Document:

exv10w1

 

Exhibit 10.1

THE BON-TON STORES, INC. AMENDED AND RESTATED

2000 STOCK INCENTIVE AND PERFORMANCE-BASED AWARD
PLAN

(Amended and Restated as of June 20, 2006)

         
1.     Purpose. The Bon-Ton
Stores, Inc. (the “Company”) hereby adopts The Bon-Ton
Stores, Inc. Amended and Restated 2000 Stock Incentive and
Performance-Based Award Plan (the “Plan”), effective
as of June 20, 2006. The Plan, as herein amended and
restated, is intended to recognize the contributions made to the
Company by employees (including employees who are members of the
Board of Directors), directors, consultants and advisors of the
Company or any Affiliate, to provide such persons with
additional incentive to devote themselves to the future success
of the Company or an Affiliate, to improve the ability of the
Company or an Affiliate to attract, retain, and motivate
individuals upon whom the Company’s sustained growth and
financial success depend, by providing such persons with an
opportunity to acquire or increase their proprietary interest in
the Company through receipt of rights to acquire the
Company’s Common Stock, par value $.01 per share (the
“Common Stock”), and to permit Awards of Restricted
Stock that may be characterized as “performance-based”
compensation for purposes of Section 162(m) of the Code. No
Performance-Based Award shall become vested unless the Plan, as
herein amended and restated, including the provisions of
Section 16, has been disclosed to and approved by the
Company’s shareholders.

         
2.     Definitions. Unless the
context clearly indicates otherwise, the following terms shall
have the following meanings:

			
	 	          A.	
    “Affiliate” means a corporation that is a parent
    corporation or a subsidiary corporation with respect to the
    Company within the meaning of Section 424(e) or (f) of
    the Code.
	 
	 	          B.	
    “Award” means an award of Restricted Stock, granted
    under the Plan, designated by the Committee at the time of such
    grant as an Award, and containing the terms specified herein for
    Awards.
	 
	 	          C.	
    “Award Document” means the document described in
    Section 9 that sets forth the terms and conditions of each
    grant of an Award.
	 
	 	          D.	
    “Board of Directors” means the Board of Directors of
    the Company.

			
	 	          E.	
    “Change of Control” shall have the meaning as set
    forth in Section 10.
	 
	 	          F.	
    “Code” means the Internal Revenue Code of 1986, as
    amended.

			
	 	          G.	
    “Committee” shall have the meaning set forth in
    Section 3.A.

			
	 	          H.	
    “Company” means The Bon-Ton Stores, Inc., a
    Pennsylvania corporation.

			
	 	          I.	
    “Disability” shall have the meaning set forth in
    Section 22(e)(3) of the Code.

			
	 	          J.	
    “Fair Market Value” shall have the meaning set forth
    in Section 8.B.

			
	 	          K.	
    “Grantee” means a person who is granted Restricted
    Stock.

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	 	          L.	
    “ISO” means an Option granted under the Plan that is
    intended to qualify as an “incentive stock option”
    within the meaning of Section 422(b) of the Code.

			
	 	          M.	
    “Non-qualified Stock Option” means an Option granted
    under the Plan that is not intended to qualify, or otherwise
    does not qualify, as an “incentive stock option”
    within the meaning of Section 422(b) of the Code.

			
	 	          N.	
    “Option” means either an ISO or a Non-qualified Stock
    Option granted under the Plan.
	 
	 	          O.	
    “Optionee” means a person to whom an Option has been
    granted under the Plan, which Option has not been exercised and
    has not expired or terminated.

			
	 	          P.	
    “Option Document” means the document described in
    Section 8 that sets forth the terms and conditions of each
    grant of Options.

			
	 	          Q.	
    “Option Price” means the price at which Shares may be
    purchased upon exercise of an Option, as calculated pursuant to
    Section 8.B.

			
	 	          R.	
    “Performance-Based Award” means an Award granted
    pursuant to Section 16.
	 
	 	          S.	
    “Performance-Based Award Limitation” means the
    limitation on the number of Shares that may be granted pursuant
    to Performance-Based Awards to any one Participant, as set forth
    in Section 16.F.

			
	 	          T.	
    “Performance Period” means any period designated by
    the Committee as a period of time during which a Performance
    Target must be met for purposes of Section 16.

			
	 	          U.	
    “Performance Target” means the performance target
    established by the Committee for a particular Performance
    Period, as described in Section 16.B.

			
	 	          V.	
    “Restricted Stock” means Shares issued to a person
    pursuant to an Award.

			
	 	          W.	
    “Shares” means the shares of Common Stock that are the
    subject of Options or Awards.

			
	 	          X.	
    “Exchange Act” means the Securities Exchange Act of
    1934, as amended.

         
3.     Administration of the
Plan.

			
	 	          A.	
    Committee. The Plan shall be administered by the Board of
    Directors, or, in the discretion of the Board of Directors, by a
    committee composed of two (2) or more of the members of the
    Board of Directors. To the extent possible, and to the extent
    the Board of Directors deems it necessary or appropriate, each
    member of the Committee shall be a “Non- Employee
    Director” (as such term is defined in
    Rule 16b-3
    promulgated under the Exchange Act) and an “Outside
    Director” (as such term is defined in Treasury Regulations
    Section 1.162-27 promulgated under the Code); however, the
    Board of Directors may designate two or more committees to
    operate and administer the Plan in its stead. Any of such
    committees designated by the Board of Directors is referred to
    as the “Committee,” and, to the extent that the Plan
    is administered by the Board of Directors, “Committee”
    shall also refer to the Board of Directors as appropriate in the
    particular context. The Board of Directors may from time to time
    remove members from, or add members

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    to, the Committee. Vacancies on the Committee, however caused,
    shall be filled by the Board of Directors.
	 
	 	          B.	
    Meetings. The Committee shall hold meetings at such times
    and places as it may determine. Acts approved at a meeting by a
    majority of the members of the Committee or acts approved in
    writing by the unanimous consent of the members of the Committee
    shall be the valid acts of the Committee.
	 
	 	          C.	
    Grants. The Committee shall from time to time at its
    discretion direct the Company to grant Options or Awards
    pursuant to the terms of the Plan. The Committee shall have
    plenary authority to (i) determine the Optionees and
    Grantees to whom and the times at which Options and Awards shall
    be granted, (ii) determine the price at which Options shall
    be granted, (iii) determine the type of Option to be
    granted and the number of Shares subject thereto,
    (iv) determine the number of Shares to be granted pursuant
    to each Award and (v) approve the form and terms and
    conditions of the Option Documents and of each Award; all
    subject, however, to the express provisions of the Plan. In
    making such determinations, the Committee may take into account
    the nature of the Optionee’s or Grantee’s services and
    responsibilities, the Optionee’s or Grantee’s present
    and potential contribution to the Company’s success and
    such other factors as it may deem relevant. The interpretation
    and construction by the Committee of any provisions of the Plan
    or of any Option or Award granted under it shall be final,
    binding and conclusive.
	 
	 	          D.	
    Exculpation. No member of the Committee shall be
    personally liable for monetary damages as such for any action
    taken or any failure to take any action in connection with the
    administration of the Plan or the granting of Options or Awards
    thereunder unless (i) the member of the Committee has
    breached or failed to perform the duties of his or her office
    within the meaning of subchapter B of Chapter 17 of the
    Pennsylvania Business Corporation Law of 1988, as amended, and
    (ii) the breach or failure to perform constitutes
    self-dealing, willful misconduct or recklessness; provided,
    however, that the provisions of this Section 3.D shall
    not apply to the responsibility or liability of a member of the
    Committee pursuant to any criminal statute or to the liability
    of a member of the Committee for the payment of taxes pursuant
    to local, state or federal law.

			
	 	          E.	
    Indemnification. Service on the Committee shall
    constitute service as a member of the Board of Directors. Each
    member of the Committee shall be entitled without further act on
    his or her part to indemnity from the Company to the fullest
    extent provided by applicable law and the Company’s
    Articles of Incorporation and/or Bylaws in connection with or
    arising out of any action, suit or proceeding with respect to
    the administration of the Plan or the granting of Options or
    Awards thereunder in which he or she may be involved by reason
    of his or her being or having been a member of the Committee,
    whether or not he or she continues to be such member of the
    Committee at the time of the action, suit or proceeding.

         
4.     Grants of Options under the
Plan. Grants of Options under the Plan may be in the form of
a Non-qualified Stock Option, an ISO or a combination thereof,
at the discretion of the Committee.

         
5.     Eligibility. All
employees (including employees who are members of the Board of
Directors or its Affiliates), directors, consultants and
advisors of the Company or its Affiliates shall be eligible to
receive Options or Awards hereunder; provided, that only
employees of the Company or its Affiliates shall be eligible to
receive ISOs. The Committee, in its sole discretion, shall
determine whether an individual qualifies as an employee of the
Company or its Affiliates.

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6.     Shares Subject to Plan.
The aggregate maximum number of Shares for which Options or
Awards may be granted pursuant to the Plan is two million six
hundred thousand (2,600,000) adjusted as provided in
Section 11. The Shares shall be issued from authorized and
unissued Common Stock or Common Stock held in or hereafter
acquired for the treasury of the Company. If an Option
terminates or expires without having been fully exercised for
any reason, or if Restricted Stock is canceled or forfeited
pursuant to the terms of an Award, the Shares for which the
Option was not exercised or that were canceled or forfeited
pursuant to the Award may again be the subject of an Option or
Award granted pursuant to the Plan.

         
7.     Term of the Plan. No
Option or Award may be granted under the Plan after
March 2, 2010.

         
8.     Option Documents and
Terms. Each Option granted under the Plan shall be a
Non-qualified Stock Option unless the Option shall be
specifically designated at the time of grant to be an ISO.
Options granted pursuant to the Plan shall be evidenced by the
Option Documents in such form as the Committee shall from time
to time approve, which Option Documents shall comply with and be
subject to the following terms and conditions and such other
terms and conditions as the Committee shall from time to time
require that are not inconsistent with the terms of the Plan.

			
	 	          A.	
    Number of Option Shares. Each Option Document shall state
    the number of Shares to which it pertains. An Optionee may
    receive more than one Option, which may include Options that are
    intended to be ISOs and Options that are not intended to be
    ISOs, but only on the terms and subject to the conditions and
    restrictions of the Plan. The maximum number of Shares for which
    Options may be granted to any single Optionee in any fiscal
    year, adjusted as provided in Section 11, shall be four
    hundred thousand (400,000) Shares.
	 
	 	          B.	
    Option Price. Each Option Document shall state the Option
    Price that, for all ISOs, shall be at least 100% of the Fair
    Market Value of the Shares at the time the Option is granted as
    determined by the Committee in accordance with this
    Section 8.B; provided, however, that if an ISO is
    granted to an Optionee who then owns, directly or by attribution
    under Section 424(d) of the Code, shares of capital stock
    of the Company possessing more than 10% of the total combined
    voting power of all classes of stock of the Company or an
    Affiliate, then the Option Price shall be at least 110% of the
    Fair Market Value of the Shares at the time the Option is
    granted. If the Common Stock is traded in a public market, then
    the Fair Market Value per Share shall be, if the Common Stock is
    listed on a national securities exchange or included in the
    NASDAQ National Market System, the last reported sale price per
    share thereof on the relevant date, or, if the Common Stock is
    not so listed or included, the mean between the last reported
    “bid” and “asked” prices per share thereof,
    as reported on NASDAQ or, if not so reported, as reported by the
    National Daily Quotation Bureau, Inc., or as reported in a
    customary financial reporting service, as applicable and as the
    Committee determines, on the relevant date. If the Common Stock
    is not traded in a public market on the relevant date, the Fair
    Market Value shall be as determined in good faith by the
    Committee.
	 
	 	          C.	
    Exercise. No Option shall be deemed to have been
    exercised prior to the receipt by the Company of written notice
    of such exercise and of payment in full of the Option Price for
    the Shares to be purchased. Each such notice shall specify the
    number of Shares to be purchased and shall (unless the Shares
    are covered by a then current registration statement or a
    Notification under Regulation A under the Securities Act of
    1933, as amended (the “Act”)), contain the
    Optionee’s acknowledgment in form and substance
    satisfactory to the Company that (i) such Shares

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    are being purchased for investment and not for distribution or
    resale (other than a distribution or resale that, in the opinion
    of counsel satisfactory to the Company, may be made without
    violating the registration provisions of the Act), (ii) the
    Optionee has been advised and understands that (A) the
    Shares have not been registered under the Act and are
    “restricted securities” within the meaning of
    Rule 144 under the Act and are subject to restrictions on
    transfer and (B) the Company is under no obligation to
    register the Shares under the Act or to take any action that
    would make available to the Optionee any exemption from such
    registration, (iii) such Shares may not be transferred
    without compliance with all applicable federal and state
    securities laws, and (iv) an appropriate legend referring
    to the foregoing restrictions on transfer and any other
    restrictions imposed under the Option Documents may be endorsed
    on the certificates. Notwithstanding the foregoing, if the
    Company determines that issuance of Shares should be delayed
    pending (I) registration under federal or state securities
    laws, (II) the receipt of an opinion that an appropriate
    exemption from such registration is available, (III) the
    listing or inclusion of the Shares on any securities exchange or
    in an automated quotation system or (IV) the consent or
    approval of any governmental regulatory body whose consent or
    approval is necessary in connection with the issuance of such
    Shares, the Company may defer exercise of any Option granted
    hereunder until any of the events described in this
    Section 8.C has occurred.
	 
	 	          D.	
    Medium of Payment. An Optionee shall pay for Shares
    (i) in cash, (ii) by certified check payable to the
    order of the Company, or (iii) by such other mode of
    payment as the Committee may approve, including, without
    limitation, payment through a broker in accordance with
    procedures permitted by Regulation T of the Federal Reserve
    Board. Furthermore, the Committee may provide in an Option
    Document that payment may be made in whole or in part in shares
    of Common Stock held by the Optionee for at least six months. If
    payment is made in whole or in part in shares of Common Stock,
    then the Optionee shall deliver to the Company certificates
    registered in the name of such Optionee representing the shares
    of Common Stock owned by such Optionee, free of all liens,
    claims and encumbrances of every kind and having an aggregate
    Fair Market Value on the date of delivery that is at least as
    great as the Option Price of the Shares (or relevant portion
    thereof) with respect to which such Option is to be exercised by
    the payment in shares of Common Stock, accompanied by stock
    powers duly endorsed in blank by the Optionee. Notwithstanding
    the foregoing, the Committee may impose from time to time such
    limitations and prohibitions on the use of shares of Common
    Stock to exercise an Option as it deems appropriate.

         
          E.     Termination
of Options.

		
	 	         
    1.     No Option shall be exercisable
    after the first to occur of the following:

			
	 	(a)	
    Expiration of the Option term specified in the Option Document,
    which shall not exceed (i) ten years from the date of
    grant, or (ii) five years from the date of grant of an ISO
    if the Optionee on the date of grant owns, directly or by
    attribution under Section 424(d) of the Code, shares of
    capital stock of the Company possessing more than ten percent
    (10%) of the total combined voting power of all classes of
    capital stock of the Company or of an Affiliate;
	 
	 	(b)	
    Expiration of ninety (90) days from the date the
    Optionee’s employment or service with the Company or its
    Affiliate terminates for any reason other

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    than Disability or death or as otherwise specified in
    Section 8.E.1(d) or Section 10 below;

			
	 	(c)	
    Expiration of one year from the date the Optionee’s
    employment or service with the Company or its Affiliate
    terminates due to the Optionee’s Disability or death;

			
	 	(d)	
    A finding by the Committee, after full consideration of the
    facts presented on behalf of both the Company and the Optionee,
    that the Optionee has breached his or her employment or service
    contract with the Company or an Affiliate, or has been engaged
    in any sort of disloyalty to the Company or an Affiliate,
    including, without limitation, fraud, embezzlement, theft,
    commission of a felony or proven dishonesty in the course of his
    or her employment or service, or has disclosed trade secrets or
    confidential information of the Company or an Affiliate. In such
    event, in addition to immediate termination of the Option, the
    Optionee shall automatically forfeit all Shares for which the
    Company has not yet delivered the share certificates upon refund
    by the Company of the Option Price of such Shares.
    Notwithstanding anything herein to the contrary, the Company may
    withhold delivery of share certificates pending the resolution
    of any inquiry that could lead to a finding resulting in a
    forfeiture; or

			
	 	(e)	
    The date, if any, set by the Board of Directors as an
    accelerated expiration date pursuant to Section 10 hereof.

			
	 	2.	
    Notwithstanding the foregoing, the Committee may extend the
    period during which an Option may be exercised to a date no
    later than the date of the expiration of the Option term
    specified in the Option Documents, as they may be amended,
    provided that any change pursuant to this Section 8.E.2
    that would cause an ISO to become a Non-qualified Stock Option
    may be made only with the consent of the Optionee.
	 
	 	3.	
    During the period in which an Option may be exercised after the
    termination of the Optionee’s employment or service with
    the Company or any Affiliate, such Option shall only be
    exercisable to the extent it was exercisable immediately prior
    to such Optionee’s termination of service or employment,
    except to the extent specifically provided to the contrary in
    the applicable Option Document.

			
	 	          F.	
    Transfers. No Option may be transferred except by will or
    by the laws of descent and distribution. During the lifetime of
    the person to whom an Option is granted, such Option may be
    exercised only by him or her. Notwithstanding the foregoing, a
    Non-qualified Stock Option may be transferred pursuant to the
    terms of a “qualified domestic relations order” within
    the meaning of Sections 401(a)(13) and 414(p) of the Code
    or within the meaning of Title I of the Employee Retirement
    Income Security Act of 1974, as amended.

			
	 	          G.	
    Holding Period. No Option may be exercised unless six
    months, or such greater period of time as may be specified in
    the Option Documents, have elapsed from the date of grant.

			
	 	          H.	
    Limitation on ISO Grants. In no event shall the aggregate
    Fair Market Value of the Shares (determined at the time the ISO
    is granted) with respect to which an ISO is exercisable for the
    first time by the Optionee during any calendar year (under all
    incentive stock option plans of the Company or its Affiliates)
    exceed $100,000.

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	 	          I.	
    Other Provisions. The Option Documents shall contain such
    other provisions including, without limitation, provisions
    authorizing the Committee to accelerate the exercisability of
    all or any portion of an Option, additional restrictions upon
    the exercise of the Option or additional limitations upon the
    term of the Option, as the Committee shall deem advisable.

			
	 	          J.	
    Amendment. The Committee shall have the right to amend
    Option Documents issued to an Optionee, subject to the
    Optionee’s consent if such amendment is not favorable to
    the Optionee, except that the consent of the Optionee shall not
    be required for any amendment made under Section 10.

         
9.     Award Documents and
Terms. Awards shall be evidenced by an Award Document in
such form as the Committee shall from time to time approve,
which Award Document shall comply with and be subject to the
following terms and conditions and such other terms and
conditions as the Committee shall from time to time require that
are not inconsistent with the terms of the Plan. A Grantee shall
not have any rights with respect to an Award until and unless
such Grantee shall have executed an Award Document containing
the terms and conditions determined by the Committee.

			
	 	          A.	
    Number of Shares and Price. Each Award Document shall
    state the number of Shares of Restricted Stock to which it
    pertains. No cash or other consideration shall be required to be
    paid by the Grantee for an Award.
	 
	 	          B.	
    Certificates. Each Grantee shall be issued a certificate
    in respect of Shares subject to an Award. Such certificate shall
    be registered in the name of the Grantee and shall bear an
    appropriate legend referring to the terms, conditions and
    restrictions applicable to such Award. The Company may require
    that the certificate evidencing such Shares be held by the
    Company until all restrictions on such Shares have lapsed.
	 
	 	          C.	
    Restrictions. Subject to the provisions of the Plan and
    the Award Documents, during a period set by the Committee
    commencing with the date of such Award, which period shall
    extend for at least six months from the date of such Award
    (except as provided by Section 9.G), the Grantee shall not
    be permitted to sell, transfer, pledge, assign, or otherwise
    dispose of the Restricted Stock awarded under the Plan.
	 
	 	          D.	
    Lapse of Restrictions. Subject to the provisions of the
    Plan and the Award Document, restrictions upon Restricted Stock
    shall lapse at such time or times and on such terms and
    conditions as the Committee may determine and set forth in the
    Award Document; provided, however, that the restrictions
    upon such Shares shall lapse only if the Grantee on the date of
    such lapse is, and has continuously been an employee of the
    Company or its Affiliate from the date such Award was granted.
    The Award Document may provide for the lapse of restrictions in
    installments, as determined by the Committee. In the event that
    a Grantee’s employment terminates as a result of the
    Grantee’s death or Disability, all remaining restrictions
    with respect to such Grantee’s Restricted Stock shall
    immediately lapse, unless otherwise provided in the Award
    Document.

			
	 	          E.	
    Rights of the Grantee. Grantees may have such rights with
    respect to the Shares subject to an Award as may be determined
    by the Committee and set forth in the Award Document, including,
    without limitation, the right to vote such Shares and the right
    to receive dividends paid with the respect to such Shares.

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	 	          F.	
    Dividends. The Committee may, in its sole discretion,
    provide in an Award Document that an amount equivalent to any
    dividends payable with respect to the number of Shares of
    Restricted Stock granted, but not yet delivered, be invested and
    reinvested in additional Shares of Restricted Stock, which shall
    be subject to the same restrictions as Restricted Stock to which
    the dividends relate. Such Shares of Restricted Stock shall be
    reflected in accordance with the terms of the Award Document by
    the credit of additional full or fractional Shares, calculated
    to the thousandth of a Share, in an amount equal to the value of
    the declared dividend divided by the Fair Market Value of a
    Share on the date of payment of the dividend. Any arrangements
    for the credit of additional Shares of Restricted Stock shall
    terminate if, and to the extent that, under the terms of the
    Award Document the right to receive the Restricted Stock to
    which the dividends relate shall terminate or lapse.

			
	 	          G.	
    Forfeiture of Restricted Stock. In the event that a
    Grantee’s employment with the Company terminates for any
    reason other than because of death or Disability, any Restricted
    Stock held by such Grantee shall be forfeited by the Grantee and
    reacquired by the Company. The Company may, in its sole
    discretion, waive, in whole or in part, any remaining
    restrictions with respect to such Grantee’s Restricted
    Stock.

			
	 	          H.	
    Delivery of Shares. When the restrictions imposed on
    Restricted Stock expire or have been canceled with respect to
    one or more Shares (whether issued as an Award or as additional
    Restricted Stock pursuant to Section 9.F), the Company
    shall notify the Grantee that such restrictions no longer apply
    with respect to such Shares, and shall deliver to the Grantee
    (or the person to whom ownership rights in such Restricted Stock
    may have passed by will or the laws of descent and distribution)
    a certificate for the number of Shares for which restrictions
    have been canceled or have expired, without any legend or
    restrictions (except those that may be imposed by the Committee
    in its sole judgment to ensure compliance with the then existing
    requirements of the Act and the Exchange Act). The right to
    payment for any fractional Shares that may have accrued shall be
    satisfied in cash based on the Fair Market Value of a Share on
    the date the restriction with respect to such fractional Share
    lapsed or terminated.

         
10.     Change of Control. In
the event of a Change of Control, the Committee may take
whatever action with respect to Options and Awards outstanding
as it deems necessary or desirable, including, without
limitation, accelerating the expiration or termination date or
the date of exercisability in any Option Documents, or removing
any restrictions from or imposing any additional restrictions on
any outstanding Awards.

         
A “Change of Control” shall be deemed to have occurred
upon the earliest to occur of the following events: (i) the
date the shareholders of the Company (or the Board of Directors,
if shareholder action is not required) approve a plan or other
arrangement pursuant to which the Company will be dissolved or
liquidated, or (ii) the date the shareholders of the
Company (or the Board of Directors, if shareholder action is not
required) approve a definitive agreement to sell or otherwise
dispose of substantially all of the assets of the Company, or
(iii) the date the shareholders of the Company (or the
Board of Directors, if shareholder action is not required) and
the holders of voting securities of the other constituent entity
(or its board of directors or similar governing body if security
holder action is not required) have approved a definitive
agreement to merge or consolidate the Company with or into such
other entity, other than, in either case, a merger or
consolidation of the Company in which holders of shares of the
Company’s Common Stock or other common voting stock
immediately prior to the merger or consolidation will hold at

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least 50% of the voting power of the outstanding voting
securities of the surviving entity immediately after the merger
or consolidation, which voting securities are to be held in the
same proportion to one another as such holders’ ownership
of Common Stock or other common voting stock of the Company
immediately before the merger or consolidation, or (iv) the
date any entity, person or group (within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Exchange
Act) other than M. Thomas Grumbacher, members of his family, his
lineal descendants, or entities of which such persons are the
beneficial owners of at least fifty percent (50%) of the voting
interests, the Company or any of its Affiliates, or any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any of its Affiliates, shall have become the
beneficial owner of, or shall have obtained voting control over,
outstanding shares of the Company’s voting stock
representing more than fifty percent (50%) of the voting power
of all of the Company’s outstanding voting stock, or
(v) the first day after the date this Plan is effective
when directors constituting a majority of the Board of Directors
shall have been members of the Board of Directors for less than
twelve (12) months, unless the nomination for election of
each new director who was not a director at the beginning of
such twelve (12) month period was approved by a vote of at
least two-thirds of the directors then still in office who were
directors at the beginning of such period.

         
11.     Adjustments on Changes in
Capitalization. The aggregate number of Shares and class of
Shares as to which Options and Awards may be granted hereunder,
the limitation as to grants to individuals set forth in
Section 8.A hereof, the number of Shares covered by each
outstanding Option or Award, and the Option Price for each
related outstanding Option, shall be appropriately adjusted in
the event of a stock dividend, stock split, recapitalization or
other change in the number or class of issued and outstanding
equity securities of the Company resulting from a subdivision or
consolidation of the Common Stock and/or, if appropriate, other
outstanding equity securities or a recapitalization or other
capital adjustment (not including the issuance of Common Stock
on the conversion of other securities of the Company that are
convertible into Common Stock) affecting the Common Stock which
is effected without receipt of consideration by the Company. The
Committee shall have authority to determine the adjustments to
be made under this Section, and any such determination by the
Committee shall be final, binding and conclusive; provided,
however, that no adjustment shall be made that will cause an
ISO to lose its status as such without the consent of the
Optionee, except for adjustments made pursuant to
Section 10 hereof.

         
12.     Amendment of the Plan.
The Board of Directors of the Company may amend the Plan from
time to time in such manner as it may deem advisable.
Nevertheless, the Board of Directors of the Company may not:
(i) change the class of individuals eligible to receive an
ISO, (ii) increase the maximum number of Shares as to which
Options or Awards may be granted, or (iii) make any other
change or amendment as to which shareholder approval is required
in order to satisfy the conditions set forth in
Rule 16b-3
promulgated under the Exchange Act, in each case without
obtaining approval, within twelve months before or after such
action, by (A) vote of a majority of the votes cast at a
duly called meeting of the shareholders at which a quorum
representing a majority of all outstanding voting stock of the
Company is, either in person or by proxy, present and voting on
the matter, or (B) a method and in a degree that would be
treated as adequate under applicable state law for actions
requiring shareholder approval, including, without limitation,
by written consent of shareholders constituting a majority of
the voting power of all shares of outstanding voting stock of
the Company entitled to vote. No amendment to the Plan shall
adversely affect any outstanding Option or Award, however,
without the consent of the Optionee or Grantee.

         
13.     No Commitment to Retain.
The grant of an Option or Award shall not be construed to imply
or to constitute evidence of any agreement, express or implied,
on the part of the Company or any Affiliate to retain the
Optionee or Grantee in the employ of the Company or an Affiliate
and/or as a member of the Company’s Board of Directors or
in any other capacity.

9

 

         
14.     Withholding of Taxes.
Whenever the Company proposes or is required to deliver or
transfer Shares in connection with an Award or the exercise of
an Option, the Company shall have the right to (a) require
the recipient to remit or otherwise make available 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 other action it deems necessary to
protect its interests with respect to tax liabilities. The
Company’s obligation to make any delivery or transfer of
Shares shall be conditioned on the Optionee’s or
Grantee’s compliance, to the Company’s satisfaction,
with any withholding requirement.

         
15.     Interpretation. The Plan
is intended to enable transactions under the Plan with respect
to directors and officers (within the meaning of
Section 16(a) under the Exchange Act) to satisfy the
conditions of
Rule 16b-3
promulgated under the Exchange Act; any provision of the Plan
that would cause a conflict with such conditions shall be deemed
null and void to the extent permitted by applicable law and in
the discretion of the Board of Directors.

         
16.     Special Rules for
Performance-Based Awards.

			
	 	            A.	
    Performance-Based Awards. The Committee may grant Awards
    of Restricted Stock pursuant to the terms of this
    Section 16, and consistent with Section 9, above,
    which shall include vesting requirements based specifically on
    the attainment of one or more Performance Targets applicable to
    any such Award, as set forth in this Section 16. In the
    event a Participant who has been granted a Performance-Based
    Award terminates his or her employment with the Company prior to
    the date on which the applicable Performance Target or Targets
    have been met or prior to the satisfaction of any other
    applicable conditions or requirements have been met or
    satisfied, such Performance-Based Award shall be immediately
    forfeited. In addition, the Committee shall have the authority
    to cause a Performance-Based Award to be forfeited, in whole or
    in part, at any time prior to the Committee’s determination
    that such Performance-Based Award has become vested by reason of
    attainment of one or more of the applicable Performance Targets,
    at the Committee’s sole discretion. Such absolute right to
    reduce or eliminate a Performance-Based Award shall be exercised
    by the Committee in light of the Committee’s review of all
    facts and circumstances the Committee deems to be relevant. The
    Committee shall have no authority to cause any Performance-Based
    Award to become vested in the absence of the achievement of any
    applicable Performance Target(s).

		
	 	         
    B.     Establishment of Performance
    Targets.

			
	 	          1.	
    The Committee shall establish one or more Performance Targets
    for each Performance Period, which Performance Targets may vary
    for different Participants who may be granted Performance-Based
    Awards.
	 
	 	          2.	
    In all cases, the Performance Target(s) established with respect
    to any Performance Period shall be established within the first
    90 days of the Performance Period or, if shorter, within
    the first twenty five percent (25%) of such Performance Period.
	 
	 	          3.	
    Each Performance Target established under the Plan shall
    constitute a goal as to which an objective method or methods is
    available for determining whether such Performance Target has
    been achieved. In addition, the Committee shall establish in
    connection with the Performance Targets applicable to a
    Performance Period an objective method for computing the

10

 

			
	 		
    portion of a particular Performance-Based Award that may be
    treated as vested as a result of attaining such Performance
    Target(s).

			
	 	C.	
    Vesting of Performance-Based Awards. Vesting of
    Performance-Based Awards shall be determined at the time (or
    times) and in the manner established by the Committee for a
    Performance Period; provided, however, that no portion of
    a Performance-Based Award shall become vested unless and until
    (i) the Plan (including the provisions of this
    Section 16 of the Plan) is approved by the Company’s
    shareholders (and such shareholder approval is still effective
    for purposes of the rules on performance-based compensation
    applicable in connection with Code Section 162(m), as
    required under Section 16.D), and (ii) the Committee
    has certified in writing that each Performance Target for the
    particular Performance Period for which a Performance-Based
    Award is granted has been achieved.
	 
	 	D.	
    Subsequent Shareholder Approval. The Plan (including the
    provisions of this Section 16) shall again be disclosed to
    the Company’s shareholders for approval at the time or
    times required under Code Section 162(m) and/or Treasury
    Regulations promulgated thereunder in order for the
    Performance-Based Awards granted under the Plan to continue to
    qualify as performance-based compensation that is exempt from
    the limitations on deductibility by the Company of compensation
    under Code Section 162(m). No Performance-Based Awards
    shall become vested if such required shareholder approval has
    not been obtained.

			
	 	E.	
    Criteria to be Used in Establishing Performance Targets.
    In establishing any Performance Target under the Plan, the
    Committee shall establish an objective target based upon one or
    more of the following business criteria (which may be determined
    for these purposes by reference to (i) the Company as a
    whole, (ii) any of the Company’s subsidiaries,
    operating divisions, business segments or other operating units,
    or (iii) any combination thereof): earnings before
    interest, taxes, depreciation, and amortization; profit before
    taxes; stock price; market share; gross revenue; net revenue;
    pretax income; net operating income; cash flow; earnings per
    share; return on equity; return on invested capital or assets;
    cost reductions and savings; return on revenues or productivity;
    loss ratio; expense ratio; combined ratio; product spread; or
    any variations or combinations of the preceding business
    criteria, which may also be modified at the discretion of the
    Committee, to take into account extraordinary items or which may
    be adjusted to reflect such costs or expense as the Committee
    deems appropriate.
	 
	 	F.	
    Performance-Based Award Limitation. Notwithstanding
    anything to the contrary herein, no Participant shall receive a
    Performance-Based Award for Shares having a Fair Market Value,
    as of the date of grant, in excess of $3,000,000.

			
	 	          1.	
    The limitation set forth in this Section 16.F shall be
    applied with respect to Performance-Based Awards that relate to
    a Performance Period longer than one year by multiplying that
    limitation by a fraction equal to the number of full calendar
    months in the Performance Period divided by twelve (12).
	 
	 	          2.	
    If a Performance Period is less than a full year, the limitation
    of this Section 16.F shall apply without adjustment;
    provided, however, that any

11

 

			
	 		
    such short Performance Period shall be treated as though it were
    a Performance Period that extends until the end of the one year
    period that starts as of the first day of the short Performance
    Period, and any other Performance Periods that overlap such one
    year period will be subject to further limitations as though
    such Performance Periods were overlapping Performance Periods,
    as described in subsection 16.F.3.
	 
	 	          3.	
    If Performance-Based Awards with overlapping Performance Periods
    are granted to any one employee, the limitations of this
    Section 16.F shall be reduced with respect to any such
    overlapping Performance Periods so that the aggregate value of
    such multiple Performance-Based Awards does not exceed the
    limitation set forth in the first sentence of this
    Section 16.F, multiplied by a fraction, the numerator of
    which is the number of full calendar months occurring during the
    period commencing as of the first day of the first to start of
    such overlapping Performance Periods, and the last day of which
    is the last day of the last to end of such overlapping
    Performance Periods, and the denominator of which is twelve (12).

         
The intent of subsections 1 through 3 of this Section 16.F
is to cause each Performance-Based Award to satisfy the
limitation of this Section 16.F as if such Award were the
only Performance-Based Award granted, and to cause, in addition,
the aggregate value of Performance-Based Awards granted for
overlapping Performance Periods to comply with the limitation of
this Section 16.F as though such multiple Performance-Based
Awards constituted a single Performance-Based Award.

12exv10w2

 

Exhibit 10.2

THE BON-TON STORES, INC.

RESTRICTED STOCK UNIT AGREEMENT

          This is a Restricted Stock Unit Agreement dated as of June 20, 2006 (“Agreement”), between The
Bon-Ton Stores, Inc. (the “Company”) and the undersigned (“Grantee”). This Agreement is entered
into pursuant to the provisions of The Bon-Ton Stores, Inc. Amended and Restated 2000 Stock
Incentive Plan (the “Plan”) in connection with Grantee’s services as an executive employee of the
Company and is intended to constitute an Award under the Plan, on the terms and conditions set
forth herein, and subject to the terms, conditions and limitations of the Plan. Except as
otherwise specifically provided herein, or as may be required by the context, all capitalized terms
used herein are used with the same meaning as is set forth in the Plan.

          1. Definitions.      As used herein:

               (a)      “Date of Grant” means June 20, 2006, the date on which the Company has awarded this
Restricted Stock Unit.

               (b)      “Restricted Stock Unit” or “RSU” means a right to receive a Share pursuant to the terms of
this Agreement, and consistent with the provisions of the Plan.

               (c)      “Share Distribution Date” shall have the meaning set forth in the Vesting Schedule.

               (d)      “Vesting Date” means such date or dates as is established as a Vesting Date pursuant to
the Vesting Schedule.

               (e)      “Vesting Schedule” means the vesting schedule attached hereto as Exhibit A.

          2.      Grant of Restricted Stock Units. Subject to the terms and conditions set forth
herein and in the Plan, the Company grants to Grantee 40,518 Restricted Stock Units, each of which
corresponds to a single Share, to be delivered to Grantee (or Grantee’s personal representative,
heir or legatee in the event of Grantee’s death or incapacity) on the Share Distribution Date.
One-half of such Restricted Stock Units shall be the “2006 RSUs,” and the other half of such
Restricted Stock Units shall be the “2007 RSUs.”

          3.      Restrictions on Restricted Stock Units. Grantee shall not be permitted to sell,
transfer, pledge or assign any Restricted Stock Units at any time. Grantee’s rights with respect
to the Restricted Stock Units granted subject to this Agreement shall be to receive, as of the
Share Distribution Date, the Shares corresponding to such Restricted Stock Units and dividend
equivalent amounts payable at such time and in such manner as is set forth in the Vesting Schedule.

 

 

          4.      Vesting. The Restricted Stock Units subject to this Agreement shall become vested,
if at all, as set forth in the Vesting Schedule.

          5.      Forfeiture of Restricted Stock Units. Any Restricted Stock Units that are not
treated as having become vested as of an applicable Vesting Date or as of the date of Grantee’s
termination of employment shall be forfeited.

          6.      Distribution of Shares. The Restricted Stock Units that are treated as vested as
of the Vesting Date shall entitle Grantee to receive a corresponding number of Shares as of the
Share Distribution Date, such Shares to be fully vested and transferable as of such date, and are
treated as issued in redemption of Grantee’s rights attributable to the Restricted Stock Units
granted hereby.

          7.      Rights of Grantee. Grantee shall not be treated as owning the Shares that
correspond to the Restricted Stock Units unless and until the Shares are transferred to Grantee as
of the Share Distribution Date, and shall have none of the rights associated with ownership of such
Shares prior to such date. Notwithstanding the foregoing, Grantee shall be entitled to payments
that represent dividend equivalent amounts from the Company that shall be payable at such time and
in such manner as is set forth in the Vesting Schedule.

          8.      Certain Adjustments. In the event there is a change in the capitalization of the
Company, Grantee’s rights to receive a distribution of Shares on the Share Distribution Date shall
be modified in a manner consistent with the provision of Section 11 of the Plan.

          9.      Change of Control of Company. In the event of a Change of Control, the Restricted
Stock Units subject to this Agreement shall become vested as provided in the Vesting Schedule.

          10.      Notices. Any notice to be given to the Company shall be addressed to the
Controller 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 records of the Company, 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, by courier service such
as Federal Express, 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.

          11.      Securities Laws. The Committee may from time to time impose any conditions on the
Restricted Stock Units or on the distribution of Shares 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.

          12.      Delivery of Shares. Upon the Share Distribution Date, the Company shall notify
Grantee (or Grantee’s personal representative, heir or legatee in the event of Grantee’s death or
incapacity) that the Shares corresponding to Grantee’s Restricted Stock Units are distributable and
shall, upon request by Grantee (or Grantee’s personal representative, heir or legatee in the event
of Grantee’s death or incapacity) deliver a certificate for such Shares without any legend or
restrictions, except for such restrictions as may be imposed by the Committee, in its sole

-2-

 

judgment, under Paragraph 11. The Committee 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.

          13.      Administration. This grant of Restricted Stock Units has been made 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.      No Effect on Employment. Nothing herein contained shall affect the right of the
Company to terminate Grantee’s employment.

          15.      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.

          IN WITNESS WHEREOF, the Company and Grantee have entered into this Agreement on the day and
year first above written.

	 	 	 	 	 
	 	THE BON-TON STORES, INC.

 	 
	 	By:  	/s/ Tim Grumbacher
 	 
	 	 	Tim Grumbacher, Executive Chairman
 of the Board 	 
	 	 	 	 
	 
	 	GRANTEE

 	 
	 	/s/ Byron L. Bergren
 	 
	 	Byron L. Bergren      	 
	 	 	 
	 

-3-

 

EXHIBIT A            Vesting Schedule

2006 RSUs

          1.      The 2006 RSUs are fully vested as of February 3, 2007 if the Company achieves the net
income required for the target bonus as specified on the CEO 2006 Bonus Metrics Table (applicable
for the Company’s fiscal year ending February 3, 2007).

          2.      Eighty seven and one-half percent (87.5%) of the 2006 RSUs become vested as of February 3,
2007 in the event that the Company achieves ninety-five percent (95%) of the net income required
for the target bonus as specified on the CEO 2006 Bonus Metrics Table (applicable for the Company’s
fiscal year ending February 3, 2007).

          3.      Seventy five percent (75%) of the 2006 RSUs become vested as of February 3, 2007 in the
event that the Company achieves ninety percent (90%) of the net income required for the target
bonus as specified on the CEO 2006 Bonus Metrics Table (applicable for the Company’s fiscal year
ending February 3, 2007).

          4.      The 2006 RSUs are forfeited entirely as of February 3, 2007 if net income for the fiscal
year ending February 3, 2007 is below the net income required for the threshold bonus as specified
on the CEO 2006 Bonus Metrics Table (applicable for the Company’s fiscal year ending February 3,
2007).

The term Vesting Date means, for purposes of the 2006 RSUs, February 3, 2007.

2007 RSUs

          1.      Targets for the 2007 RSUs (the “2007 RSU Targets”) are to be established by the Human
Resources and Compensation Committee of the Company’s board of directors (the “Committee”) at the
same time as performance goals are established by the Committee for the cash bonus under the
Company’s executive cash bonus plan, consistent with Section 4(b) of the Grantee’s employment
agreement with the Company, as amended by the Second Amendment to Employment Agreement, dated as of
May 23, 2006 (the Grantee’s employment agreement, as so amended, being referred to herein as the
“Employment Agreement”).

          2.      In the event the Grantee is discharged without Cause (as defined in the Employment
Agreement) or resigns for Good Reason (as defined in the Employment Agreement) on or after February
4, 2007, the 2007 RSUs shall become vested to the extent provided under the terms of the 2007 RSU
Targets to the same extent as would have applied had the Grantee remained employed through the date
the determination of vesting for the 2007 RSUs is made; provided, however, that the vesting of the
2007 RSUs and the delivery of the Shares attributable to the 2007 RSUs is contingent on the
Grantee’s execution of a general release of claims.

The term Vesting Date means, for purposes of the 2007 RSUs, February 2, 2008.

-4-

 

Change of Control

          The Restricted Stock Units vest on occurrence of a Change of Control (as that term is defined
in the Plan) as follows: (i) in the event of a Change of Control before February 4, 2007, all
Restricted Stock Units fully vest provided the Grantee is employed as of the date of such Change of
Control; (ii) in the event of a Change of Control on or after February 4, 2007 and on or before
February 2, 2008, the 2007 RSUs fully vest provided the Grantee is employed as of the date of such
Change of Control. The occurrence of a Change of Control on or after February 4, 2007 shall have
no effect on the vesting of the 2006 RSUs.

DIVIDEND EQUIVALENTS

          Dividends with respect to Restricted Stock Units that are treated as “vested” as of an
applicable Vesting Date are accumulated from and after such Vesting Date and retained by the
Company until the date the Shares underlying the RSUs are actually delivered to the Grantee.

SHARE DISTRIBUTION DATE

          The Share Distribution Date applicable to the Restricted Stock Units shall be the six-month
anniversary of the Grantee’s termination of employment; provided, however, that with respect to any
Restricted Stock Units that are vested by reason of achievement of net income targets or such other
performance targets as may be established with respect to the 2007 RSUs, the applicable Share
Distribution Date shall be the later of the six-month anniversary of the Grantee’s termination of
employment or the earliest date following the determination of performance based vesting as of
which distribution of Shares is practicable.

-5-

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