EXHIBIT 10.1

AMENDMENT NO. 3 TO
EXECUTIVE TRANSITION AGREEMENT

THIS AMENDMENT NO. 3 is effective as of the 20th day of December, 2010, between
The Bon-Ton Stores, Inc., a Pennsylvania corporation (the “Company”), and Mr. M.
Thomas Grumbacher (the “Executive”).

WHEREAS, the Company and the Executive are parties to an Executive Transition
Agreement effective as of February 1, 2005;

WHEREAS, as of December 6, 2007, the Company and the Executive entered Amendment
No. 1 to the Executive Transition Agreement extending its term until January 31,
2010, and making certain other changes;

WHEREAS, as of February 1, 2010, the Company and the Executive entered into
Amendment No. 2 to the Executive Transition Agreement (“Amendment No. 2”)
extending its term until December 31, 2010, and making certain other changes;
and

WHEREAS, the parties wish to amend the Transition Agreement, as amended (with
all amendments, the “Transition Agreement”), to extend its term until
February 5, 2012, and make certain other changes.

NOW, THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:

1. Capitalized Terms. Unless otherwise defined herein, capitalized terms used
herein shall have the respective meanings ascribed to such terms in the
Transition Agreement.

2. Amendments to Transition Agreement. The Transition Agreement is hereby
amended, as follows:

a. Section I of the Transition Agreement is hereby amended by deleting the
existing section and substituting the following:

“Term. The term of the Executive’s service hereunder shall commence as of
February 1, 2005 (the “Effective Date”) and shall remain in effect through
February 5, 2012, or until such earlier time at which the Executive ceases to
serve as Executive Chairman of the Board (the “Term”). The Term shall
automatically renew for successive periods of one year unless either party shall
give written notice to the other party not less than 60 days prior to the end of
the then current Term that it does not wish to renew the Transition Agreement.”

b. Section II of the Transition Agreement is hereby amended by deleting the
existing section and substituting the following:

 

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“Position and Duties. During the Term, Executive shall serve as Executive
Chairman of the Board and as a member of the Executive Committee of the Board.
It is understood that Executive’s duties, authority and responsibilities in such
role shall be governed by and subject to the applicable provisions of the
Company’s “Governance Policies and Procedures” adopted by the Board, as the same
may be in effect from time to time.”

c. Section III.A of the Transition Agreement is hereby amended by deleting the
existing section and substituting the following:

“A. Base Salary. For each fiscal year of the Company (each, a “Fiscal Year”)
during the Term, i.e., the Fiscal Years commencing on or about February 1, 2005,
February 1, 2006, February 1, 2007, February 1, 2008, February 1, 2009,
February 1, 2010 and February 1, 2011 (and for each Fiscal Year thereafter
during the Term), the Executive shall receive a base salary at the rate of
$650,000 per year (“Base Salary”), payable in accordance with the Company’s
normal payroll practices.”

d. After the fifth sentence of Section III.B of the Transition Agreement (the
current fifth sentence of such Section having been added by the Amendment
No. 2), the following sentence is hereby added:

“For the 2011 Fiscal Year (and for each fiscal year thereafter during the Term),
the Executive shall be eligible for a target bonus of 40% of Base Salary and a
maximum bonus equal to 80% of his Base Salary.”

e. Section IV.A of the Transition Agreement is hereby amended by deleting the
existing section and substituting the following:

“A. Medical Insurance. During the Term, the Executive and his eligible
dependents shall be eligible to participate in the Company’s group medical plans
in accordance with the terms of such plans and subject to the restrictions and
limitations contained in the plans or applicable insurance or agreements.
Following the cessation of the Executive’s service as Executive Chairman for any
reason, the Executive (for the duration of his lifetime) and his wife Nancy
Grumbacher (for the duration of her lifetime) shall be reimbursed for the costs
actually incurred by them (or either of them following the death of the other)
for the purchase of health coverage generally similar to the coverage available
to active employees of the Company; provided, however, that any such coverage
shall be of a type that is coordinated with and pays secondarily after benefits
the Executive and/or Mrs. Grumbacher are entitled to receive from the U.S.
government (such as Medicare coverage), or, in the alternative, if possible, the
Company shall purchase such a policy for the Executive and/or Mrs. Grumbacher,
as applicable. Reimbursements to the Executive and/or Mrs. Grumbacher shall be
paid to them on provision of appropriate documentation indicating the amounts
actually paid by the Executive and/or Mrs. Grumbacher, and shall be

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paid at a time and in a manner that is consistent with the requirements set
forth in Treasury Regulation Section 1.409A-3(i)(1)(iv) (that permits certain
arrangements that call for the payment of reimbursements or the provision of
in-kind benefit plans to be treated as creating a fixed schedule of payments as
permitted with regard to nonqualified deferred compensation plans subject to
Code Section 409A). In addition, in the event the arrangement is treated as
creating a tax liability for the Executive (and/or Mrs. Grumbacher), such tax
liability shall be “grossed up” (i.e., the Company shall pay to Executive and/or
Mrs. Grumbacher, as applicable, an additional payment (the “Gross Up Payment”)
in an amount that is sufficient so that, after payment of all tax liabilities
attributable to the Gross Up Payment itself, Executive and/or Mrs. Grumbacher,
as applicable, shall have an amount that is sufficient to pay the tax liability
attributable to the benefit arrangement) and payments of any such amounts as are
required to be paid as such a gross up shall be paid consistent with the
requirements of Treasury Regulation Section 1.409A-3(i)(1), including provisions
regarding tax gross-up payments. The Company shall continue to provide the
Executive with the Pinnacle Care Plan (or similar coverage) through the date of
Executive’s cessation of service as Executive Chairman, and the Company shall
continue to provide such coverage (or similar coverage) at no cost to either the
Executive or Mrs. Grumbacher for the lifetime of each of the them, but only if
such coverage is available and does not violate any applicable law, including,
but not limited to, provisions of law enacted as part of federal healthcare
reform legislation.”

f. A new Section IV.G is added at the end of Section IV of the Transition
Agreement to read as follows:

“G. Additional Provisions Related to Code Section 409A. Notwithstanding anything
to the contrary contained herein, and in addition to other amendments to the
Executive Transition Agreement that eliminate provisions that may have been
considered to constitute impermissible alternative forms of payments or
benefits, the Executive Transition Agreement shall be interpreted and
implemented pursuant to the following provisions:

1. Any benefit or payment that is paid by reason of the Executive’s cessation of
service as the Executive Chairman that constitutes a form of nonqualified
deferred compensation that is subject to Code Section 409A shall only be paid
following the Executive’s “separation from service” with the Company, and
reference to cessation or termination of service as Executive Chairman herein
shall be interpreted so that, to the extent necessary to comply with Code
Section 409A and applicable Treasury Regulations thereunder, the event that
constitutes such cessation of service as Executive Chairman also qualifies as a
“separation from service” (as that phrase is used for purposes of Code
Section 409A and as defined in Treasury Regulation Section 1.409A-1(h).

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2. Any payment of deferred compensation that is subject to the requirement under
Code Section 409A(a)(2)(B)(i) (regarding the six month delay of payments to
specified employees of a publicly traded company) shall not be paid earlier than
18 months following the date of the amendment adding this Section IV.G. to the
Executive Transition Agreement, or six months following the date of the
Executive’s separation from service, whichever is later, to the extent such
deferral of payment is necessary to comply with Code Section 409A and with the
requirements of IRS Notice 2010-6.”

3. Full Force and Effect. Except as amended hereby, the Transition Agreement
shall remain unchanged and in full force and effect.

IN WITNESS WHEREOF, the Company has caused this Amendment No. 3 to be duly
executed and the Executive has hereunto set his hand, effective as of the date
first set forth above.

THE BON-TON STORES, INC.

By: /s/ MARSHA M. EVERTON
Marsha M. Everton
Chair, Human Resources and Compensation Committee

EXECUTIVE

/s/ M. THOMAS GRUMBACHER
M. Thomas Grumbacher

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