involved in
obtaining the relief, be deprived of the benefit of the full period of the
applicable restrictive period(s).  Accordingly, the covenants set forth in
Sections Eight (8) and/or Nine (9), above, shall be deemed to have the duration
specified therein, computed from the date the relief is granted, but reduced by
the time between the period when the restriction began to run and the date of
Employee’s first violation of the applicable covenant(s).

 

SECTION TWELVE

SUCCESSORS AND ASSIGNS

 

This Agreement shall be binding upon the parties to this Agreement and their
respective heirs, administrators, executors, successors and assigns.  For
purposes 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.  Employee consents to the assignment of this Agreement to any
purchaser of the Company.

 

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.

 

Nothing in this Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all 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 “the Company” as used herein, shall mean such
other entity and this Agreement shall continue in full force and effect.

 

SECTION THIRTEEN

TAX-RELATED ISSUES

 

A.                                    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.

 

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B.                                    Compliance With Code Section 409A.

 

1.                                      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 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).

 

2.                                      The intent of this provision is to
ensure that no additional lax 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 Section, 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.

 

SECTION FOURTEEN

ENTIRE UNDERSTANDING

 

This Agreement, the Cash Bonus Plan and the Restricted Stock Agreement (affixed
hereto as Attachment A) constitute the entire understanding between the Company
and Employee with respect to the subject matter hereof and supersedes all prior
and contemporary agreements and understandings, inducements or conditions,
express or implied, written or oral, between the Company and Employee.

 

SECTION FIFTEEN

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 Board may designate specifically for this purpose.

 

SECTION SIXTEEN

SEVERABILITY

 

In the event that any part of this Agreement shall be held unenforceable or
invalid, the remaining parts thereof shall nevertheless continue to be valid and
enforceable as though the

 

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invalid portions were not a part thereof.  In the event that any of the
provisions of Sections Eight (8) and/or Nine (9) relating to the time period
restricting Employee’s activities are found by a court of competent jurisdiction
to be unenforceable, then the period of time restricting Employee’s activities
as set forth in those Sections shall be deemed to be the maximum time period
which said court of competent jurisdiction deems valid and enforceable in any
jurisdiction in which such court of competent jurisdiction shall be convened.

 

SECTION SEVENTEEN

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
UPS, or by messenger) or when deposited in the United States mail, registered or
certified mail, postage pre-paid, return receipt requested, addressed as set
forth below:

 

A.

If to the Company:

 

 

 

The Bon-Ton Stores, Inc.

 

331 W. Wisconsin Avenue Milwaukee, WI 53203

 

Attention: Chief Executive Officer

 

 

 

with a copy to:

 

 

 

The Bon-Ton Stores, Inc.

 

2801 East Market Street York, PA 17402

 

Attention: General Counsel

 

 

B.

If to Employee:

 

 

 

Most current Employee address the Company has on file. Otherwise:

 

 

 

Luis Fernandez

 

7641 Cedar Elm Dr.  Irving, TX 75063

 

 

In addition, notice by mail shall be by air mail or courier 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 Section for the giving of
notice.

 

SECTION EIGHTEEN

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

 

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law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.

 

SECTION NINETEEN

WAIVER

 

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.

 

SECTION TWENTY

SECTION HEADINGS

 

The section headings in this Agreement are for convenience only, and, as such,
they form no part of this Agreement and shall not affect its interpretation.

 

SECTION TWENTY-ONE

GOVERNING LAW AND JURISDICTION

 

The validity, legality, and construction of this Agreement or of any of its
provisions shall be governed exclusively by the laws of the Commonwealth of
Pennsylvania.  If any part of this Agreement should be found by a court of
competent jurisdiction to be unenforceable in whole or in part, then Employee
agrees that such court may enforce this Agreement to the fullest extent
permissible under the law, and to the fullest extent necessary to carry out the
intentions of the Parties as set forth in this Agreement.  In the event a
dispute or claim should arise regarding this Agreement, jurisdiction and venue
of any such action shall be in York County, Pennsylvania.  In the event that the
Parties to this Agreement have diverse citizenship and/or the dispute at issue
involves a federal question of law, then jurisdiction and venue may
alternatively be in the United States District Court for the Middle District of
Pennsylvania.  Each of the parties expressly consents to the jurisdiction and
venue set forth in this Section Twenty-One.

 

SECTION TWENTY-TWO

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 one or more counterparts
hereof, individually or taken together, shall bear the signatures of all of the
parties hereto.

 

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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
written below.

 

 

THE BON-TON STORES, INC.

 

 

 

 

 

By:

/s/ Brendan L. Hoffman

 

 

 

Brendan L. Hoffman

 

Date: May 7, 2012

 

President and Chief Executive Officer

 

 

 

 

 

 

 

 

/s/ Luis Fernandez

 

 

 

Luis Fernandez

 

Date: May 7, 2012

 

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ATTACHMENT A

 

THE BON-TON STORES, INC.

 

RESTRICTED STOCK AGREEMENT

 

PERFORMANCE SHARES

 

This Restricted Stock Agreement — Performance Shares dated as of May 7, 2012
(“Agreement”), between The Bon-Ton Stores, Inc. (the “Company”) and Luis
Fernandez (“Grantee”). This Agreement is entered into pursuant to the provisions
of the Plan (as defined below) and in connection with a certain employment
agreement entered into by and between the Grantee and the Company as of
April        1, 2012, (the employment agreement, including all amendments
thereto being referred to herein as the “Employment Agreement”). All
determinations regarding the vesting of Restricted Stock hereunder shall be made
by the Committee (as defined below) consistent with the Plan’s provisions
regarding performance-based compensation.

 

1.                                      Definitions.  As used herein:

 

(a)                                 “Committee” means the Human Resources and
Compensation Committee of the Board of Directors of the Company, or such other
committee as may be designated by the Board of Directors pursuant to the Plan.

 

(b)                                 “Date of Grant” means May 7, 2012, the date
on which the Company awards the Restricted Stock (the “Award”):

 

(c)                                  “Forfeiture Date” means any date as of
which Grantee’s rights to all or any portion of the Restricted Stock are
forfeited pursuant to applicable provisions of this Agreement.

 

(d)                                 “Plan” means The Bon-Ton Stores, Inc. 2009
Omnibus Incentive Plan, as may be amended from time to time.

 

(e)                                  “Restricted Period” with respect to any
shares of Restricted Stock (as hereinafter defined) means the period beginning
on the Date of Grant and ending on the Vesting Date for such shares.

 

(f)                                   “Vesting Date” means the earlier of: 
(i) the date of Grantee’s termination of employment by reason of death or
disability, and (ii) the date as set in Paragraph 2 upon which the Restricted
Stock shall vest.

 

All other capitalized terms used herein shall have the meaning set forth in the
Plan except to the extent the context clearly requires otherwise.  This
Agreement is intended to be consistent with the terms of the Plan and is subject
in all regards to the terms of the Plan.  In any case where there is a conflict
between the terms of this Agreement and the terms of the Plan, the conflict
shall be resolved in favor of the Plan.

 

2.                                      Grant of Restricted Stock.  Subject to
the terms and conditions set forth herein and in the Plan, the Company grants to
Grantee Ten Thousand (10,000) shares of the Company’s Common Stock, par value
$.01 (the “Restricted Stock”).   The Restricted Stock is subject to vesting (or
forfeiture) on the basis of the achievement of certain performance goals
established for the Company’s 2012 fiscal year (i.e., the fiscal year ending
February 2, 2013. Except as otherwise provided herein, the Restricted Stock
shall vest (or be forfeited) as follows:

 

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(a) One hundred percent (100%) of the Restricted Stock become vested in the
event the Company achieves the target financial objectives set by the Committee
for Fiscal Year 2012.  These performance targets shall be determined by the
Committee consistent with the Plan and in the normal course (i.e., in the first
quarter of the Company’s 2012 fiscal year).  The Committee may also establish
vesting for less than one hundred percent of such shares based on achievement of
financial objectives below the target financial objective.

 

(b) The Vesting Date with respect to the Restricted Stock shall be as of
February 2, 2013, subject to the Committee’s certification in writing of its
determination of the level of achievement of the performance goals established
in connection with the vesting of such shares of Restricted Stock (without
regard to whether Grantee has remained employed by the Company or an Affiliate
of the Company after the Vesting Date).  Any portion of the Restricted Stock not
vested as a result of such determination shall be considered as having been
forfeited as of February 2, 2013.

 

(c) Any Restricted Stock that is not earned and vested on the effective date of
the Grantee’s termination of employment for any reason shall be forfeited (if
not already forfeited), subject to the following:

 

In the event that the Grantee, prior to February 2, 2013, is discharged without
Cause or resigns for Good Reason, the Restricted Stock shall become vested to
the same extent such Restricted Stock would have become vested had the Grantee
remained employed with the Company or an Affiliate of the Company through the
date that the Committee makes a determination regarding the achievement of the
performance goals established for the Company’s 2012 fiscal year; provided,
however, that no portion of the Restricted Stock shall be vested in such a
situation unless the Grantee executes a general release of claims consistent
with the release of claims as required under applicable provisions of the
Employment Agreement.

 

3.                                      Restrictions on Restricted Stock. 
Subject to the terms and conditions set forth herein and in the Plan, Grantee
shall not be permitted to sell, transfer, pledge or assign any Restricted Stock
during such shares’ Restricted Period.

 

4.                                      Lapse of Restrictions.  Subject to the
terms and conditions set forth herein and in the Plan, the restrictions on
Restricted Stock set forth in Paragraph 3 shall lapse on such shares’ Vesting
Date.

 

5.                                      Forfeiture of Restricted Stock.  Subject
to the terms and conditions set forth herein and in the Plan, if Grantee’s
employment with the Company or an Affiliate of the Company terminates during the
Restricted Period for any reason other than (i) death or disability, within the
meaning of the Code, (ii) Grantee’s resignation for Good Reason (as defined in
the Employment Agreement), or (iii) Grantee’s discharge without Cause (as
defined in the Employment Agreement), Grantee shall forfeit any Restricted Stock
still subject to restrictions as of the Forfeiture Date. Upon a forfeiture of
any shares of Restricted Stock as provided in this Paragraph 5, the shares of
Restricted Stock so forfeited shall be reacquired by the Company without
consideration.

 

6.                                      Rights of Grantee.  Except for the
restrictions set forth in Paragraph 3 and the provisions respecting dividends on
Restricted Stock set forth in Paragraph 7, during the Restricted Period Grantee
shall have all of the rights of a shareholder with respect to the Restricted
Stock, including the right to vote the Restricted Stock to the same extent that
such shares could be voted if they were not subject to the restrictions set
forth in this Agreement.

 

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7.                                      Dividends on Restricted Stock. No
dividends shall accrue or be paid to the Grantee with respect to any shares of
Restricted Stock for any period prior to the date such shares become vested.

 

8.                                      Change of Control of the Company.  In
the event of a Change of Control (as defined, from time to time, in the
Employment Agreement) on or before February 2, 2013, the Restricted Stock
Performance shall become vested without regard to the achievement of the goals
established for the Company’s 2012 fiscal year on the third month anniversary of
the date of the Change of Control, provided the Grantee remains employed by the
Company or an Affiliate of the Company or, if applicable, a successor company,
through such date, or on such earlier date following the Change of Control if
the Grantee is terminated by the Company or an Affiliate of the Company or, if
applicable, a successor company, without Cause.

 

9.                                      Notices.  Any notice to be given to the
Company shall be addressed to the General Counsel of the Company at its
principal executive office, and any notice to be given to Grantee shall be
addressed to Grantee at the address then appearing on the personnel records of
the Company or the Affiliate of the Company by which he or she is employed, or
at such other address as either party hereafter may designate in writing to the
other.  Any such notice shall be deemed to have been duly given when personally
delivered, sent by recognized courier service, or by other messenger, or when
deposited in the United States mail, addressed as aforesaid, registered or
certified mail, and with proper postage and registration or certification fees
prepaid.

 

10.                               Securities Laws.  The Committee may from time
to time impose any conditions on the Restricted Stock as it deems necessary or
advisable to ensure that all rights granted under the Plan satisfy the
conditions of Rule 16b-3 promulgated pursuant to the Securities Exchange Act of
1934, as amended.

 

11.                               Delivery of Shares.  Upon a Vesting Date, the
Company shall notify Grantee (or Grantee’s personal representative, heir or
legatee in the event of Grantee’s death) that the restrictions on the Restricted
Stock have lapsed, and shall, without payment from Grantee for such Restricted
Stock, upon such Grantee’s request deliver a certificate for such Restricted
Stock without any legend or restrictions, except for such restrictions as may be
imposed by the Committee, in its sole judgment, under Paragraph 10, provided
that no certificates for shares will be delivered to Grantee (or to his or her
personal representative, heir or legatee) until appropriate arrangements have
been made with the Company for the withholding of any taxes which may be due
with respect to such shares.  The Company may condition delivery of certificates
for shares upon the prior receipt from Grantee of any undertakings which it may
determine are required to assure that the certificates are being issued in
compliance with federal and state securities laws.  The right to payment of any
fractional shares shall be satisfied in cash, measured by the product of the
fractional amount times the Fair Market Value of a share on the Vesting Date.

 

12.                               Status of Restricted Stock.  The Restricted
Stock is intended to constitute property that is subject to a substantial risk
of forfeiture during the Restricted Period, and subject to federal income tax in
accordance with section 83 of the Code.  Section 83 generally provides that
Grantee will recognize compensation income with respect to the Restricted Stock
on such Restricted Stock’s Vesting Date in an amount equal to the then fair
market value of the shares for which restrictions have lapsed.  Alternatively,
Grantee may elect, pursuant to Section 83(b) of the Code, to recognize
compensation income for all or any part of the Restricted Stock at the Date of
Grant in an amount equal to the fair market value of the Restricted Stock
subject to the election on the Date of Grant.  Such election must be made within
30 days of the Date of Grant and Grantee shall immediately notify the Company if
such an election is made. Grantee should consult his or her tax advisors to
determine whether a Section 83(b) election is appropriate.

 

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13.                               Administration.  This Award has been granted
pursuant to and is subject to the terms and provisions of the Plan.  All
questions of interpretation and application of the Plan and this Award shall be
determined by the Committee.  The Committee’s determination shall be final,
binding and conclusive.

 

14.                               Award Not to Affect Employment.  Nothing
herein contained shall affect the right of the Company or any Affiliate to
terminate Grantee’s employment, services, responsibilities, duties, or authority
to represent the Company or any Affiliate at any time for any reason whatsoever.

 

15.                               Withholding of Taxes.  Whenever the Company
proposes or is required to deliver or transfer shares in connection with this
Award, the Company shall have the right to (a) require Grantee to remit to the
Company an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements prior to the delivery or transfer of any
certificate or certificates for such shares or (b) take whatever action it deems
necessary to protect its interest with respect to tax liabilities. In addition,
Grantee shall have the right to have such withholding tax requirements
satisfied, either in whole or in part, by means of a relinquishment back to, the
Company of a number of shares as to which Grantee’s interest is fully vested
having a Fair Market Value equal to the amount of such withholding tax
requirements as Grantee indicates he wants to meet by such means.

 

16.                               Compensation Recovery Policy.  In addition to,
and not in limitation of, the Company’s rights under Paragraph 5, in the event
of a restatement of the Company’s financial statements, the Company may take
action to recoup Restricted Stock in accordance with the Company’s Compensation
Recovery Policy (the “Policy”).

 

17.                               Governing Law.  The validity, performance,
construction and effect of this Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania, without giving effect to principles of conflicts
of law.

 

18.                               Entire Agreement.  This Agreement is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter herein.  This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.

 

IN WITNESS WHEREOF, the parties, intending to be legally bound, have executed
this Agreement as of the day and year first above written.

 

 

THE BON-TON STORES, INC.

 

 

 

 

 

By:

/s/ Brendan L. Hoffman

 

 

Brendan L. Hoffman

 

 

President and Chief Executive Officer

 

 

 

 

 

Grantee:

 

 

 

 

 

 

 

 

/s/ Luis Fernandez

 

 

Luis Fernandez

 

23

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