**EXHIBIT 10.3****THE BON-TON STORES, INC.****RESTRICTED STOCK AGREEMENT**     This is a Restricted Stock Agreement dated as of July 19, 2007 (“Agreement”), between TheBon-Ton Stores, Inc. (the “Company”) and the undersigned (“Grantee”). This Agreement is enteredinto pursuant to the provisions of the Plan (as defined below) and in connection with a certainemployment agreement entered into by and between the Grantee and the Company on August 24, 2004,and as such has been amended from time to time (including the Third Amendment to EmploymentAgreement, entered into in July, 2007 (the employment agreement, including all amendments theretobeing referred to herein as the “Employment Agreement”). This Agreement is intended to beconsistent with the Employment Agreement and specifically those provisions of the EmploymentAgreement regarding the Fiscal Year 2007 “Performance-Based Restricted Share Grant” to be made assoon as practicable after the effective date of the Third Amendment to the Employment Agreement,and shall be so interpreted. To the extent any provision hereof is inconsistent with theprovisions of the Employment Agreement, the provisions of the Employment Agreement shall be giveneffect. To the extent the definition of any terms defined in the Employment Agreement is modifiedfrom time to time by amendments made to the Employment Agreement, the definition as in effect atthe relevant time shall apply for purposes of this Agreement. All determinations regarding thevesting of Restricted Stock hereunder shall be made by the Committee (as that term is defined inthe Plan) consistent with the Plan’s provisions regarding performance-based compensation.     Definitions. As used herein:          “Date of Grant” means July 19, 2007, the date on which the Company awarded theRestricted Stock.          “Forfeiture Date” means any date as of which Grantee’s rights to all or any portion ofthe Restricted Stock are forfeited pursuant to applicable provisions of this Agreement.          “Plan” means The Bon-Ton Stores, Inc. Amended and Restated 2000 Stock Incentive andPerformance-Based Award Plan.          “Restricted Period” with respect to any shares of Restricted Stock means the periodbeginning on the Date of Grant and ending on the Vesting Date applicable to such shares.          “Vesting Date” with respect to any shares of Restricted stock means the date set as avesting date pursuant to Paragraph 2 hereof.All other capitalized terms used herein shall have the meaning set forth in the EmploymentAgreement or in the Plan, as applicable. In the event of any inconsistency in the definitioncontained in the Employment Agreement and that contained in the Plan, the definition in theEmployment Agreement shall control.
 

 
     Grant of Restricted Stock. Subject to the terms and conditions set forth herein andin the Plan, the Company grants to Grantee 41,297 shares of the Company’s Common Stock, par value$.01 (the “Restricted Stock”). Of the Restricted Stock subject to this Agreement, fifty percent(50%) is subject to vesting (or forfeiture) on the basis of the achievement of certain performancegoals established for the Company’s 2007 fiscal year (i.e., the fiscal year ending on or aboutJanuary 31, 2008), and the remaining fifty percent (50%) is subject to vesting (or forfeiture) onthe basis of the achievement of performance goals to be established for the Company’s 2008 fiscalyear (i.e., the fiscal year ending on or about January 31, 2009). The two portions of theRestricted Stock are referred to herein as the “2007 Performance Shares Based Upon CompanyPerformance For Fiscal Year 2007” and the “2007 Performance Shares Based Upon Company Performancefor Fiscal Year 2008,” respectively. Except as otherwise provided herein, the Restricted Stockshall vest (or be forfeited) as follows:          2007 Performance Shares Based Upon Company Performance For Fiscal Year 2007:               One hundred percent (100%) of the 2007 Performance Shares Based Upon Company PerformanceFor Fiscal Year 2007 shall become vested in the event that the Company achieves the Net Incomerequired for the target bonus as specified on the CEO 2007 Bonus Metrics Table (Net Income forthese purposes shall be determined in a manner consistent with the determination of Net Incomeapplicable to Grantee’s bonus under Paragraph 5(a)(ii) of the Third Amendment to the EmploymentAgreement.)               Eighty-seven and one-half percent (87.5%) of the 2007 Performance Shares Based Upon CompanyPerformance For Fiscal Year 2007 shall become vested in the event that the Company achievesninety-five percent (95%) of the Net Income required for the target bonus as specified on the CEO2007 Bonus Metrics Table, and the remaining 2007 Performance Shares Based Upon Company PerformanceFor Fiscal Year 2007 shall be forfeited as of the close of the Company’s 2007 fiscal year.               Seventy-five percent (75%) of the 2007 Performance Shares Based Upon Company Performance ForFiscal Year 2007 shall become vested in the event that the Company achieves ninety percent (90%) ofthe Net Income required for the target bonus as specified on the CEO 2007 Bonus Metrics Table, andthe remaining 2007 Performance Shares Based Upon Company Performance For Fiscal Year 2007 shall beforfeited as of the close of the Company’s 2007 fiscal year.               Achievement of Net Income below the Net Income required for the threshold bonus as specifiedon the CEO 2007 Bonus Metrics Table shall result in forfeiture of the 2007 Performance Shares BasedUpon Company Performance For Fiscal Year 2007.The Vesting Date with respect to the 2007 Performance Shares Based Upon Company PerformanceFor Fiscal Year 2007 shall be as of February 2, 2008, subject to the Committee’s certification inwriting of its determination of the level of achievement of the performance goals set forth above(without regard to whether Grantee has remained employed by the Company or an Affiliate of theCompany after the Vesting Date). Any 2007 Performance Shares Based Upon
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Company Performance ForFiscal Year 2007 not vested as a result of such determination shall be considered as having beenforfeited as of February 2, 2008.          2007 Performance Shares BasedUpon Company Performance For Fiscal Year 2008.The 2007 Performance Shares Based Upon Company Performance For Fiscal Year 2008 shall become vestedor shall be forfeited as a result of the achievement or non-achievement of performance targets forthe selected performance metrics (among Net Income, GMROI Dollars ($); Total Sales, and EBITDA)established for the Company’s 2008 fiscal year by the Committee. These performance targets shallbe in line with the respective targets under the Company Plan for its 2008 fiscal year as well asin line with the respective targets established with respect to bonuses payable under the Company’sCash Bonus Plan for the Company’s 2008 fiscal year, all as determined by the Committee consistentwith the Plan and in the normal course (i.e., in the first quarter of the Company’s 2008 fiscalyear).The Vesting Date with respect to the 2007 Performance Shares Based Upon Company Performance ForFiscal Year 2008 shall be as of January 31, 2009, subject to the Committee’s certification inwriting of its determination of the level of achievement of the performance goals established inconnection with the vesting of such shares of Restricted Stock (without regard to whether Granteehas remained employed by the Company or an Affiliate of the Company after the Vesting Date). 2007Performance Shares Based Upon Company Performance For Fiscal Year 2008 not vested as a result ofsuch determination shall be considered as having been forfeited as of January 31, 2009.          Termination of Employment. Any Restricted Stock that is not earned and vested on theeffective date of the Grantee’s termination of employment for any reason shall be forfeited (if notalready forfeited), subject to the following:               In the event that the Grantee, prior to February 2, 2008, is discharged without Cause orresigns for Good Reason, the 2007 Performance Shares Based Upon Company Performance For Fiscal Year2007 shall become vested to the extent provided above based on attainment of the performance goalsfor the Company’s 2007 fiscal year to the same extent such Restricted Stock would have becomevested had the Grantee remained employed with the Company or an Affiliate of the Company throughthe date that the Committee makes a determination regarding the achievement of the performancetargets described above for the Company’s 2007 fiscal year; provided, however, that no portion ofthe 2007 Performance Shares Based Upon Company Performance for Fiscal Year 2007 shall be vested insuch a situation unless the Grantee executes a general release as required under applicableprovisions of the Employment Agreement; and               In the event that the Grantee, on or after February 3, 2008 and prior to January 31, 2009, isdischarged without Cause or resigns for Good Reason, the 2007 Performance Shares Based Upon CompanyPerformance For Fiscal Year 2008 shall become vested to the same extent such Restricted Stock wouldhave become vested had the Grantee remained employed with the Company or an Affiliate of theCompany through the date that the Committee makes a determination regarding the achievement of theperformance goals established for the Company’s 2008 fiscal year; provided, however, that noportion of the 2007 Performance Shares Based Upon Company Performance For Fiscal Year 2008 shall bevested in
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such a situation unless the Grantee executes a general release of claims consistent withthe release of claims as required under applicable provisions of the Employment Agreement.     Restrictions on Restricted Stock. Subject to the terms and conditions set forthherein and in the Plan, Grantee shall not be permitted to sell, transfer, pledge or assign anyRestricted Stock during such shares’ Restricted Period.     Lapse of Restrictions. Subject to the terms and conditions set forth herein and inthe Plan, the restrictions on Restricted Stock set forth in Paragraph 3 shall lapse on the datesuch shares become vested.     Forfeiture Dates and Forfeiture of Restricted Stock. Subject to the terms andconditions set forth herein and in the Plan;          If Grantee’s employment with the Company or an Affiliate of the Company terminates during theRestricted Period for any reason, such date shall be the Forfeiture Date, and Grantee shall forfeitany Restricted Stock still subject to restrictions as of such Forfeiture Date, except as providedabove in Paragraph 2(c).          Any shares that may become vested or forfeited while Grantee remains employed by the Companyor an Affiliate of the Company pursuant to Paragraph 2(a) or 2(b) above shall be forfeited, to theextent not vested as of the applicable date set forth in Paragraph 2(a) or 2(b), as the case may be(such date being the applicable Forfeiture Date).          Any shares that may become vested or forfeited after a termination of Grantee’s employment inaccordance with Paragraph 2(c) above shall be forfeited, to the extent not vested, as of theapplicable date set forth in Paragraph 2(a) or 2(b), as the case may be (such date being theapplicable Forfeiture Date).          Upon a forfeiture of any shares of Restricted Stock as provided in this Paragraph 5, theshares of Restricted Stock so forfeited shall be reacquired by the Company without consideration.     Rights of Grantee. Except for the restrictions set forth in Paragraph 3 and theprovisions respecting dividends on Restricted Stock set forth in Paragraph 7, during the RestrictedPeriod 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 bevoted if they were not subject to the restrictions set forth in this Agreement.     Dividends on Restricted Stock. No dividends shall accrue or be paid to the Granteewith respect to any shares of Restricted Stock for any period prior to the date such shares becomevested.     Change of Control of Company. In the event of a Change of Control (as defined, fromtime to time, in the Employment Agreement) prior to February 3, 2008, the Restricted Stock shallimmediately become fully vested. In the event of a Change of Control on or after February 3, 2008and on or before January 31, 2009, the 2007 Performance Shares Based Upon Company Performance ForFiscal Year 2008 shall become vested without regard to the
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achievement of the goals established forthe Company’s 2008 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, ifapplicable, a successor company, through such date, or on such earlier date following the Change ofControl if the Grantee is terminated by the Company or an Affiliate of the Company or, ifapplicable, a successor company, without Cause.     Notices. Any notice to be given to the Company shall be addressed to the Controllerof the Company at its principal executive office, and any notice to be given to the Grantee shallbe addressed to the Grantee at the address then appearing on the personnel records of the Companyor the Affiliate of the Company by which he or she is employed, or at such other address as eitherparty hereafter may designate in writing to the other. Any such notice shall be deemed to havebeen duly given when personally delivered, by courier service such as Federal Express, or by othermessenger, or when deposited in the United States mail, addressed as aforesaid, registered orcertified mail, and with proper postage and registration or certification fees prepaid.     Securities Laws. The Committee may from time to time impose any conditions on theRestricted Stock as it deems necessary or advisable to ensure that all rights granted under thePlan satisfy the conditions of Rule 16b-3 promulgated pursuant to the Securities Exchange Act of1934, as amended.     Delivery of Shares. Upon the determination that any portion of the Restricted Stockhas become vested, the Company shall notify Grantee (or Grantee’s personal representative, heir orlegatee in the event of Grantee’s death) that the restrictions on an installment of RestrictedStock have lapsed, and shall, without payment from Grantee for such Restricted Stock, upon suchGrantee’s request deliver a certificate for such Restricted Stock without any legend orrestrictions, except for such restrictions as may be imposed by the Committee, in its solejudgment, 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 havebeen made with the Company for the withholding of any taxes which may be due with respect to suchshares. The Company may condition delivery of certificates for shares upon the prior receipt fromGrantee of any undertakings which it may determine are required to assure that the certificates arebeing issued in compliance with federal and state securities laws. The right to payment of anyfractional shares shall be satisfied in cash, measured by the product of the fractional amounttimes the Fair Market Value of a share on the Vesting Date.     Status of Restricted Stock. The Restricted Stock is intended to constitute propertythat is subject to a substantial risk of forfeiture during the Restricted Period, and subject tofederal income tax in accordance with section 83 of the Internal Revenue Code of 1986, as amended(the “Code”). Section 83 generally provides that Grantee will recognize compensation income withrespect to each installment of the Restricted Stock on the date such installment ceases to besubject to a substantial risk of forfeiture in an amount equal to the then fair market value of theshares for which restrictions have lapsed. Alternatively, Grantee may elect, pursuant to Section83(b) of the Code, to recognize compensation income for all or any part of the Restricted Stock atthe Date of Grant in an amount equal to the fair market value of the Restricted Stock subject tothe election on the Date of Grant. Such election must be made within 30 days of the Date of Grantand Grantee shall immediately notify the Company if such an election is made. Grantee
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should consult his or her tax advisors to determine whether a Section 83(b) election is appropriate.     Administration. This Award has been granted pursuant to and is subject to the termsand provisions of the Plan. All questions of interpretation and application of the Plan and thisAward shall be determined by the Committee. The Committee’s determination shall be final, bindingand conclusive.     Award Not to Affect Employment. Nothing herein contained shall affect the right ofthe Company or an Affiliate of the Company to terminate Grantee’s employment, services,responsibilities, duties, or authority to represent the Company or an Affiliate of the Company atany time for any reason whatsoever.     Withholding of Taxes. Whenever the Company proposes or is required to deliver ortransfer shares in connection with this Award, the Company shall have the right to (a) require theGrantee to remit to the Company an amount sufficient to satisfy any federal, state and/or localwithholding tax requirements prior to the delivery or transfer of any certificate or certificatesfor such shares or (b) take whatever action it deems necessary to protect its interest with respectto tax liabilities. In addition, Grantee shall have the right to have such withholding taxrequirements satisfied, either in whole or in part, by means of a relinquishment back to, theCompany of a number of shares as to which Grantee’s interest is fully vested having a Fair MarketValue equal to the amount of such withholding tax requirements as Grantee indicates he wants tomeet by such means.     Governing Law. The validity, performance, construction and effect of this Agreementshall be governed by the laws of the Commonwealth of Pennsylvania, without giving effect toprinciples of conflicts of law.     Entire Agreement. This Agreement is intended by the parties as a final expression oftheir agreement and intended to be a complete and exclusive statement of the agreement andunderstanding of the parties hereto in respect of the subject matter herein. This Agreementsupersedes all prior agreements and understandings between the parties with respect to such subjectmatter, except that the Employment Agreement shall control in the event of any inconsistenciesbetween this Agreement and the Employment Agreement.
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     IN WITNESS WHEREOF, the parties, intending to be legally bound, have executed this Agreementas of the day and year first above written.      THE BON-TON STORES, INC.   By:  /s/ Tim Grumbacher    Tim Grumbacher, Chairman            /s/ Byron Bergren    Byron Bergren      
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