EXHIBIT 10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (“Agreement”), dated as of the 23rd day of January,
2012 and effective as of February 7, 2012 (the “Effective Date”), is by and
between THE BON-TON STORES, INC., a Pennsylvania corporation (the “Company”),
and BRENDAN L. HOFFMAN (“Executive”).

 

W I T N E S S E T H:

 

WHEREAS, the Company desires to employ Executive as its President and Chief
Executive Officer;

 

WHEREAS, Executive is currently employed by another business under the terms of
an employment agreement (the “Prior Employment Agreement”); and

 

WHEREAS, the Company and Executive have agreed upon the terms upon which
Executive will be employed by the Company.

 

NOW THEREFORE, in consideration of the mutual promises and covenants contained
herein and intending to be legally bound hereby, the Company and Executive agree
as follows:

 

1.             Position and Responsibilities.

 

(a)           The Company hereby employs Executive and Executive hereby accepts
employment by the Company as the Company’s President and Chief Executive
Officer.   Executive shall report to the Board of Directors of the Company and
shall exercise the responsibilities and authority of his position in accordance
with the by-laws of the Company and the Governance Policies established by the
Board of Directors, as they may be amended from time to time.

 

(b)           The Company agrees to nominate Employee to serve as a Director of
the Company beginning as soon as practicable after the Effective Date and
continuing for as long as he is employed as President and Chief Executive
Officer pursuant to this Agreement.  Upon termination of employment for any
reason whatsoever, Employee does hereby resign his Director position effective
on the date of termination of employment.

 

(c)           Throughout the term of this Agreement, Executive 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 Board of Directors; however, such
approval will not be unreasonably withheld, provided that such activities do not
significantly interfere with Executive’s duties under this Agreement.  Executive
shall comply with the Company’s Code of Ethical Standards and Business
Practices.

 

2.             Term.  This Agreement shall become effective on the Effective
Date and shall continue through the third anniversary of the Effective Date,
unless sooner terminated in accordance with Paragraph 10 below (the “Term”).

 

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3.             Place of Performance.  Executive shall be based at the office of
the Company in Milwaukee, Wisconsin, except for travel required for Company
business.

 

4.             Compensation.

 

(a)           Salary.  Executive shall receive a base salary (the “Base Salary”)
at the annual rate of $1,000,000.  Base Salary, less taxes and normal
deductions, shall be paid to Executive in substantially equal installments in
accordance with the Company’s regular executive payroll practices in effect from
time to time.  Base Salary may be increased during the Term but may not be
decreased, and the Board of Directors shall consider, on an annual basis, the
nature, extent and advisability, if any, of an increase in the Executive’s Base
Salary.

 

(b)           Signing Bonus.  The Company shall pay to Executive a signing
bonus, as follows: (i) within 30 days following the Effective Date, the Company
shall pay to Executive $1,000,000 in cash, and (ii) on the first anniversary of
the Effective Date, if Executive is employed by the Company on such date, the
Company shall pay to Executive $1,000,000 in cash.

 

(c)           Performance Based Compensation.

 

(i)            Annual Bonus.

 

(A)          Executive shall be eligible for an annual cash bonus (the “Annual
Bonus”) in accordance with the terms of the Company’s Amended and Restated Cash
Bonus Plan, as may be amended from time to time (the “Cash Bonus Plan”).  The
Earned Percentage Schedule (as defined in the Cash Bonus Plan) applicable to
Executive shall be as follows: a target bonus of 100% of Base Salary, a
threshold bonus of 50% of Base Salary, and a maximum bonus of 200% of Base
Salary.  The performance goals and weighting of such performance goals with
respect to each fiscal year of the Company shall be determined by the Company’s
Human Resources and Compensation Committee (“HRCC”) in consultation with the
Executive and in accordance with the Cash Bonus Plan. Notwithstanding the HRCC’s
consultation with Executive regarding establishment of the foregoing performance
goals, the HRCC shall establish such performance goals in its discretion.

 

(B)           Each Annual Bonus shall be subject to terms of the Cash Bonus
Plan, including the achievement of the performance goals established by the
HRCC, and nothing herein shall be construed to guarantee that any Annual Bonus
will be paid or the amount of any such Annual Bonus; provided, however, that
with respect to Company’s 2012 fiscal year, Executive shall receive a minimum
cash bonus of $500,000.

 

(C)           To the extent reasonably practicable, the Annual Bonus shall be
computed and paid within 90 days following the close of the Company’s fiscal
year.

 

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(ii)           Award of Restricted Shares.

 

(A)          On the Effective Date, the Company shall grant to Executive 300,000
shares of restricted common stock of the Company (the “Time-Based Vesting
Restricted Shares”) under the Company’s 2009 Omnibus Incentive Plan (as amended
or replaced from time to time, the “Incentive Plan”).  The Time-Based Vesting
Restricted Shares shall vest, if at all, in one-third increments on the first
three anniversaries of the Effective Date and shall be governed by the terms and
conditions set forth in the Restricted Stock Award attached hereto as Exhibit A.

 

(B)           On the Effective Date, the Company shall grant to Executive
300,000 shares of restricted common stock of the Company (the “Performance-Based
Vesting Restricted Shares”) under the Incentive Plan.  The Performance-Based
Vesting Restricted Shares shall vest, if at all, as follows: (1) 50,000
Performance-Based Vesting Restricted Shares based on sales and net income
targets to be established by the HRCC in consultation with the Executive with
respect to Company performance in the Company’s 2012 fiscal year; (2) 125,000
Performance-Based Vesting Restricted Shares based on sales and net income
targets to be established by the HRCC in consultation with the Executive with
respect to Company performance in the Company’s 2013 fiscal year; and
(3) 125,000 Performance-Based Vesting Restricted Shares based on sales and net
income targets to be established by the HRCC in consultation with the Executive
with respect to Company performance in the Company’s 2014 fiscal year. 
Notwithstanding the HRCC’s consultation with Executive regarding establishment
of the foregoing performance targets, the HRCC shall establish such performance
targets in its discretion. The Performance-Based Vesting Restricted Shares shall
be governed by the terms and conditions set forth in the Restricted Stock Award
attached hereto as Exhibit B.

 

(C)           Executive shall be eligible for additional equity-based
compensation under the Incentive Plan from time to time as determined by the
Board of Directors and/or the HRCC in their discretion.  In deciding whether to
award, and the amount of, any future equity-based compensation to Executive, the
Board of Directors and/or the HRCC shall consider the Company’s past practice in
making equity awards to the Company’s President and Chief Executive Officer.

 

5.             Legal Fees.  The Company shall reimburse Executive for reasonable
attorney’s fees expended by Executive in the review and negotiation of this
Agreement, up to a maximum of $20,000.  Any legal fees to be reimbursed
hereunder shall be reimbursed to the Employee within a reasonable time after
submission of the invoices to the Company but (a) in the case of legal fees
incurred within the 2011 calendar year, no later than December 31, 2012, and
(b) in the case of legal fees incurred within the 2012 calendar year, no later
than December 31, 2013.

 

6.             Relocation.  Executive intends to relocate his residence to the
Milwaukee, Wisconsin metropolitan area by the end of the Term.  The Company
shall reimburse Executive for all

 

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relocation expenses incurred by Executive in accordance with the Company’s
policy applicable to relocation of senior executives of the Company, and the
Company shall make additional payments to Executive so that the United States
Federal and state tax effect to Executive of the reimbursements for relocation
expenses is zero.  The Company shall reimburse Executive for reasonable expenses
incurred by Executive in connection with travel between New York, New York and
the Company’s offices, stores and facilities, as well as lodging, prior to such
relocation, provided that such reimbursement shall not exceed $75,000 per year.

 

7.             Medical Insurance.  During the Term, Executive and his eligible
dependents shall be eligible to participate in the Company’s group medical,
dental and vision plans (the “Health Plans”) in accordance with the terms of the
Health Plans and subject to the restrictions and limitations contained in the
Health Plans or applicable insurance or other agreements.  The Company shall pay
the company contribution for such Health Plans, and Executive shall pay the
associate portion of Health Plan costs, as such costs and contributions are
determined by the Company from time to time.  During the Term, Executive shall
be eligible to use available hours of service under the Company’s Pinnacle
Health Care plan or a similar plan, if the Company has contracted for such
services in its discretion.

 

8.             Other Benefits.  Executive shall be eligible to participate in
the Company’s profit sharing 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 any payments under Paragraph 11 of this
Agreement shall be in lieu of any severance benefits otherwise provided by the
Company.  However, 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. Executive shall be
eligible for four weeks of vacation per calendar year, which vacation
entitlement shall be pro-rated in any calendar year in which Executive does not
work the entire calendar year.

 

9.             Business Expenses.  The Company shall pay or reimburse Executive
for reasonable entertainment and other business expenses incurred by Executive
in connection with the performance of Executive’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.

 

10.           Termination of Employment.  Notwithstanding any other provision of
this Agreement, Executive’s employment and all of the Company’s obligations or
liabilities under this Agreement may be terminated immediately, subject to any
obligations the Company may have under Paragraph 11 below, in any of the
following circumstances:

 

(a)           Disability or Incapacity.  In the event of Executive’s physical or
mental inability to perform his essential duties hereunder, with or without
reasonable accommodation, for a

 

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period of 13 consecutive weeks or for a cumulative period of 26 weeks during the
term of this Agreement.

 

(b)           Death of Executive.  In the event of Executive’s death.

 

(c)           Resignation for Good Reason.  Executive may resign for “Good
Reason,” defined below, upon 30 days’ written notice by Executive to the Company
except as set forth in Paragraph 10(d) below.  The Company may waive Executive’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
Executive, Executive shall receive Base 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: (i) a material adverse change in Executive’s duties, authority or
responsibilities, (ii) Executive no longer reports to the Company’s Board of
Directors; (iii) Executive is no longer President and Chief Executive Officer of
the Company and a Director of the Company; (iv) any reduction in Executive’s
Base Salary below $1,000,000; (v) any reduction in Executive’s potential Annual
Bonus target percentage amounts; (vi) the failure of a Surviving Company (as
defined below) to assume this Agreement following a Change of Control (as
defined below); (vii) Executive is no longer eligible for awards under the
Incentive Plan; and (viii) any substantial breach by the Company of any material
provision of this Agreement.  Notwithstanding the foregoing, the acts or
omissions described above shall not constitute “Good Reason” unless Executive
provides the Company with written notice detailing the matters he asserts to be
“Good Reason” which the Company does not cure within thirty (30) days of
receiving the written notice.

 

(d)           Change of Control.  Notwithstanding the foregoing, in the event of
a Change of Control of the Company, provided the Company or Surviving Company
(as defined below) continues to pay Executive his Base Salary and other amounts
due and payable hereunder pursuant to Paragraphs 4, 6, 8 and 9 hereof, and to
provide materially comparable medical insurance and other employee benefits as
provided under Paragraph 7 hereof, Executive shall be prohibited from resigning
for Good Reason for a period of three months following the Change of Control. 
For purposes of this Agreement, a “Change of Control” shall be deemed to occur
if:

 

(i)            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;

 

(ii)           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; or

 

(iii)          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

 

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(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, directly or indirectly, 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.

 

For purposes of this definition, the terms “person,” “beneficial owner,”
“beneficial ownership” and “affiliate” 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; provided, that an executor shall not be considered a
separate person from an affiliate.

 

(e)           Discharge for Cause.  The Company may discharge Executive at any
time for “Cause.”  For purposes hereof, “Cause” means any of the following:
(i) a material and serious breach or neglect of Executive’s responsibilities;
(ii) willful violation or disregard by Executive of standards of conduct
established by law; (iii) willful violation or disregard by Executive of
standards of conduct established by Company policy as may from time to time be
communicated to Executive; (iv) fraud, willful misconduct, misappropriation of
funds or other dishonesty committed by Executive; (v) Executive’s conviction of
a crime of moral turpitude; (vi) any material misrepresentation made by
Executive in this Agreement; or (vii) any material breach by Executive 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).  For purposes of this Paragraph 10(e),
an act or failure to act shall not be considered “willful” if done or omitted to
be done with a reasonable belief that such act or failure to act: (A) did not
violate any law or applicable standard of conduct and (B) was in the best
interests of the Company.  In the event the Company determines a Cause event has
occurred under subparagraphs (i), (ii), (iii), (vi) or (vii) of this Paragraph
10(e), the Company shall give Executive written notice detailing the specific
event(s) constituting Cause and, if such event is curable in the sole discretion
of the Board, Executive shall have a period of thirty (30) days following
receipt of such notice to cure such event to the satisfaction of the Board.

 

(f)            Discharge without Cause.  Notwithstanding any other provision of
this Agreement, Executive’s employment and any and all of the Company’s
obligations under this Agreement (excluding any obligations the Company may have
under Paragraph 11 below) may be terminated by the Company at any time without
Cause.

 

(g)           Resignation Without Good Reason.  Executive may voluntarily resign
without Good Reason at any time upon 60 days’ prior written notice to the
Company, provided that the Company may waive any portion of such notice period
in its sole discretion.

 

11.           Payments Upon Termination.

 

(a)           Discharge Without Cause or Resignation for Good Reason. If
Executive is discharged without Cause or resigns for Good Reason during the
Term, Executive shall receive a

 

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severance payment (the “Severance Payment”) equal to the sum of (i) the greater
of (A) his Base Salary for the remainder of the Term, or (B) 200% of Base
Salary, (ii) an amount equal to 24 multiplied by the monthly COBRA payment
applicable to Executive as of the termination date, (iii) an amount equal to the
Annual Bonus that Executive would have received with respect to the fiscal year
in which Executive is discharged without Cause or resigns for Good Reason during
the Term, pro-rated based upon the number of days Executive was employed by the
Company during such fiscal year, and (iv) any unpaid amounts under Paragraph
4(b) of this Agreement.  The Severance Payment shall be payable 50% in a lump
sum as of the six (6) month anniversary of Executive’s termination of employment
and 50% in a lump sum as of the one-year anniversary of Executive’s termination
of employment, provided that Executive 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 form and substance satisfactory to the Company. The
Severance Payment shall be in lieu of any other payment to which Executive may
be entitled by reason of any severance plan sponsored by the Company or
otherwise.  Additionally, all of Executive’s then unvested restricted stock
awarded pursuant to Paragraph 4(c)(ii) herein will automatically vest in full. 
Executive shall also receive any vested benefits to which Executive is entitled
under the Company’s equity compensation plans and other employee benefit plans
in accordance with, to the extent provided in, and subject to the restrictions
and payout schedules contained in such plans.  Upon discharge without Cause or
resignation for Good Reason, Executive shall have no duty to mitigate his
damages (if any), and the amounts due Employee under this Paragraph 11(a) shall
not be reduced by any payments received from other sources.

 

(b)           Death or Disability/Incapacity.

 

(i)            Upon the death of Executive, the sole entitlement of Executive’s
estate will be to receive Base Salary for any days worked prior to Executive’s
death, an amount equal to the Annual Bonus that Executive would have received
with respect to the fiscal year in which death occurs (pro-rated based upon the
number of days Executive was employed by the Company during such fiscal year),
amounts payable to Executive on account of Executive’s death under any insurance
or benefit plans or policies maintained by the Company, and any vested benefits
to which Executive is entitled under the Company’s equity compensation plans and
other employee benefit plans in accordance with, to the extent provided in, and
subject to the restrictions and payout schedules contained in such plans. 
Additionally, all of Executive’s then unvested restricted stock awarded pursuant
to Paragraph 4(c)(ii) herein will automatically vest in full.

 

(ii)           Upon the termination of this Agreement as a result of Executive’s
disability or incapacity, Executive’s sole entitlement will be to receive Base
Salary for any days worked prior to the date of termination of this Agreement,
an amount equal to the Annual Bonus that Executive would have received with
respect to the fiscal year in which death occurs (pro-rated based upon the
number of days Executive was employed by the Company during such fiscal year),
amounts payable to Executive on account of Executive’s disability or incapacity
under any insurance or benefit plans or policies maintained by the Company, and
any vested benefits to which Executive is entitled under the Company’s equity
compensation plans and other employee benefit plans in accordance with, to the
extent provided in, and subject to the restrictions and payout schedules
contained in such plans.  Additionally, all of Executive’s then

 

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unvested restricted stock awarded pursuant to Paragraph 4(c)(ii) herein will
automatically vest in full.

 

(c)           Discharge for Cause or Resignation by Executive without Good
Reason.  If Executive is discharged by the Company for Cause or if Executive
resigns without Good Reason, Executive’s sole entitlement will be the receipt of
Base Salary for any days worked through the date of termination and any vested
benefits to which Executive 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.

 

(d)           Change of Control.

 

(i)            Upon a Change of Control as defined in Paragraph 10(d) while
Executive is employed pursuant to this Agreement, if Executive is discharged
without Cause or resigns with Good Reason in the period from the time of the
consummation of the Change of the Control until one year following the
consummation of the Change of Control, then, in lieu of the Severance Payment
provided in Paragraph 11(a) above, Executive shall receive a payment (the
“Change of Control Payment”) equal to the sum of (i) two multiplied by Base
Salary, (ii) two multiplied by the Average Annual Bonus, (iii) an amount equal
to 24 multiplied by the monthly COBRA payment applicable to Executive as of the
termination date, and (iv) an amount equal to the Annual Bonus that Executive
would have received with respect to the fiscal year in which Executive is
discharged without Cause or resigns for Good Reason during the Term, pro-rated
based upon the number of days Executive was employed by the Company during such
fiscal year.  For purposes hereof, “Average Annual Bonus” means the average
Annual Bonus that Executive received during the Term; provided, however, that if
only one Annual Bonus was paid to Executive during the Term then that amount
shall constitute the “Average Annual Bonus.”  The Change of Control Payment
shall be payable 50% in a lump sum as of the six (6) month anniversary of
Executive’s termination of employment and 50% in a lump sum as of the one-year
anniversary of Executive’s termination of employment, provided that Executive
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 form and substance
satisfactory to the Company.  The Change of Control Payment shall be in lieu of
any other payment to which Executive may be entitled by reason of any severance
plan sponsored by the Company or otherwise.

 

(ii)           Upon a Change of Control while Executive is employed pursuant to
this Agreement, the vesting of equity awards held by Executive shall be governed
by the terms of such equity awards.

 

(iii)          Notwithstanding any other provision of this Agreement, if the
aggregate present value of the “parachute payments” to the Executive, 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 benefit
that may be realized upon a Change of Control under this Section 11(d) such that
the aggregate present value of such “parachute payments” to Executive is less
than three times his “base amount.” In addition, in the event the aggregate
present value of the parachute payments to Executive would be at least three
times his base amount even after a

 

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reduction of the Change of Control benefits 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 that
would constitute “parachute payments” shall be reduced so that the aggregate
present value of all “parachute payments” to Executive, 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 acceptable to Executive.

 

12.           Company Property.  All advertising, sales, manufacturers’ and
other materials or articles or information, including, without limitation, data
processing reports, customer sales analyses, invoices, price lists, documents
(tangible or electronic) or information or any other materials or data of any
kind furnished to Executive by the Company or developed by Executive on behalf
of the Company or at the Company’s direction or for the Company’s use or
otherwise in connection with Executive’s employment with the Company, are and
shall remain the sole and confidential property of the Company.

 

13.           Non-Solicitation, Non-Competition and Confidentiality. To the
maximum extent permissible by law:

 

(a)           During his employment with the Company and for a period of two
years after the termination of his employment with the Company for any reason
whatsoever, whether by Executive or by the Company and whether during the term
of this Agreement or subsequent to the expiration of this Agreement, Executive
shall not, directly or indirectly, solicit, induce, encourage, influence or
otherwise cause any customer, employee, consultant, independent contractor or
supplier of the Company to change his, her or its business relationship with or
terminate employment with the Company.

 

(b)           During his employment with the Company and after the termination
of his employment with the Company for any reason whatsoever, whether by
Executive or by the Company and whether during the term of this Agreement or
subsequent to the expiration of this Agreement, for a period of one year,
Executive shall not be engaged by or engage in business with (as a principal,
partner, director, officer, agent, employee, consultant, owner, independent
contractor or otherwise) or be financially interested in (other than any
investment approved by the Board of Directors) any Competitor of the Company in
the United States.  For purposes of this Agreement, “Competitor” means any
person or entity conducting business in the retail department store industry,
including but not limited to each of Macy’s Inc., Dillard’s Inc., Kohl’s
Corporation, Belk, Inc. and J.C. Penney, Inc. and the affiliates and successors
of each of them.  Executive’s passive ownership of less than 2% of any class of
securities of a company shall not constitute a violation of the first sentence
of this Subparagraph 13(b).

 

(c)           During his employment with the Company and at all times
thereafter, and except as required by law, Executive 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 of the Company that Executive acquires in
the course of his employment, which is not otherwise lawfully known by and
readily available to the general public. This confidential information includes,
but is not limited to: any material

 

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referred to in Paragraph 12 or 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. Executive confirms that such
information is confidential and constitutes the exclusive property of the
Company, and agrees that, immediately upon his termination, whether by Executive
or by the Company and whether during the term of this Agreement or subsequent to
the expiration of this Agreement, Executive shall deliver to the Company all
correspondence, documents, books, records, lists, computer programs and other
writings relating to the Company’s business; and Executive shall retain no
copies, regardless of where or by whom said writings were kept or prepared.

 

(d)           Both during his employment with the Company and following the
termination of his employment with the Company for any reason whatsoever,
whether by Executive or by the Company and whether during the term of this
Agreement or subsequent to the expiration of the Agreement, Executive 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 Executive for all reasonable expenses incurred by him in fulfilling
his obligation under this subparagraph (d).

 

(e)           The provisions of subparagraphs (a), (b), (c) and (d) of this
Paragraph 13 shall survive the cessation of Executive’s employment for any
reason, as well as the expiration of this Agreement at the end of the Term or
the termination of this Agreement at any time prior thereto.

 

(f)            Executive acknowledges that the restrictions contained in this
Paragraph 13, in view of the nature of the business in which the Company is
engaged and the Executive’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. Executive 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
Executive, in addition to damages from Executive 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.

 

(g)           Executive 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, Executive 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 Executive violates any of the restrictions
contained in subparagraphs (a) or (b), the period of such violation (from the
commencement of any such violation until such time as such violation shall be
cured by Executive to the satisfaction of the Company) shall not count toward or
be included in the restrictive period contained in subparagraphs (a) and (b).

 

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(h)           For purposes of Paragraphs 12 and 13 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. Executive consents to the
assignment of this Agreement to any purchaser of the Company or a substantial
portion of its assets.

 

14.           Other Tax Matters.

 

(a)           Executive 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 Executive to
the extent required by applicable statutes, rulings or regulations.

 

(b)           Compliance With Code Section 409A.

 

(i)            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 Executive 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).

 

(ii)           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 Executive’s termination of employment with the
Company. In the event any payment is delayed by reason of this Paragraph 14,
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.

 

15.           Company Policies.  Executive acknowledges that he is subject to,
and agrees to comply with, among other policies adopted by the Company from time
to time which may be applicable to Executive, (a) any Company policy regarding a
“clawback” of compensation in certain circumstances, (b) the Company’s stock
ownership policy applicable to the Company’s senior executives, and (c) the
Company’s policy regarding trading in Company securities.

 

16.           Prior Agreements.

 

(a)           Executive represents that there are no restrictions, agreements or
understandings whatsoever to which Executive is a party, including but limited
to the Prior Employment Agreement, that could impact upon his employment under
this Agreement or that would prevent or make unlawful his execution of this
Agreement or his employment and performance hereunder.

 

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(b)           Executive 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.

 

17.           Medical Examination.  This Agreement, the Company’s offer of
employment and Executive’s employment by the Company hereunder are contingent on
Executive’s successful completion of a pre-employment medical examination
conducted by a physician selected by the Company.

 

18.           Entire Understanding. This Agreement contains the entire
understanding between the Company and Executive 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 Executive 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 Executive and the Company’s Chief Executive
Officer or such other person as the Board 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.           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 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.

 

22.           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 mails, 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.
2801 East Market Street
York, PA 17402
Attention: Chairman of the Board

 

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with a copy to:

 

The Bon-Ton Stores, Inc.
2801 East Market Street
York, PA 17402
Attention: General Counsel

 

(b)           If to Executive:

 

Brendan L. Hoffman
29 Hampton Road
Scarsdale, NY 10583

 

with a copy to:

 

Thomas A. Hickey, Esq.

Gunster, Yoakley & Stewart, PA

777 S. Flagler Drive, Suite 500 E

West Palm Beach, FL 33408

 

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 Paragraph for the giving of
notice.

 

23.           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.

 

24.           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 Executive, his heirs, executors and legal
representatives.

 

25.           No Assignment by Executive.  Executive acknowledges that the
services to be rendered by him are unique and personal.  Accordingly, Executive
may not assign or delegate any of his rights or obligations hereunder.

 

26.           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.

 

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27.           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.

 

28.           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.

 

29.           Mediation.  Other than with respect to disputes or controversies
under Paragraph 13 of this Agreement, the parties agree to submit any disputes
or controversies hereunder to non-binding mediation prior to instituting any
action in a court of law.  The costs of any such mediation (including the costs
of the mediators) shall be borne equally by the parties.

 

30.           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.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have duly
executed and delivered this Agreement as of the date first above written.

 

 

 

THE BON-TON STORES, INC.

 

 

 

 

 

By:

/s/ TIM GRUMBACHER

 

 

Tim Grumbacher,

 

 

Chairman of the Board of Directors

 

 

 

 

 

EXECUTIVE:

 

 

 

 

 

 

/s/ BRENDAN L. HOFFMAN

 

 

Brendan L. Hoffman

 

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