<PAGE>   1

                                   EXHIBIT 4.6

                               AMENDMENT NO. 3 TO
                       THE BON-TON DEPARTMENT STORES, INC.
                     PROFIT SHARING/RETIREMENT SAVINGS PLAN


                  WHEREAS, THE BON-TON DEPARTMENT STORES, INC. a Pennsylvania
corporation (hereinafter referred to as the "Company") established The Bon-Ton
Stores, Inc. Profit-Sharing/Retirement Savings Plan ("Plan"); and

                  WHEREAS, forfeitures under the Plan arising from matching
contributions are allocated only to employees who made matching contributions
and were employed on the last day of the Plan Year; and

                  WHEREAS, the Company is terminating the Hess's Department
Stores, Inc. Employees' Pension Plan ("Hess Plan"); and

                  WHEREAS, the Company intends to make a transfer of assets in
accordance with Section 4980(d) of the Internal Revenue Code of 1986, as amended
("Code") from the Hess Plan to the Plan; and

                  WHEREAS, the Company desires to amend the Plan to clarify its
intentions with respect to matching contributions, the allocation of
forfeitures, the limits on after-tax contributions and to provide for the
transfer of assets from the Hess Plan in accordance with the provisions of Code
Section 4980 (d); and

                  WHEREAS, Section 12(a) of the Plan authorizes the Company to
amend the Plan.

                  NOW, THEREFORE, the Plan is hereby amended as follows:

                  1. Subsection 4(k) of the Plan is hereby amended to clarify
the treatment of forfeitures effective January 1, 1994 to read:

                  "(k)     Forfeitures. Amounts which have been forfeited from a
                           Member's Company Contribution Account in any Plan
                           Year pursuant to the provisions of subsection 4(n),
                           8(d) or 8(e) hereof shall be allocated among the
                           Members who both (i) made salary reduction
                           contributions under subsection 4(f) for the Plan Year
                           in proportion to their respective contributions under
                           subsection 4(f) for such Plan Year and (ii) were
                           employed by a Participating Company or Related Entity
                           on the last day of the Plan Year. Forfeitures under
                           this subsection shall be allocated to a Member by
                           multiplying the total forfeitures to be allocated by
                           a

                                      - 1 -
<PAGE>   2
                  percentage equal to the Member's Company matching
                  contributions for the Plan Year as a percentage of the total
                  of all Company matching contributions made for the Plan Year.
                  Such amounts shall be treated as additions to the Member's
                  Company Contribution Account."

                  2. Subsection 4(m)(i) of the Plan is amended, effective as of
January 1, 1994 to read:

                  "(i)     Amount. Each Member shall be eligible to make
                           non-deductible Member contributions to the Fund for
                           such Plan Year in an amount not in excess of 5% of
                           such Member's compensation for the Plan Year.
                           However, the permitted contribution under this
                           subsection shall be reduced to the extent necessary
                           to preclude the sum of the contributions made under
                           subsection 4(f), 4(j) and this subsection from
                           exceeding the limitations of subsection 5. To the
                           extent feasible, any such excess shall be refunded by
                           the Participating Companies to the Member before
                           contribution to the Fund to the extent necessary to
                           avoid reduction of the allocation provided for in
                           subsection 5(a)."

                  3. The Plan is hereby amended, effective January 1, 1997 by
adding the following new Section 19 to read:

                  "19.     4980 SUSPENSE ACCOUNT

                  (a)      Establishing the Account. The 4980 Suspense Account
                           shall be established to receive a transfer of assets
                           from the Hess's Department Stores, Inc. Employees'
                           Pension Plan ("Hess Plan"). The assets held in the
                           4980 Suspense Account shall be invested by the
                           Trustee at the direction of the Committee.

                  (b)      Allocations. All amounts credited to the 4980
                           Suspense Account, including earnings allocable to the
                           4980 Suspense Account, shall be allocated to the
                           accounts of Members as Profit Sharing Contributions
                           and/or Matching Contributions in an amount and type
                           determined by the Company in its sole discretion,
                           subject to the limitations and provisions of the Plan
                           which apply to Profit Sharing Contributions and
                           Matching Contributions. Notwithstanding anything
                           herein to the contrary, all amounts allocated to the
                           4980 Suspense Account must be allocated to Member
                           accounts at the Company's sole discretion, either (I)
                           in the Plan Year of the transfer of assets from the
                           Hess Plan to the Plan or (ii) at a rate that is no
                           less rapid than ratably over the seven year period
                           beginning with year of the transfer of the assets
                           from the Hess Plan to the Plan. Earnings credited to
                           the 4980 Suspense Account shall be allocated no less
                           rapidly

                                      - 2 -
<PAGE>   3
                  then ratably over the remainder of the allocation period used
                  by the Company.

                  (c)      Limitations on Allocations. Any amount to be
                           allocated to a Member under this section which cannot
                           be allocated to a Member before the end of the close
                           of the seven year period described in subsection
                           19(b) because of the limitations described in Section
                           5 shall be allocated to the accounts of other Members
                           subject to the limitations of Section 5.

                  (d)      Plan Termination. Any amounts credited to the 4980
                           Suspense Account which have not been allocated to
                           Member accounts as of the date of the termination of
                           the Plan shall be allocated to the accounts of
                           Members in accordance with the provisions of
                           subsection 19(c). If any such amounts cannot be
                           allocated to Members because of the limitations of
                           Section 5 such amounts shall be treated in accordance
                           with the provisions of Code Section
                           4980(d)(2)(C)(iv)(II)."

                  4. In all other respects the Plan is hereby ratified and
confirmed.

                  IN WITNESS WHEREOF, the Company has caused this Amendment to
be executed this 3rd day of February, 1997.


ATTEST:                                   THE BON-TON DEPARTMENT STORES, INC.

/s/ Robert E. Stern,                      By /s/ Michael L. Gleim
-----------------------------                ------------------------------
Secretary                                    Vice Chairman and C.O.O.

[Corporate Seal]


                                      - 3 -