THE BON-TON STORES, INC.

~~PROXY STATEMENT~~

PROXY STATEMENT

We are providing this proxy statement to solicit your proxy for use at the annual meeting of shareholders which will be held at 9:00 a.m. on Tuesday, June ~~20, 2006.~~19, 2007. The proxy materials, which consist of the Annual Report, the Notice of Annual Meeting, this proxy statement and the proxy card, are first being sent to our shareholders on or about May ~~23, 2006.~~16, 2007.

We do not anticipate that any matters will be raised at the meeting other than those described in the notice. If any other matters come before the meeting, your proxies will be authorized to act in accordance with their best judgment.

When your proxy card is returned properly signed, or you have effectively submitted your proxy over the internet or by telephone, your shares will be voted in accordance with your instructions. If your proxy card is signed and returned without specifying choices, your shares will be voted “for” the Board nominees, “for” the amendment and restatement of The Bon-Ton Stores, Inc. ~~Amended and Restated 2000 Stock Incentive~~Cash Bonus Plan (the ~~“Stock Incentive~~“Cash Bonus Plan”), and “for” ratification of the appointment of KPMG LLP as independent registered public accounting firm.

You may revoke your proxy before its exercise by notifying the Secretary of the Company in writing, by delivering a properly executed, later-dated proxy card, by submitting your proxy again over the internet or by telephone, or by voting in person at the meeting.

Your proxy is being solicited by the Board of Directors. We will bear the cost of this solicitation, including the charges of brokerage houses, nominees and fiduciaries in forwarding these materials to beneficial owners. This solicitation may be made in person, by telephone or by other means of communication by our directors, officers or employees.

References in this proxy statement to a year refer to our fiscal year, which is the 52- or53-week period ending on the Saturday nearer to January 31 of the following calendar year (for example, a reference to ~~2005~~2006 is a reference to the fiscal year ended ~~January 28, 2006)~~February 3, 2007).

VOTING PROCEDURES AND SECURITY OWNERSHIP

Outstanding Shares and Voting Rights

Shareholders of record at the close of business on April ~~28, 2006~~27, 2007 are entitled to vote at the meeting. At that time, there were ~~13,978,340~~14,499,090 shares of common stock and 2,951,490 shares of Class A common stock outstanding. The common stock and the Class A common stock vote together on all matters. Holders of common stock are entitled to one vote per share and holders of Class A common stock are entitled to ten votes per share. There are no other classes of voting securities outstanding. In the election of directors, shareholders do not have cumulative voting rights.

The presence at the meeting, in person or by proxy, of persons entitled to cast a majority of the shareholder votes will constitute a quorum.

The ~~nine~~eight nominees receiving a plurality of the votes cast (that is, the ~~nine~~eight nominees receiving the greatest number of votes) will be elected. A proxy marked “withhold” with respect to

the election of a director will not be voted as to the director indicated, but will be counted for purposes of determining whether there is a quorum.

Approval of any other matter requires the affirmative vote of a majority of the votes cast. Abstentions and broker non-votes are counted to determine whether a quorum is present at the meeting but are not counted as a vote in favor of or against a particular matter. A ~~broker “non-vote”~~“broker non-vote” occurs when a nominee for a beneficial owner does not vote on a particular matter because the

nominee does not have discretionary voting power as to that item and has not received voting instructions from the beneficial owner.

If you own common stock in your own name, you are an “owner of record.” This means you may direct the persons named as proxies how to vote your shares. If you fail to vote, the proxies cannot vote your shares at the meeting.

You have four voting options:


	•	Internet: You can vote over the internet at the internet address shown on your proxy card. Internet voting is available 24 hours a day. If you have access to the ~~Internet,~~internet, we encourage you to vote this way.If you vote over the internet, do not return your proxy ~~card~~card..

	•	Telephone: You can vote by calling the toll-free telephone number on your proxy card. Telephone voting is available 24 hours a day.~~Easy-to~~Easy-to-follow~~-follow~~ voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded.If you vote by telephone, do not return your proxy ~~card~~card..

	•	Proxy Card: You can vote by signing, dating and mailing your proxy card in the postage-paid envelope provided.

	•	Vote in Person: You can attend the Annual Meeting and vote at the meeting.

If a broker, bank or other nominee holds your common stock for your benefit but not in your name, your shares are in “street name.” In that case, your bank, broker or other nominee will send you a voting instruction form to use in voting your shares. The availability of internet and telephone voting depends on their voting processes. Please follow the voting instruction form sent to you by your bank, broker or other nominee.

If you are a participant in The Bon-Ton Stores, Inc. Retirement Contribution Plan (the “401(k) Plan”), your proxy will incorporate all shares you own through the 401(k) Plan, assuming all your shares are registered in the same name. Your proxy will serve as a voting instruction for the trustee of the 401(k) Plan. If you own shares through the 401(k) Plan and you do not vote, the plan trustee will vote your shares in the same proportion as shares for which instructions were received from other shareholders under the 401(k) Plan.

The Nasdaq Stock Market ~~regulations~~listing standards provide that if more than 50% of the voting power in a company is held by an individual, group or another company, the company is a “controlled” company. Using this definition, Bon-Ton is a “controlled” company because Tim Grumbacher, Executive Chairman of the Board, is the beneficial owner of shares of common stock and Class A common stock entitled to vote more than 50% of the votes entitled to be cast at the meeting. Mr. Grumbacher has indicated that he will vote “for” each of the nominees for director, “for” the amendment and restatement of the ~~Stock Incentive~~Cash Bonus Plan and “for” ratification of the appointment of KPMG LLP. Consequently, the election of each nominee for director, approval of the amendment of the ~~Stock Incentive~~Cash Bonus Plan and ratification of the appointment of KPMG LLP are assured.

Principal Shareholders

This table shows owners of 5% or more of the Class A common stock or common stock as of April ~~3, 2006.~~2, 2007. Each person listed has sole voting power and sole investment power as to the shares indicated unless otherwise noted.

Class A Common Stock Common Stock(1)

Number of Number of
Name and Address Shares Percent Shares Percent

Tim Grumbacher
2801 E. Market Street
York, PA 17402 2,406,253 81.53 % 5,883,475 (2) 35.98 %

Dimensional Fund Advisors, Inc.
1299 Ocean Avenue
Santa Monica, CA 90401 — — 1,181,828 (3) 8.48 %

Henry F. Miller
1650 Arch Street – 22^ndFloor
Philadelphia, PA 19103 545,237 (4) 18.47 % 1,562,844 (5) 10.79 %

Thomas W. Wolf
2801 E. Market Street
York, PA 17402 545,237 (4) 18.47 % 1,637,054 (6) 11.29 %

David R. Glyn
1650 Arch Street – 22^ndFloor
Philadelphia, PA 19103 545,237 (4) 18.47 % 647,851 (7) 4.47 %

M. Thomas Grumbacher Trust
dated March 9, 1989 for the benefit
of Matthew Reed Grumbacher(8)
1650 Arch Street – 22^ndFloor
Philadelphia, PA 19103 181,746 6.16 % 202,898 1.44 %

M. Thomas Grumbacher Trust
dated March 9, 1989 for the benefit
of Beth Anne Grumbacher Elser(8)
1650 Arch Street – 22^ndFloor
Philadelphia, PA 19103 181,746 6.16 % 202,898 1.44 %

M. Thomas Grumbacher Trust
dated March 9, 1989 for the benefit
of Max Aaron Grumbacher(8)
1650 Arch Street – 22^ndFloor
Philadelphia, PA 19103 181,746 6.16 % 202,898 1.44 %


	Class A Common Stock						Common Stock(1)
	Number of			Percent			Number of			Percent
Name and Address	Shares			of Class			Shares			of Class


Tim Grumbacher		2,406,253			81.53	%		5,883,475	(2)		35.53	%
2801 E. Market Street York, PA 17402
Trafelet Capital Management, L.P.		—			—			1,883,200	(3)		13.31	%
900 Third Avenue, 5^th Floor New York, NY 10022
Buckingham Capital Management Inc.		—			—			1,282,400	(3)		9.06	%
750 Third Avenue, 6^th Floor New York, NY 10017
Dimensional Fund Advisors LP		—			—			806,326	(3)		5.70	%
1299 Ocean Avenue Santa Monica, CA 90401
Whale Rock Capital Management LLC		—			—			736,978	(3)		5.21	%
One Post Office Square, 41^st Floor Boston, MA 02109
Henry F. Miller		545,237	(4)		18.47	%		1,332,978	(5)		9.07	%
1650 Arch Street — 22^nd Floor Philadelphia, PA 19103
Michael L. Gleim		545,237	(4)		18.47	%		1,571,860	(6)		10.66	%
2801 E. Market Street York, PA 17402
David R. Glyn		545,237	(4)		18.47	%		649,199	(7)		4.42	%
1650 Arch Street — 22^nd Floor Philadelphia, PA 19103
M. Thomas Grumbacher Trust		181,746			6.16	%		202,898			1.42	%
dated March 9, 1989 for the benefit of Matthew Reed Grumbacher(8) 1650 Arch Street — 22^nd Floor Philadelphia, PA 19103
M. Thomas Grumbacher Trust		181,746			6.16	%		202,898			1.42	%
dated March 9, 1989 for the benefit of Beth Anne Grumbacher Elser(8) 1650 Arch Street — 22^nd Floor Philadelphia, PA 19103
M. Thomas Grumbacher Trust		181,746			6.16	%		202,898			1.42	%
dated March 9, 1989 for the benefit of Max Aaron Grumbacher(8) 1650 Arch Street — 22^nd Floor Philadelphia, PA 19103

(1)

Each share of Class A common stock is convertible into one share of common stock at the holder’s option. Accordingly, the number of shares of common stock for each person includes the number of shares of common stock issuable upon conversion of all shares of Class A common stock beneficially owned by such ~~person.~~person, if any. Also, the total number of shares of common stock outstanding for purposes of calculating percentage ownership of a person includes the number of shares of Class A common stock beneficially owned by such person.


(2)	~~Includes~~The number of shares of common stock includes (a) ~~165,773~~176,773 shares of common stock held by The Grumbacher Family Foundation, a charitable foundation of which Mr. Grumbacher, Nancy T. Grumbacher (Mr. Grumbacher’s wife), Henry F. Miller and ~~Thomas W. Wolf~~Michael L. Gleim are the directors, (b) ~~14,210~~15,558 shares of common stock held by trusts for the benefit of Mr. Grumbacher’s grandchildren of which Ms. Grumbacher, Beth Elser, Mr. ~~Wolf~~Gleim and David R. Glyn are the trustees, (c) 365,205 shares of common stock which are subject to forfeiture as provided in the Company’s ~~Amended and Restated~~ 2000 Stock Incentive and Performance-Based Award Plan, and (d) ~~763,430~~522,564 shares of common stock held by ~~two~~ grantor retained annuity trusts under which Mr. Grumbacher is the beneficiary and pursuant to which Mr. Grumbacher may at any time acquire such shares by substituting other property in such trusts. Mr. Grumbacher disclaims beneficial ownership of all shares referred to in clauses (a) and (b) of this note. As of May 3, 2007, Mr. Grumbacher had pledged 1,288,997 shares of common stock as security for a personal loan.

(3)	Based solely on ~~a Schedule~~Schedules 13G ~~dated February 6, 2006~~ filed with the Securities and Exchange Commission as follows: (a) by Trafelet Capital Management, L.P. on March 16, 2007; (b) by Buckingham Capital Management Inc. on February 14, 2007; (c) by Dimensional Fund Advisors ~~Inc.~~LP on February 9, 2007; and (d) by Whale Rock Capital Management LLC on January 24, 2007.


(4)	Consists of Class A common stock held by trusts for the benefit of Tim Grumbacher’s children of which ~~Thomas W. Wolf,~~Michael L. Gleim, Henry F. Miller and David R. Glyn are the trustees. Messrs. ~~Wolf,~~Gleim, Miller and Glyn each disclaim beneficial ownership of all shares referred to in this note.

(5)	Consists of (a) ~~165,773~~176,773 shares of common stock held by The Grumbacher Family Foundation, a charitable foundation of which Tim Grumbacher, Nancy T. Grumbacher, ~~Thomas W. Wolf~~Michael L. Gleim and Mr. Miller are the directors, (b) 545,237 shares of Class A common stock and 63,454 shares of common stock held by trusts for the benefit of Mr. Grumbacher’s children of which Mr. Miller, Mr. ~~Wolf~~Gleim and David R. Glyn are the trustees, (c) 24,950 shares of common stock held by other trusts for the benefit of Mr. Grumbacher’s children of which Messrs. ~~Wolf,~~Gleim, Miller and Glyn are the trustees, and (d) ~~763,430~~522,564 shares of common stock held by two trusts for the benefit of Mr. Grumbacher of which Messrs. ~~Wolf~~Gleim and Miller are the trustees. Mr. Miller disclaims beneficial ownership of all shares referred to in this note.

(6)	Includes (a) ~~165,773~~176,773 shares of common stock held by The Grumbacher Family Foundation, a charitable foundation of which Tim Grumbacher, Nancy T. Grumbacher, Mr. ~~Wolf~~Gleim and Henry F. Miller are the directors, (b) 545,237 shares of Class A common stock and 63,454 shares of common stock held by trusts for the benefit of Tim Grumbacher’s children of which Mr. ~~Wolf,~~Gleim, Mr. Miller and David R. Glyn are the trustees (c) 24,950 shares of common stock held by other trusts for the benefit of Mr. Grumbacher’s children of which Messrs. ~~Wolf,~~Gleim, Miller and Glyn are the trustees, (d) ~~14,210~~15,558 shares of common stock held by trusts for the benefit of Mr. Grumbacher’s grandchildren of which ~~Nancy T.~~Ms. Grumbacher, Beth Elser and Messrs. ~~Wolf~~Gleim and Glyn are the trustees, and (e) ~~763,430~~522,564 shares of common stock held by two trusts for the benefit of Mr. Grumbacher of which Messrs. ~~Wolf~~Gleim and Miller are the trustees. Also includes 93,367 shares owned by Cathy Gleim, Mr. ~~Wolf~~Gleim’s wife, and 5,700 shares which Mr. Gleim holds as custodian for his grandchildren. Mr. Gleim disclaims beneficial ownership of all shares referred to above. Also includes options exercisable within 60 days of April ~~3, 2006~~2, 2007 to purchase ~~5,000~~45,000 shares of common stock. Does not include ~~6,625~~9,032 restricted stock units held by Mr. ~~Wolf.~~Gleim. Restricted stock units do not confer on the holder voting or dispositive control over shares of common stock until one year following termination of Board service, at which time shares of common stock are issued.

(7)	Consists of (a) 545,237 shares of Class A common stock and 63,454 shares of common stock held by trusts for the benefit of Tim Grumbacher’s children of which Mr. Glyn, ~~Thomas W. Wolf~~Michael L. Gleim and Henry F. Miller are the trustees, (b) 24,950 shares of common stock held by other trusts for the benefit of Mr. Grumbacher’s children of which Messrs. ~~Wolf,~~Gleim, Miller and Glyn are the trustees, and (c) ~~14,210~~15,558 shares of common stock held by trusts for the benefit of Mr. Grumbacher’s grandchildren of which Nancy T. Grumbacher, Beth Elser and Messrs. ~~Wolf~~Gleim and Glyn are the trustees. Mr. Glyn disclaims beneficial ownership of all shares referred to in this note.

(8)	In notes (4), (5), (6) and (7) above, we discussed trusts for the benefit of Tim Grumbacher’s children, of which ~~Thomas W. Wolf,~~Michael L. Gleim, Henry F. Miller and David R. Glyn serve as trustees. This is one of such trusts.

The holders of the Class A common stock have entered into an agreement granting Tim Grumbacher (or his personal representative) the right of first refusal to acquire any shares of Class A common stock proposed to be transferred.

Security Ownership of Directors and Executive Officers

This table shows, as of April ~~3, 2006,~~2, 2007, the holdings of our Chief Executive Officer, our Chief Financial Officer, the ~~four~~three other most highly compensated executive officers during ~~2005~~2006 (collectively, the “named executive officers”), each director, and all directors and executive officers as a group. Each person listed has sole voting power and sole investment power with respect to the shares indicated unless otherwise noted.

Class A Common Stock Common Stock(1)

Shares Shares
Beneficially Beneficially
Name Owned Percent Owned(2)(3)(4) Percent

Tim Grumbacher 2,406,253 81.53 % 5,883,475 (5) 35.98 %
James H. Baireuther — — 191,000 1.37 %
Robert B. Bank — — — *
Byron L. Bergren — — 76,666 *
Philip M. Browne — — 2,500 *
Shirley A. Dawe — — — *
Marsha M. Everton — — 860 *
Michael L. Gleim — — 368,342 (6) 2.63 %
Robert E. Salerno — — 2,100 *
Thomas W. Wolf 545,237 (7) 18.47 % 1,637,054 (8) 11.29 %
James M. Zamberlan — — 16,000 *
David B. Zant — — 67,000 *
All directors and executive officers as a group (17 persons) 2,951,490 100.00 % 7,334,279 (9) 43.06 %


	Class A Common Stock						Common Stock(1)
	Shares						Shares
	Beneficially			Percent			Beneficially			Percent
Name	Owned			of Class			Owned(2)(3)(4)			of Class


Tim Grumbacher		2,406,253			81.53	%		5,883,475	(5)		35.53	%
Robert B. Bank		—			—			—			*
Byron L. Bergren		—			—			179,519			1.26	%
Philip M. Browne		—			—			2,500			*
Anthony J. Buccina		—			—			99,865			*
Shirley A. Dawe		—			—			—			*
Marsha M. Everton		—			—			860			*
Michael L. Gleim		545,237	(6)		18.47	%		1,571,860	(7)		10.66	%
Keith E. Plowman		—			—			33,394	(8)		*
Robert E. Salerno		—			—			2,100			*
David B. Zant		—			—			87,716			*
All directors and executive officers as a group (15 persons)		2,951,490			100.00	%		7,201,896	(9)		41.52	%


	*	less than 1%


(1)	See note (1) to Principal Shareholders table.

(2)	The shares reflected in this column do not include ~~6,625~~9,032 restricted stock units held by each of the Company’s non-employee directors, Mr. Bank, Mr. Browne, Ms. Dawe, Ms. Everton, Mr. Gleim ~~Mr. Salerno~~ and Mr. ~~Wolf. Restricted~~Salerno. The restricted stock units held by the Company’s non-employee directors do not confer on the holder voting or dispositive control over shares of common stock until one year following termination of Board service, at which time shares of common stock are issued. The shares reflected in this column also do not include 40,518 restricted stock units held by Mr. Bergren. These restricted stock units do not confer on Mr. Bergren voting or dispositive control over shares of Common Stock until after Mr. Bergren’s employment with the Company is terminated.

(3)	The shares reflected in this column include options exercisable within 60 days of April ~~3, 2006~~2, 2007 to purchase the following number of shares as to each of the following: Mr. Bergren, ~~41,666~~104,000 shares; Mr. Buccina, 32,000 shares; Mr. Gleim, ~~65,667~~45,000 shares; Mr. ~~Wolf, 5,000 shares; Mr. Zamberlan, 5,000~~Plowman, 3,334 shares; and Mr. Zant, ~~20,000~~40,000 shares.

(4)	The shares reflected in this column include shares of restricted stock as to each of the following: Mr. Grumbacher, 365,205 shares; Mr. ~~Baireuther, 10,000~~Bergren, 75,519 shares; Mr. ~~Bergren, 35,000~~Buccina, 67,865 shares; Mr. ~~Zamberlan, 4,000~~Plowman, 16,865 shares; and Mr. Zant, ~~31,000~~31,716 shares. Shares of restricted stock confer voting rights on the holder but are subject to forfeiture as provided in the Company’s 2000 Stock Incentive and Performance-Based Award Plan.

(5)	See note (2) to Principal Shareholders table.

(6)	Includes 103,367 shares owned by Mr. Gleim’s spouse and 5,700 shares which Mr. Gleim holds as custodian for his grandchildren. Mr. Gleim disclaims beneficial ownership of all of the foregoing shares.

~~(7)~~	See note (4) to Principal Shareholders table.

~~(8)~~(7)	See note (6) to Principal Shareholders table.

(8)	Includes 675 shares held in an IRA by Mr. Plowman’s spouse; Mr. Plowman disclaims beneficial ownership of these shares.

(9)	See notes (2), (3), (4), (5), (6) and ~~(8)~~(7) above. Includes ~~675 shares held in an IRA plan by the spouse of an executive officer not named in this table as to which the executive officer disclaims beneficial ownership. Also includes 19,500~~30,122 shares of restricted stock held by executive officers not named in this table. Shares of restricted stock confer voting rights on the holder but are subject to forfeiture as provided in the Company’s 2000 Stock Incentive and Performance-Based Award Plan.

PROPOSAL ONE

ELECTION OF DIRECTORS

The Board proposes the following nominees for election as directors to hold office until the ~~2007~~2008 Annual Meeting of Shareholders and until their respective successors have been elected. Each is currently a director and has agreed to serve if elected. Should a nominee become unable or decline to serve before the Annual Meeting, the proxies may vote for a substitute recommended by the Governance and Nominating Committee of the Board, unless the Board reduces the number of directors.

ROBERT B. BANK — Director since 2002. Age 5960
Mr. Bank has been President of Robert B. Bank Advisory Services, a private capital investment and consulting firm, since 1990.

BYRON L. BERGREN — Director since 2004. Age 5960
Mr. Bergren has been President and Chief Executive Officer of Bon-Ton since August 2004. Mr. Bergren, who joined Bon-Ton in November 2003 as Vice Chairman and served as President and Chief Executive Officer of Elder-Beerman from February 2002 through August 2004, served as Chairman of the Southern Division of Belk, Inc. from 1999 to February 2002, and in senior executive positions at Belk, ~~Stores~~Inc. from 1985 to 1999.

PHILIP M. BROWNE — Director since 2002. Age 4647
Mr. Browne has been Senior Vice President and Chief Financial Officer of Advanta Corp., one of the nation’s largest ~~providers of~~credit card issuers in the small business ~~credit cards to small businesses,~~market, since June 1998. Prior to that, Mr. Browne was a partner at Arthur Andersen LLP, where he was employed for more than 15 years.

SHIRLEY A. DAWE — Director since 2002. Age 5960
Ms. Dawe has been President of Shirley Dawe Associates, Inc., a Toronto-based retail management consulting group, since 1986. ~~Prior~~From 1969 to ~~1986,~~1985, she held progressively senior merchandising and marketing positions with the Hudson’s Bay Company, a Canadian national department store ~~chain, for over 15 years.~~chain. Ms. Dawe is a director of the National Bank of Canada and ~~Henry~~ Birks & ~~Sons,~~Mayors, Inc., a North American fine jewelry ~~retailer.~~retail chain.

MARSHA M. EVERTON — Director since 2003. Age 5455
Ms. Everton has been President of Marsha Everton LLC, a York, Pennsylvania-based consulting firm, since September 2006. She was President of The Pfaltzgraff Co., a subsidiary of Lifetime Brands, Inc., a multi-channel retail company, ~~since~~from July ~~2005.~~2005 to August 2006. From January 2002 to July 2005, she was President and Chief Executive Officer of The Pfaltzgraff Co., a casual dinnerware manufacturer. Ms. Everton was Vice President of The Pfaltzgraff Co. for more than ten years prior, and was responsible during this period for various departments including stores and direct marketing, corporate development and market planning and administration.

MICHAEL L. GLEIM — Director since 1991. Age 6364
Mr. Gleim was Vice Chairman and Chief Operating Officer of Bon-Ton from December 1995 to February 2002. From 1991 to December 1995 he was Senior Executive Vice President of Bon-Ton, and from 1989 to 1991 he was Executive Vice President of Bon-Ton.

TIM GRUMBACHER — Director since 1967. Age 6667
Mr. Grumbacher has been Executive Chairman of the Board of Directors of Bon-Ton since February 2005. He served as Chairman of the Board of Directors of Bon-Ton from August 1991 to February 2005. He was Chief Executive Officer of Bon-Ton from 1985 to 1995 and from June 2000 to August 2004. From 1977 to 1989 he was President of Bon-Ton.

ROBERT E. SALERNO — Director since 2002. Age 5859
Mr. Salerno has been Chief Operating Officer of Nancy Koltes Associates, a wholesaler of luxury domestics and linens, since June 2004. He was Chief Operating Officer of Kieselstein-Cord International, a luxury accessories wholesaler and retailer, from December 2002 to June 2004; and Vice President and Chief Operating Officer of Circline.com, an internet based broker of fine arts and antiques, from November 2001 to December 2002. From October 1999 to August 2001, Mr. Salerno was Chief Executive Officer of Bluefish Clothing, an apparel marketer. In November 1999, Bluefish Clothing filed for relief under chapter 11 of the U.S. Bankruptcy Code and the company was liquidated in November 2001. From June 1996 to February 1999, he was Senior Vice President of Bergdorf Goodman, responsible for all operational, financial and administrative functions.

~~THOMAS W. WOLF~~ ~~— Director since 1998. Age 57~~

~~Mr. Wolf has been President of the Wolf Organization, Inc., a building materials manufacturer and distributor, since 1985. He is also a director of Irex Corporation, a national building contractor.~~6

~~THE BOARD OF DIRECTORS RECOMMENDS~~

~~VOTING “FOR” THE ELECTION OF THE~~

~~NOMINEES LISTED ABOVE~~

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS INFORMATION

Governing Documents

The key documents that constitute ~~the~~our corporate governance framework ~~of the Company~~ are as follows:


	•	Articles of Incorporation

	•	Bylaws

	•	Corporate Governance Policies

	•	Audit Committee Charter

	•	Human Resources and Compensation Committee Charter

	•	Governance and Nominating Committee Charter

	•	Executive Committee Charter ~~and~~

	•	Code of Ethical Standards and Business ~~Conduct.~~Conduct

Each of the committee charters and the Code of Ethical Standards and Business Conduct is available on our website at www.bonton.com by clicking on “Investor Relations,” then “Corporate Governance.”

Director Independence

The Board of Directors has determined that each of Messrs. Bank, Browne and Salerno, Ms. Dawe and Ms. Everton is an “independent” director as that term is defined in the listing standards of the Nasdaq Stock Market. In determining independence, the Board of Directors carefully reviewed any possible related party transactions between Bon-Ton or any of its affiliates and each of the independent directors, including the Company’s purchase of merchandise from The Pfaltzgraff Co. Ms. Everton was the President of The Pfaltzgraff Co. from July 2005 to August 2006. In determining whether Ms. Everton is an independent director, the Board considered the Company’s transactions with The Pfaltzgraff Co. and determined that purchases by the Company were made in arms-length transactions that were not material to either company. Further, the Board determined that Ms. Everton did not have any direct or indirect material interest in the transactions.

Attendance at Board Meetings

During ~~2005,~~2006, the Board of Directors held ~~eight~~six meetings and took action by unanimous consent without a meeting ~~one time.~~three times.

No director attended fewer than 75% of the total number of meetings of the Board and committees on which he or she served while in office.

Board Committees

The Board has an Audit Committee, a Human Resources and Compensation Committee, a Governance and Nominating Committee and an Executive Committee. The primary functions of each committee, its members, the number of times the committee met during ~~2005,~~2006, and certain other information regarding each committee, are described below.

Audit Committee

The members of the Audit Committee are Philip M. Browne (Chair), Robert B. Bank and Robert E. Salerno. The Board has determined that Mr. Browne is an “audit committee financial

expert” as defined by SEC rules and the listing standards of the Nasdaq Stock Market. The Audit Committee is ~~composed~~comprised entirely of “independent” directors under applicable SEC rules and Nasdaq

Stock Market listing standards and operates under a charter which was adopted by the Board of Directors. This charter is ~~attached to this proxy statement as Appendix A and is~~ posted in the Investor Relations section of the Company’s website at www.bonton.com.

The Audit Committee appoints and establishes the compensation for the Company’s independent registered public accounting firm, approves in advance all engagements with the independent registered public accounting firm to perform non-audit services, reviews and approves the procedures used to prepare the Company’s periodic reports, reviews and approves the Company’s critical accounting policies, discusses the plans and reviews results of the audit engagement with the independent registered public accounting firm, reviews the independence of the independent registered public accounting firm, and oversees the Company’s accounting processes including the adequacy of its internal accounting controls. To assist it in carrying out its responsibilities, the Audit Committee is authorized to retain the services of independent advisors.

The Audit Committee met six times during ~~2005.~~2006.

Human Resources and Compensation Committee

~~During 2005, the~~

The members of the Human Resources and Compensation Committee (the “HRC Committee”) ~~were~~are Shirley A. Dawe (Chair), Robert B. Bank and ~~Philip M. Browne. Effective April 3, 2006,~~ Marsha M. ~~Everton was appointed to the HRC Committee.~~Everton. The HRC Committee is ~~composed~~comprised entirely of “independent” directors, as defined by the listing standards of the Nasdaq Stock Market, and operates under a charter which was adopted by the Board of Directors. This charter is posted in the Investor Relations section of the Company’s website at www.bonton.com.

The HRC Committee advises and assists management in developing the Company’s overall compensation strategy to assure that it promotes shareholder interests, supports the Company’s strategic objectives, and provides for appropriate rewards and incentives for the Company’s management and employees. ~~As part~~The HRC Committee reviews, evaluates and provides recommendations to the Board regarding the plans, policies and programs relating to the compensation of ~~that responsibility,~~the Company’s principal executive officers, the general compensation policies of the Company, succession planning, management development and termination policies and arrangements. In addition, the HRC Committee reviews and approves the structure of the Company’s bonus plans, ~~and~~ administers the Company’s stock option ~~plans. To assist it in carrying out its responsibilities,~~plans and oversees the ~~HRC Committee is authorized to retain the services of independent advisors.~~Company’s retirement, defined benefit and health and welfare plans.

At the end of each year, the HRC Committee evaluates the performance of the Executive Chairman of the Board, the President and Chief Executive Officer, and the other principal executive officers of the Company with respect to approved goals and objectives. In addition, annually, or whenever the Company hires a new executive officer, the HRC Committee establishes ~~their~~the compensation levels for the ~~next year.~~Chairman of the Board, Chief Executive Officer and the other principal executive officers, including base pay, annual incentive compensation, long-term incentive plan participation, entrance into an agreement regarding employment and any special or supplemental benefits. (See “Compensation Discussion and Analysis” for additional discussion of the elements of executive officer compensation.) The compensation of the President and Chief Executive Officer is also reviewed ~~and approved~~ by the full Board of Directors. The HRC Committee ~~also~~annually reviews with the Chief Executive Officer the performance of the other executive officers and approves their compensation for the next year. Finally, the HRC Committee establishes the corporate goals under the Company’s ~~cash bonus plan~~Cash Bonus Plan and ~~may~~has the authority to determine whether the requirements for receipt of a bonus should be waived.

The HRC Committee may delegate its authority to a subcommittee comprised solely of its members. To assist it in carrying out its responsibilities, the HRC Committee is authorized to retain the services of independent advisors. (See “Compensation Discussion and Analysis” for additional discussion of the processes and procedures for the consideration and determination of executive and director compensation.)

The HRC Committee met ~~fourteen~~16 times during ~~2005.~~2006.

Governance and Nominating Committee

The members of the Governance and Nominating Committee (the “GN Committee”) are Michael L. Gleim (Chair), and Marsha M. ~~Everton and Thomas W. Wolf. Messrs.~~Everton. Mr. Gleim ~~and Wolf are~~is not an “independent” ~~directors~~director as set forth under the Nasdaq Stock Market listing standards. As discussed above, the Company is a “controlled company” under Nasdaq Stock Market listing ~~stan-~~

~~dards.~~standards. As a controlled company, the Company may elect, and has elected, not to have a nominating committee comprised solely of independent directors. ~~Both~~ Mr. Gleim ~~and Mr. Wolf provide~~provides the Board with valuable insight with respect to both the governance of the Company and the nominations process, and, therefore, the Board believes ~~they~~that he should continue as ~~members~~a member of the GN Committee.

The GN Committee reviews, develops and makes recommendations to the Board of Directors regarding various aspects of the Company’s governance processes and procedures. It also recommends candidates for election to fill vacancies on the Board, including renominations of members whose terms are due to expire. The GN Committee is also responsible for making recommendations to the Board regarding the compensation of its non-employee members. The GN Committee operates under a charter which was adopted by the Board of Directors. This charter is posted in the Investor Relations section of the Company’s website at www.bonton.com.

The GN Committee met ~~six~~three times during ~~2005.~~2006.

Executive Committee

The members of the Executive Committee are Tim Grumbacher (Chair), Shirley A. Dawe and Michael L. ~~Gleim and Thomas W. Wolf.~~Gleim. The Executive Committee has the authority to act in place of the Board of Directors on specified matters.

The Executive Committee has the following responsibilities: to propose the Board agenda for each year and to refine the agenda prior to each Board meeting; to keep the members of the Board informed of pertinent issues that arise between regularly scheduled quarterly Board meetings; and to act as a sounding board for the Company’s Chief Executive Officer as appropriate. The Executive Committee Charter, under which the Executive Committee operates, was adopted by the Board and is posted in the Investor Relations section of the Company’s website at www.bonton.com.

The Executive Committee met ~~thirteen~~18 times during ~~2005.~~2006.

Director Nominations Process and Director Qualifications

The GN Committee considers any appropriate recommendations for candidates for the Board. Any candidate recommended for the Board shall, at a minimum, possess a background that includes a solid education, sufficient business, professional or academic experience and the requisite reputation, character, integrity, skills, judgment and temperament and such other relevant characteristics, which, in the GN Committee’s view, have prepared him or her for dealing with the multi-faceted financial, business and other issues that confront a board of directors of a corporation with the size, complexity, reputation and success of the Company.

The GN Committee will consider shareholder recommendations for candidates for the Board from any shareholder who has been a continuous record owner of at least 3% of the common stock of the Company for at least one year prior to submission of the recommendation and who provides a written statement that the shareholder intends to continue share ownership through the date of the meeting at which directors are to be elected. Any such shareholder recommendation should be sent to the Governance and Nominating Committee, c/o Office of General Counsel, The Bon-Ton Stores, Inc., P.O. Box 2821, York, PA 17405. ~~Any candidate recommended by a~~No shareholder ~~shall, at a minimum, possess a background that includes a solid education, sufficient business, professional or academic experience and~~recommendations have been received since the ~~requisite reputation, character, integrity, skills, judgment and temperament and such other relevant characteristics, which, in~~2006 shareholder meeting.

In addition, the GN Committee’s view, have prepared him or her for dealing with the multi-faceted financial, business and other issues that confront a board of directors of a corporation with the size, complexity, reputation and success of the Company.

~~The GN~~ Committee ~~also~~ considers potential candidates recommended by current directors, Company officers, employees and others. When appropriate, the GN Committee may retain executive recruitment firms to assist in identifying suitable candidates. The GN Committee screens all potential candidates in the same manner regardless of the source of the recommendation.

In nominating candidates to fill vacancies created by the expiration of the term of a member of the Board, the GN Committee determines whether the incumbent director is willing to

stand for re-election. If so, the GN Committee evaluates his or her performance in office to determine suitability for continued service, taking into consideration the value of continuity and familiarity with the Company’s business. ~~When appropriate, the GN Committee may retain executive recruitment firms to assist in identifying suitable candidates.~~

Director Attendance at Annual Meetings

The Company has adopted a policy which encourages Board members to attend the annual shareholders meeting. ~~Five~~Three members of the Board attended the ~~2005~~2006 Annual Meeting of Shareholders.

Shareholder Communication with Board of Directors

Any shareholder who wishes to communicate with the Board of Directors, or any individual director, may do so by directing correspondence which prominently displays the fact that it is a shareholder-board communication, to such director or directors, c/o Office of General Counsel, The Bon-Ton Stores, Inc., P.O. Box 2821, York, PA 17405. Until and unless a procedure is adopted by a majority of the independent members of the Board whereby it may be deemed unnecessary or inappropriate to relay certain shareholder communications to the appropriate parties, all shareholder communications will be relayed to the intended director or directors.

Compensation of Directors

Messrs. Grumbacher and Bergren are employees of the Company and are not paid any separate compensation for serving as directors. They are the only employees who serve as directors.

Each non-employee director receives both cash compensation and stock compensation ~~which includes:~~comprised of the following:


	•	a ~~$90,000~~$110,000 annual fee, ~~$40,000~~$50,000 of which is paid in cash and ~~$50,000~~$60,000 of which is paid in restricted stock units that vest at the end of the fiscal year in which ~~vest 12 months following termination of Board service;~~they are granted;

	•	a ~~$15,000~~$20,000 annual fee for serving on the Executive Committee;

	•	a $5,000 annual fee for serving on each committee other than the Executive Committee;

	•	a $10,000 supplemental annual fee for each Committee chair.

Robert B. Bank, one of the Company’s non-employee directors, serves as the Board’s representative on the committee that oversees the Company’s Retirement Contribution Plan. For his service on this committee, Mr. Bank receives $1,250 for each meeting attended. ~~On April 3,~~In addition, in 2006 ~~in recognition of work performed in connection with the Company’s acquisition of the Northern Department Store Group of Saks Incorporated,~~ the Board approved supplemental ~~one-time~~ payments in the amount of $5,000 to each of the members of the HRC Committee other than the Chair and a supplemental ~~one-time~~ payment in the amount of $15,000 to the Chair of the HRC Committee.

Directors may defer all or any part of their cash compensation into additional restricted stock units.

The following table presents the compensation provided by the Company during ~~2005~~2006 to each non-employee director for service on the Board of Directors:

~~Non-Employee Director Compensation Table~~

Annual
Annual Cash Restricted Committee
Name Retainer Stock Units Fees Other Fees Total

Robert B. Bank $ 40,000 $ 50,000 $ 15,000 3,750 (1) $ 108,750
Philip M. Browne 40,000 50,000 25,000 — 115,000
Shirley A. Dawe 40,000 50,000 25,000 — 115,000
Marsha M. Everton 40,000 50,000 5,000 — 95,000
Michael L. Gleim 40,000 50,000 30,000 — 120,000
Robert E. Salerno 40,000 50,000 5,000 — 95,000
Thomas W. Wolf 40,000 50,000 20,000 — 110,000


									Change in
									Pension
									Value and
									Nonqualified
	Fees Earned						Non-Equity		Deferred
	or Paid		Stock		Option		Incentive Plan		Compensation		All Other
	in Cash		Awards		Awards		Compensation		Earnings		Compensation			Total
Name	($)		($)		($)		($)		($)		($)			($)

Robert B. Bank		70,000		60,000		—		—		—		—			130,000
Philip M. Browne		72,500		60,000		—		—		—		—			132,500
Shirley A. Dawe		96,667		60,000		—		—		—		—			156,667
Marsha M. Everton		58,750		60,000		—		—		—		—			118,750
Michael L. Gleim		85,000		60,000		—		—		16,351		197,500	(1)		358,851
Robert E. Salerno		55,000		60,000		—		—		—		—			115,000
Thomas W. Wolf(2)		75,000		60,000		—		—		—		—			135,000


(1)	Mr. ~~Bank serves~~Gleim and the Company have entered into a consulting agreement under which Mr. Gleim receives $180,000 in cash compensation per year.

(2)	Mr. Wolf resigned as a director of the ~~Board’s representative on the committee that oversees the Company’s Retirement Contribution Plan and receives $1,250 for each meeting of such committee that he attends.~~Company effective February 9, 2007.

THE BOARD OF DIRECTORS RECOMMENDS
VOTING “FOR” THE ELECTION OF THE
NOMINEES LISTED ABOVE

PROPOSAL TWO

~~AMENDMENT OF THE BON-TON STORES, INC.~~

~~AMENDED AND RESTATED 2000 STOCK INCENTIVE PLAN~~

AMENDMENT AND RESTATEMENT OF
THE CASH BONUS PLAN

The ~~Stock Incentive~~Cash Bonus Plan was adopted by the Board of Directors and was approved by the Company’s shareholders in June 2000. The purpose of the Stock Incentive Plan is to recognize the contributions made to the Company by its employees, consultants and advisors, to provide these individuals with additional incentives to devote themselves to the future success of the Company, and to improve the ability of the Company to attract, retain and motivate individuals upon whom the sustained growth and financial success of the Company depends.

The Stock Incentive Plan provides for the grant of options (“Options”) to purchase shares of common stock and awards (“Awards”) of shares of common stock subject to risk of forfeiture (“Restricted Shares”). Under the Stock Incentive Plan, Options and Awards presently can be granted for up to an aggregate of 1,900,000 shares (exclusive of shares granted and thereafter cancelled). The Board of Directors, at the recommendation of the HRC Committee, has amended the Stock Incentive Plan (the “Plan Amendment”), subjectJuly 2004. Subject to shareholder approval, ~~to:~~


	•	~~increase the number of shares available under the Stock Incentive Plan by 700,000 to an aggregate of 2,600,000 shares; and~~

	•	permit, but not require, the grant of “performance-based” Awards to participants in the Stock Incentive Plan so that such awards qualify for an exemption from the limitations on deductibility of certain compensation imposed by Section 162(m) of the Internal Revenue Code.

The Plan Amendment will become effective immediately if approved by shareholders at the Annual Meeting. If the Plan Amendment is not approved at this Annual Meeting, the Plan Amendment will not become effective and the Stock Incentive Plan as it presently exists will continue in effect. The results of the vote will not affect any awards outstanding under the Stock Incentive Plan as of the date of this proxy statement. A copy of the Stock Incentive Plan, as amended and restated to include the Plan Amendment and certain technical changes approved by the Board, is attached to this proxy statement as Appendix B.

As of April 3, 2006, an aggregate of 785,948 shares of common stock remain reserved for issuance under the Stock Incentive Plan. The Board believes that the availability of an adequate number of shares in the share reserve of the Stock Incentive Plan is an important factor in attracting, motivating and retaining qualified employees and advisors essential to the success of the Company.

The Plan Amendment increases the share reserve under the Stock Incentive Plan to a total of 1,485,948 shares in contemplation of using these shares to grant options over the next few years. In light of historical usage and expected future grants, the Company expects that the increase will be adequate to meet these foreseeable requirements.

Future Options and Awards, if any, that will be made to eligible participants in the Stock Incentive Plan are subject to the discretion of the Human Resources and Compensation Committee and, therefore, are not determinable at this time.

~~The key provisions of the Stock Incentive Plan, as proposed to be amended, are as follows:~~

~~Number of Shares.~~ ~~The maximum number of shares that may be issued under the Stock Incentive Plan is 2,600,000. The maximum number of shares will be adjusted to reflect certain~~

changes in the Company’s capitalization. If any shares subject to any Option or Award are forfeited, or an Option is terminated without the issuance of shares, the shares subject to such Option or Award will again be available pursuant to the Stock Incentive Plan. The closing sale price for a share of common stock on May 3, 2006 was $27.98 as reported by the Nasdaq Stock Market.

~~Administration.~~ ~~The Stock Incentive Plan is administered by~~ the Board of Directors ~~or, at the discretion~~has adopted an amendment and restatement of the Board of Directors, by a committee composed of two or more members of the Board of Directors (for purposes of this Proposal Two, the “Committee”). 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~~ ~~under the Securities Exchange Act of 1934) and an “Outside Director” (as such term is defined in Treasury Regulations Section~~ ~~1.162-27~~ under the Internal Revenue Code (the “Code”)); however, the Board may designate two committees to operate and administer the Stock Incentive Plan in its stead. The Stock Incentive Plan presently is administered by the Human Resources and Compensation Committee.

~~Eligibility.~~ All employees (including all executive officers), directors, consultants and advisors of the Company or its subsidiaries and affiliates are eligible to receive Options or Awards under the Stock Incentive Plan.

~~Term of the Stock Incentive Plan.~~ ~~The Stock Incentive Plan became effective March 3, 2000 and provides that no Options or Awards may be granted after March 2, 2010.~~

~~Options and Awards.~~ From time to time, at its discretion, the Committee may select eligible recipients to whom Options or Awards will be granted, determine when each Option or Award will be granted, determine the number of shares subject to such Option or Award and, subject to the provisions of the Stock Incentive Plan, determine the terms and conditions of each Option or Award.

~~Options.~~ Options granted under the Stock Incentive Plan may be either incentive stock options (“ISOs”) or non-qualified stock options. ISOs are intended to qualify as “incentive stock options” within the meaning of Section 422 of the Code. Unless an Option is specifically designated at the time of grant as an ISO, Options are non-qualified options. Options are not transferable by the optionee except by will or by the laws of descent and distribution. No Option granted under the Stock Incentive Plan may be exercised unless at least six months has elapsed since the date of the grant.

The exercise price of the Options is determined by the Committee, provided that the exercise price of an ISO must be at least 100% of the fair market value of a share of common stock on the date the Option is granted, or at least 110% of the fair market value if the recipient owns shares possessing more than 10% of the total combined voting power of all classes of stock of the Company. The term of each Option is fixed by the Committee. The aggregate fair market value, determined as of the time of grant, of the shares with respect to which an ISO is exercisable for the first time by the recipient during any calendar year (under all incentive stock option plans of the Company) may not exceed $100,000.

~~Maximum Grants.~~ ~~The Stock Incentive Plan provides that the maximum number of shares for which options may be granted to any single optionee in any fiscal year is 400,000 shares.~~

~~Termination of Options.~~ ~~All Options terminate on the earliest of:~~


	a.	~~The expiration of the term specified in the Option, which shall not exceed ten years from the date of grant or five years from the date of grant of an ISO if the recipient owns~~

~~shares possessing more than 10% of the total combined voting power of all classes of stock of the Company;~~
b. The expiration of 90 days from the date the optionee’s employment or service with the Company terminates for any reason other than disability (as defined in the Code) or death or as otherwise specified in subparagraphs d. or e. below;


	c.	~~The expiration of one year from the date the optionee’s employment or service with the Company terminates due to the optionee’s death or disability;~~


	d.	~~A finding by the Committee that the optionee has breached his or her employment contract with the Company or has engaged in disloyalty to the Company; or~~

	e.	~~Such time as the Committee may determine if there is a Change of Control of the Company as defined in the Stock Incentive Plan.~~

~~Payment for Options.~~ ~~An optionee may pay for shares in cash, certified check or such other mode of payment as the Committee may approve, including payment in shares held by the optionee for at least six months.~~

~~Awards.~~The Committee will determine the period, which under the Stock Incentive Plan must extend for at least six months from the date of grant, during which the grantee may not sell, transfer, pledge or assign Restricted Shares (the “Restrictions”). Restrictions may lapse in installments, as determined by the Committee. The Committee may, at its sole discretion, waive any Restrictions in whole or in part. The Committee will determine the rights that grantees have with respect to Restricted Shares, including the right to vote Restricted Shares and the right to receive dividends paid with respect to Restricted Shares. In the event a grantee terminates employment with the Company for any reason other than death or disability, all Restricted Shares remaining subject to Restrictions will be forfeited by the grantee and canceled by the Company. In addition, the Stock IncentiveCash Bonus Plan as ~~amended, also contains special provisions regarding the award of Awards that will be “Performance-Based,” as outlined in more detail, below, in the discussion of Federal Income Tax Consequences.~~

~~Provisions Relating to a Change of Control of the Company.~~ Notwithstanding any other provision of the Stock Incentive Plan, in the event of a Change of Control of the Company, the Committee may take whatever action with respect to Options and Awards outstanding as it deems necessary or desirable, including acceleration of the expiration or termination date or the date of exercisability of an Option or removing any restrictions from or imposing any additional restrictions on outstanding Awards.

~~A “Change of Control” will occur if:~~ (a) the Company is dissolved or liquidated; (b) an agreement to sell or dispose of substantially all of the assets of the Company is approved; (c) subject to certain exceptions, an agreement to merge or consolidate the Company with or into another corporation is approved; (d) any entity, person or group (within the meaning of certain provisions of the Securities Exchange Act), other than Tim Grumbacher, members of his family, his lineal descendants or entities of which such persons are the beneficial owners of at least 50% of the voting interests, the Company or any of its subsidiaries or any employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company, becomes the beneficial owner or has obtained voting control over securities of the Company representing more than 50% of the voting power of the Company’s outstanding voting stock; or (e) directors constituting a majority of the Board of Directors have been members of the Board of Directors for less than 12 months, unless the nomination for election of each new director who was not a director at the beginning of such~~12-month~~ ~~period was approved by a vote of at least two-thirds of the directors then still in office who were the directors at the beginning of such period.~~

~~Amendment and Termination.~~ The Board of Directors may amend the Stock Incentive Plan at any time, provided the Board may not (a) change the class of individuals eligible to receive an ISO, (b) increase the maximum number of shares as to which Options and Awards may be granted or (c) 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~~ under the Securities Exchange Act, in each case without obtaining shareholder approval within 12 months before or after such action. No Option or Award will be adversely affected by any such amendment without the consent of the optionee or grantee.

~~Federal Income Tax Consequences.~~ The following discussion is a summary of certain federal income tax consequences of the issuance of Options and the acquisition of shares of common stock by exercising Options or receiving Awards of Restricted Shares under the Stock Incentive Plan and does not present a complete analysis of all tax consequences which may be relevant to any particular recipient. It does not purport to discuss state or local income tax laws.

~~(a)~~ ~~Options.~~ With respect to ISOs, for federal income tax purposes, an optionee will not have taxable income upon grant or exercise. However, upon exercise of an ISO, an optionee will generally recognize income for alternative minimum tax purposes in an amount equal to the difference between the exercise price of the ISO and the fair market value of the shares received. Any gain realized on sale of the shares acquired upon exercise of an ISO will be treated as long-term capital gain, provided the optionee does not dispose of the shares for at least two years after the date of grant or within one year after the date of exercise. No gain or loss will generally be recognized by an optionee upon, nor will any deduction be allowed to the Company as a result of, the grant or exercise of ISOs.

In general, in the case of non-qualified stock options or ISOs as to which the foregoing holding period limitations have not been satisfied, an optionee will have taxable income at ordinary income rates upon exercise (or at the time of a sale of ISO stock which does not satisfy the holding periods) for the difference between the exercise price and the fair market value at the date of exercise or, if the optionee is subject to certain restrictions imposed by federal securities laws, upon the lapse of those restrictions, unless the optionee elects under Section 83(b) of the Code within 30 days after exercise to be taxed upon exercise. The amount of that difference will generally be a deductible expense to the Company.

The ability of the Company to deduct compensation expense is generally subject to limitations under Section 162(m) of the Code (applicable to compensation in excess of $1,000,000 paid to certain “covered” employees). Any income recognized as ordinary compensation income on the exercise of a non-qualified stock option should, however, be exempt from these Code limitations as “performance-based” compensation provided the option grant meets certain requirements. It is the Company’s intention to administer the Stock Incentive Plan in accordance with all applicable “performance-based” compensation requirements, including administration of the Stock Incentive Plan with respect to “covered” employees by a committee of two or more “outside” directors (as that term is used in applicable IRS regulations) and to make Option grants to such employees with an exercise price that is at least equal to the fair market value of the shares on the date of grant. Under these circumstances, such Options should, on exercise, result in a deductible compensation expense that is exempt from Section 162(m) of the Code as “performance-based” compensation.

~~(b)~~ ~~Restricted Shares.~~ For federal income tax purposes, the recipient of an Award will not recognize income and the Company will not be entitled to a deduction at the time of the Award because the Restricted Shares are subject to risk of forfeiture and are not transferable. When the risk of forfeiture and non-transferability restrictions lapse, the recipient will recognize compensation income and the Company will be entitled to a deduction (subject generally to a $1,000,000 limitation on deductible compensation of certain employees of the Company as pro-

~~vided under Section 162(m) of the Code) in an amount equal to the then fair market value of the Restricted Shares.~~

~~(c)~~ ~~Performance-Based Awards.~~ Pursuant to special provisions in the Stock Incentive Plan, as amended, the Committee may grant Awards that have vesting requirements linked to the attainment of one or more “performance targets” applicable to any such Award. In the event the grantee of any such Award terminates employment prior to the end of the “performance period” applicable to the Award, the grantee will forfeit his or her rights to the Award. In addition, in the event the “performance target” that applies to an Award is not attained by the end of the applicable “performance period,” all rights to the Award will also be forfeited. The Committee also has the right to cause any performance-based Award to be forfeited, at its discretion, without regard to whether applicable performance targets are attained if the Committee determines that such a forfeiture is appropriate.

If performance-based Awards are granted, the Committee must establish one or more performance targets for each performance period, which may vary for different grantees. In all cases, the performance target(s) established with respect to any performance period will 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. Each performance target will be in the form of a goal as to which an objective method or methods is available for determining whether it has been achieved. In addition, the Committee will establish in connection with the performance targets applicable to a performance period an objective method for computing the portion of a particular performance-based Award that will be treated as vested as a result of attaining such performance target(s).

If performance-based Awards are granted, the performance targets established must be 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.

Performance-based Awards cannot be made in excess of the limitations established under the special performance-based provisions of the Stock Incentive Plan. Specifically, no grantee may receive performance-based Awards for Restricted Shares having a fair market value, as of the date the performance-based Award is granted, in excess of $3,000,000. This limitation is an annual limitation, so that if performance-based Awards relate to a performance period longer than one year, the limitation is increased proportionately. If a performance period is less than a full year, this annual limitation applies without adjustment, except that if there are multiple performance periods within any one twelve month period, the limitation cannot be exceeded in the aggregate taking into account the multiple performance-based Awards granted with respect to those performance periods, and a similar limitation applies to overlapping performance periods.

Unlike Awards of Restricted Shares that vest solely by reason of a period of continuous employment, performance-based Awards granted under the Stock Incentive Plan are intended to qualify as “performance-based” compensation for purposes of Section 162(m) of the Code because vesting of the Awards is linked to bona fide performance targets established by the Committee consistent with the requirements set forth in the Stock Incentive Plan. As a consequence, it is

anticipated that at the time a performance-based Award becomes vested, the value of the Restricted Shares will be included in the income of the grantee and will be deductible by the Company without regard to the limitations imposed on deductibility under Section 162(m) of the Code.

~~(d)~~ ~~Election under Section 83(b) of the Code.~~ Except as provided below, an Award recipient may nevertheless elect pursuant to Section 83(b) of the Code to include the Restricted Shares in his income at their fair market value at the time of award, in which event the Company would be entitled to a corresponding deduction. Such election must be made within 30 days after the Award. If this election is made, any appreciation in value recognized by the Award recipient on a subsequent disposition of the Restricted Shares will in general be taxed at capital gains rates and not as ordinary income. If, however, an Award recipient who makes a Section 83(b) election forfeits the Restricted Shares back to the Company, the recipient will not recognize a loss on such forfeiture. In some cases, the particular restrictions with respect to an Award may be such that an Award recipient will not be entitled to make the Section 83(b) election.

~~The Board of Directors approved the Plan Amendment on April 4, 2006.~~described below. Approval of the amendment and restatement of the Cash Bonus Plan ~~Amendment~~ requires the affirmative vote of a majority of the votes cast by holders of common stock and Class A common stock.

The Cash Bonus Plan is a performance-based plan that is intended to provide a means by which those key employees who are designated as participants may be compensated for their roles in the performance of the Company. The Cash Bonus Plan was adopted by the Board of Directors as a means to provide greater flexibility in the establishment of performance goals and setting of target bonuses while permitting such bonuses to be fully deductible as “performance-based compensation” (as that term is used under Section 162(m) of the Internal Revenue Code (the “Code”)).

The purpose of the amendment and restatement adopted by the Board is to increase the maximum individual bonus available under the Cash Bonus Plan from $1,500,000 to $5,000,000 and from two times base salary to three times base salary of an eligible participant. No 2007 bonuses in excess of $1,500,000 may be paid under the Cash Bonus Plan unless and until the amendment and restatement has been approved by the Company’s shareholders.

The design and administration of the Cash Bonus Plan are intended to cause all taxable compensation attributable to the Cash Bonus Plan to be treated as “performance-based compensation.” As a consequence, the provisions of the Code which would otherwise limit the deductibility by us of certain executive compensation in excess of $1,000,000 should not be applicable to any compensation expense attributable to the Cash Bonus Plan. The Cash Bonus Plan is administered by the Human Resources and Compensation Committee (or such other committee consisting exclusively of two or more “outside directors” as may be designated to act in that capacity by the Board from time to time). This administrative committee for the Cash Bonus Plan is referred to in this Proposal Two as the “Committee.”

The material provisions of the Cash Bonus Plan, as proposed to be amended and restated, are described below. The description of the Cash Bonus Plan is qualified in its entirety by the Cash Bonus Plan as amended and restated, a copy of which is attached to this proxy statement as Appendix A and is incorporated herein by reference.

Eligibility. Participants in the Cash Bonus Plan are those key executives, including the named executive officers, who are designated by the Committee to participate in the Cash Bonus Plan from time to time. As of April 24, 2007, 688 executives and other employees have been designated by the Committee to participate in the Cash Bonus Plan.

Shareholder approval and term of Cash Bonus Plan. The Cash Bonus Plan has been in effect since February 1, 2004, and will continue in effect, amended as described in this proxy statement if approved by the shareholders, until it is terminated by the Board. The Cash Bonus Plan may be submitted for reapproval by the shareholders from time to time, and should be so reapproved no later than the shareholders’ meeting that occurs in the fifth year following its last shareholder approval in order to remain qualified as a “performance-based” compensation arrangement for purposes of the Code rules regarding executive compensation referred to above.

Benefits under the Cash Bonus Plan. In general, the benefits under the Cash Bonus Plan consist of a cash bonus payable to participants provided the performance goals established by the Committee are met and, if met, to the extent met. Following the adoption of the amendment and restatement, the maximum amount that can be paid to any one participant under the Cash Bonus

Plan with respect to any one fiscal year is three times his or her base salary in effect for the relevant year, and in no event may any such bonus exceed $5,000,000.

The bases for such performance goals may include: stock price, market share, gross sales, gross revenues, net revenues, pretax income, 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, or any variation or combination of these. In addition, the Committee may establish as an additional performance measure the attainment by a participant in the Cash Bonus Plan of one or more personal objectivesand/or goals that the Committee deems appropriate, including, but not limited to, implementation of Company policies, negotiation of significant corporate transactions, development of long-term business goals or strategic plans for the Company, or the exercise of specific areas of managerial responsibility.

In all cases, measurement of the Company’s or a participant’s achievement of one or more performance goals must be objectively determinable and, where applicable, determined in accordance with generally accepted accounting principles. In all cases, the performance goals for a year must be established no later than 90 days after the beginning of the year. The achievement of performance goals established under the Cash Bonus Plan must be certified by the Committee before any bonus may be paid.

Administration of the Cash Bonus Plan. The Cash Bonus Plan is administered by the Committee which, as noted above, will at all times consist exclusively of two or more “outside directors” (as that term is defined under Section 162(m) of the Code). The resolution of any questions arising with respect to the Cash Bonus Plan will be determined by the Committee, and all such determinations are final and conclusive.

Amendment and termination of the Cash Bonus Plan. The Board may terminate or revoke the Cash Bonus Plan at any time and may amend the Cash Bonus Plan from time to time, provided that none of the termination, revocation or amendment of the Cash Bonus Plan may, without the written approval of the participant, reduce the benefit to which the participant would otherwise be entitled, and provided further that no changes that would increase the benefit available will be effective without approval by the Committee and without disclosure to and approval by the shareholders in a separate vote prior to the date the participant would become entitled to such increased benefit. In addition, the Cash Bonus Plan may be modified or amended by the Committee as it deems appropriate in order to comply with any rules, regulations or other guidance promulgated by the Internal Revenue Service with respect to applicable provisions of the Code.

Federal tax issues. Section 162(m) of the Code limits the deductibility of compensation in excess of $1,000,000 to certain employees of publicly held companies (this limitation is referred to herein as the “million dollar cap”), unless the compensation comes within certain exceptions. One exception to the million dollar cap is available for “performance-based compensation.” In order for taxable compensation to be within this exception to the million dollar cap, a number of requirements must be satisfied, including the establishment of performance goals by a committee of two or more “outside” members of the Company’s Board, disclosure to the shareholders of the material terms of the performance-based bonus arrangement under which the bonus is to be paid, and approval by the shareholders of that arrangement. Additional rules apply to the ongoing administration of such an arrangement in order for compensation to qualify as performance-based.

Bonuses payable under the Cash Bonus Plan are intended to be provided only on the attainment of the performance goals established by the Committee for the year for which the bonus is paid. Assuming the Cash Bonus Plan, as amended and restated, is put into effect in accordance with its terms, is approved by the Company’s shareholders, and is administered in accordance with the provisions set forth therein, the taxable compensation payable under the Cash Bonus Plan should qualify as “performance-based compensation” that is exempt from the million dollar cap.

New Plan Benefits. The following table sets forth the annual bonus opportunities for 2007 depending on the extent to which the performance goals established by the Committee are achieved, assuming the amendment and restatement of the Cash Bonus Plan is approved by shareholders.

The Bon-Ton Stores Amended and Restated Cash Bonus Plan


Name	Threshold($)		Target($)		Maximum($)


Tim Grumbacher		195,000		260,000		520,000
Byron L. Bergren		1,125,000		1,500,000		2,000,000
Anthony J. Buccina		731,300		975,000		1,462,500
Keith E. Plowman		151,900		202,500		303,800
David B. Zant		281,300		375,000		562,500
All executive officers as a group (9 persons)		3,224,188		4,298,750		6,328,175
All eligible non-executive officer employees as a group (679 persons)		8,064,212		10,752,250		16,128,325

THE BOARD OF DIRECTORS RECOMMENDS

VOTING “FOR” ~~AMENDMENT~~APPROVAL OF THE~~BON-TON~~ AMENDMENT
AND RESTATEMENT OF THE CASH BONUS PLAN. ~~STORES, INC.~~

~~2000 STOCK INCENTIVE PLAN~~

PROPOSAL THREE

RATIFICATION OF THE APPOINTMENT

OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has recommended ratification of its appointment of KPMG LLP (“KPMG”), which served as our independent registered public accounting firm in ~~2005,~~2006, to serve as our independent registered public accounting firm for ~~2006.~~2007. If the shareholders do not ratify this appointment, another independent registered public accounting firm will be considered by the Audit Committee.

In making its selection of KPMG, the Audit Committee considered whether the non-audit services provided by KPMG are compatible with maintaining KPMG’s independence.

FEES PAID TO KPMG

2005 2004

Audit Fees(1) $ 1,192,200 $ 1,386,400
Audit-Related Fees(2) 722,711 23,400
Tax Fees(3) 217,020 308,100
All Other Fees — —


	2006		2005


Audit Fees(1)	$	2,469,200		1,192,200
Audit-Related Fees(2)		325,725		722,711
Tax Fees(3)		366,606		217,020
All Other Fees		—		—


(1)		Audit Fees include fees associated with audit services, consultation on matters related to the consolidated financial statements, ~~review of the tax provision,~~ consents, reviews of the Company’s quarterly reports onForm 10-Q and reviews of the Company’s filings under the Securities Exchange Act of 1934.

(2)		Audit-Related ~~fees in 2005~~Fees relate primarily to services ~~including due diligence,~~ provided in connection with the acquisition of the ~~Northern Department Store Group from~~Carson’s division of Saks Incorporated and the related financing. ~~Audit-Related fees in 2004 relate to benefit plan audits.~~

(3)		Tax Fees reflect all ~~tax related~~tax-related services, ~~excluding any costs included in Audit Fees,~~ including consultation, return preparation, planning and compliance.

The Audit Committee is responsible for the pre-approval of all audit services and non-audit services performed by the Company’s independent registered public accounting firm. All of the fees shown in the chart above were pre-approved by the Audit Committee. The Audit Committee may delegate to one of its members the authority to grant such pre-approvals, and any such approvals are presented to the full Audit Committee at its next scheduled meeting.

A representative of KPMG is expected to be present at the meeting, will have the opportunity to make a statement if he or she so desires, and will be available to respond to appropriate questions from shareholders.

THE BOARD OF DIRECTORS RECOMMENDS

VOTING “FOR” RATIFICATION OF THE APPOINTMENT

OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~EXECUTIVE COMPENSATION~~

~~Summary Compensation Table~~

~~This table sets forth, for the last three years, certain information regarding the compensation paid or accrued for our Chief Executive Officer and for the named executives:~~

Long-Term
Annual Compensation Compensation Awards

Other Restricted Securities
Name and Annual Stock Underlying All Other
Position Year Salary Bonus Compensation(1) Awards(2) Options(#) Compensation(3)

Tim Grumbacher 2005 $ 650,000 $ — $ 22,584 $ 6,588,298 — $ 11,590
Executive Chairman 2004 712,500 845,025 — — — 12,217
of the Board 2003 625,000 817,500 — — — 11,425

Byron L. Bergren(4) 2005 736,538 — 55,075 — 95,000 127,374
President and CEO 2004 605,662 247,143 — 456,750 125,000 1,838,760
2003 148,741 878,750 — — — 1,413

James H. Baireuther 2005 400,000 — 18,421 178,100 — 14,416
Vice Chairman and 2004 394,564 149,900 — — — 14,719
Chief Administrative Officer 2003 402,300 210,000 — — — 13,927

David B. Zant(5) 2005 500,000 125,000 24,716 106,860 — 24,108
Vice Chairman and 2004 28,846 225,000 — 630,000 60,000 —
Chief Merchandising Officer 2003 — — — — — —

James M. Zamberlan(6) 2005 400,000 — 5,602 71,240 — 15,491
Executive Vice President — 2004 370,350 114,900 — 104,090 5,000 10,269
Stores 2003 99,000 131,400 — — — 931


~~(1)~~	The amounts disclosed in this column for 2005 include the following: (i) automobile allowances and Company car benefits in the amount of $13,425 for Mr. Bergren, $9,500 for Mr. Baireuther, $9,500 for Mr. Zant and $3,302 for Mr. Zamberlan; (ii) supplemental medical benefits in the amount of $22,584 for Mr. Grumbacher, $30,511 for Mr. Bergren, $2,300 for Mr. Baireuther, $3,893 for Mr. Zant and $2,300 for Mr. Zamberlan, and (iii) club membership expenses in the amount of $11,139 for Mr. Bergren, $6,621 for Mr. Baireuther and $11,323 for Mr. Zant. Prior to 2005, the Company did not disclose the value of perquisites and other personal benefits provided to its named executive officers because the dollar value of such perquisites and other personal benefits did not exceed the threshold requiring disclosure under applicable SEC rules.

~~(2)~~	The total number of restricted stock awards held by the named executives at the end of 2005 was 445,205 shares. The closing price of the common stock on January 28, 2006 was $21.18 per share, giving the named executives’ restricted stock holdings a value of $9,429,442 at year-end. Holders of restricted stock are entitled to the same dividend that the Company pays on common stock.

~~(3)~~	The amounts disclosed in this column for 2005 include the following: (i) life insurance premiums, or reimbursement for life insurance premiums, in the amount of $528 for Mr. Grumbacher, $1,806 for Mr. Bergren, $3,354 for Mr. Baireuther, $776 for Mr. Zant, and $4,429 for Mr. Zamberlan; (ii) Company contributions under the Company’s Retirement Contribution Plan in the amount of $11,062 for each of Messrs. Grumbacher, Bergren, Baireuther and Zamberlan; and (iii) relocation benefits in the amount of $114,506 for Mr. Bergren and $23,332 for Mr. Zant.

~~(4)~~	~~Mr. Bergren became an executive officer of the Company in November 2003.~~

~~(5)~~	~~Mr. Zant became an executive officer of the Company in January 2005.~~

~~(6)~~	~~Mr. Zamberlan joined the Company in October 2003 upon the acquisition of Elder-Beerman and became an executive officer of the Company in November 2004.~~

~~Stock Option Grants~~

~~The following table reflects the stock option grants to each of the named executives during 2005. We do not have any plan pursuant to which stock appreciation rights may be granted.~~

~~Option Grants in 2005~~

Individual Grants Potential Realizable Value at
Assumed Annual Rate of
Securities % of Total Stock Price Appreciation for
Underlying Options Granted Option Term(1)
Options to Employees in Exercise Expiration
Name Granted 2005 Price(2) Date 5% 10%

Tim Grumbacher — — — — — —

Byron L. Bergren 95,000 (3) 53.07 % $ 20.44 7-6-12 $ 790,508 $ 1,842,219

James H. Baireuther — — — — — —

David B. Zant — — — — — —

James M. Zamberlan — — — — — —


~~(1)~~	Illustrates value that might be realized upon exercise of options immediately prior to the expiration of their term, assuming specified compounded rates of appreciation on the Common Stock over the term of the options. Assumed rates of appreciation are not necessarily indicative of future stock performance.

~~(2)~~	~~The exercise price represents the closing price of the common stock on the Nasdaq National Market on the date of grant.~~

~~(3)~~	~~This option vests as follows: (i) 20,667 shares on July 6, 2006, (ii) 20,667 shares on July 6, 2007, (iii) 20,666 shares on July 6, 2008, and (iv) 33,000 shares on July 6, 2009.~~

~~Stock Option Exercises and Holdings~~

~~The following table shows stock option exercises during 2005 and the number and value of stock options (exercised and unexercised) at the end of 2005 for the named executives:~~

~~Option Values at January 28, 2006~~

Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
Shares January 28, 2006 at January 28, 2006(1)
Acquired Value
On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable

Tim Grumbacher 44,550 $ 627,634 — — — —

Byron L. Bergren — — — 220,000 — $ 1,086,550

James H. Baireuther — — — — — —

David B. Zant — — — 60,000 — 325,800

James M. Zamberlan — — 5,000 — $ 31,550 —


~~(1)~~	~~In-the~~-money options are options having an exercise price below the year-end share price of $21.18. Value is calculated by multiplying the difference between the option exercise price and $21.18 by the number of shares underlying the option.

~~Employment Agreements~~

~~Tim Grumbacher~~

During the initial three-year period, Mr. Grumbacher will receive an annual base salary of $650,000 and will be eligible to earn an annual cash bonus in accordance with pre-determined criteria established by the HRC Committee under the Company’s bonus plan for senior executives with target bonuses of 75%, 50% and 40% of base salary for 2005, 2006 and 2007, respectively. The maximum bonus payable for such years will be 150%, 100% and 80% of base salary, respectively. Mr. Grumbacher did not receive a performance bonus for 2005.

Under the agreement, Mr. Grumbacher was granted 365,205 restricted shares of the Company’s common stock pursuant to the terms of the Company’s Amended and Restated 2000 Stock Incentive Plan. The shares will vest at the end of the term of the agreement, subject to accelerated vesting upon a change in control (as defined in the agreement) of the Company, upon Mr. Grumbacher ceasing to serve the Company as a result of his death or disability (as defined in the agreement) or if, prior to the end of the term, Mr. Grumbacher and the Board mutually agree that he shall cease to serve as Executive Chairman of the Board. Mr. Grumbacher will forfeit the restricted shares if, prior to the end of the term, he ceases to serve as Executive Chairman of the Board and such cessation of service is not the result of a breach of the agreement by the Company. Mr. Grumbacher will not be entitled to any other long-term incentive awards. The Company has agreed to provide Mr. Grumbacher and his wife with medical insurance for the duration of each of their lives. In addition, for the duration of Mr. Grumbacher’s life, the Company will provide him with secretarial support and office space and allow him to participate in the Company’s discount program that allows executives to make “at-cost” purchases from the Company.

If during the initial three-year period, Mr. Grumbacher shall cease to serve as executive Chairman by reason of the occurrence of a change in control of the Company, then he shall be entitled to receive a lump sum cash payment, as soon as practicable following the cessation of such service (subject to delay if necessary to comply with Section 409A of the Internal Revenue Code), equal to the sum of (i) any accrued but unpaid compensation and reimbursement for any business expenses, (ii) the remainder of his base salary for the initial three-year period and (iii) the amount of any target bonus in respect of any fiscal year not commenced or completed prior to the change in control.

In the event that any amounts payable under the agreement or any other plan or agreement would constitute “excess parachute payments” that exceed ten percent of Mr. Grumbacher’s “safe harbor” (as each term is defined in Section 280G of the Internal Revenue Code and the regulations promulgated thereunder), the Company will provide a~~gross-up~~ payment to Mr. Grumbacher to compensate him fully for the imposition of excise taxes under Section 280G. If the amounts payable exceed the “safe harbor” limit, but not by more than ten percent, then the amounts payable to Mr. Grumbacher shall be reduced so that no payments are deemed to be “excess parachute payments.”

~~Byron L. Bergren~~

Mr. Bergren’s current employment agreement with the Company was entered into August 24, 2004. The term of this employment agreement continues to January 31, 2008, and thereafter from year to year unless terminated by Mr. Bergren or the Company. The current employment agreement initially provided for a minimum annual base salary of $700,000. This minimum base salary was increased to $750,000 effective May 1, 2005. The current employment agreement also provides for a bonus in accordance with pre-determined criteria established by the HRC Committee up to a maximum bonus of 100% of base salary in 2004 and 150% in succeeding years. No performance bonus was awarded to Mr. Bergren for 2005. If Mr. Bergren is discharged without cause or resigns for good reason (each as defined in the employment agreement) he will continue to receive his base salary and other benefits for the greater of one year or the remaining term of the current employment agreement.

Upon a change in control (as defined in the current employment agreement) of the Company, all options and shares of restricted stock held by Mr. Bergren will immediately vest and, upon termination of his employment under certain circumstances after a change in control, Mr. Bergren will be entitled to a payment equal to the lesser of (i) 2.99 times his base salary at the time of the change in control, and (ii) the maximum amount permitted by Section 280G of the Internal Revenue Code. As set forth in the agreement, Mr. Bergren was nominated to serve as a Director and was granted, effective August 24, 2004, 35,000 restricted shares of the Company’s common stock which vest on January 31, 2008 and options to purchase 125,000 shares of the Company’s common stock which vest in three equal installments on January 31, 2006, January 31, 2007 and January 31, 2008.

~~David B. Zant~~

Mr. Zant’s employment agreement was entered into December 13, 2004 and continues to January 31, 2008. It provides for a minimum annual base salary of $500,000 and an annual target bonus of 50% of his base salary and a maximum bonus of 100% of his base salary in accordance with objectives determined by the HRC Committee. For the first year of participation in the bonus plan only, 2005, Mr. Zant received a guaranteed bonus payment of $125,000. Mr. Zant did not receive any additional bonuses for 2005. If Mr. Zant is discharged without cause or resigns for good reason (each as defined in the employment agreement), he will continue to receive his base salary for one year. Upon a change in control (as defined in the employment agreement) of the Company, all options and shares of restricted stock held by Mr. Zant will immediately vest and, upon termination of his employment under certain circumstances after a change in control, Mr. Zant will be entitled to a payment equal to the lesser of (i) 2.99 times his base salary at the time of the change in control, and (ii) the maximum amount permitted by Section 280G of the Internal Revenue Code.

~~James M. Zamberlan~~

By agreement dated November 29, 2004, the Company assumed the terms and provisions of Mr. Zamberlan’s employment agreement with The Elder-Beerman Stores Corp., and agreed to certain modifications thereto. This employment agreement, as amended, continued to January 28, 2006, and continues indefinitely thereafter unless terminated by the Company or Mr. Zamberlan. It provides for a minimum annual base salary of $400,000 and a bonus in accordance with pre-determined criteria established by the HRC Committee up to a maximum bonus of 80% of his base salary. Mr. Zamberlan’s annual base salary was increased to $425,000 effective April 30, 2006. Mr. Zamberlan did not receive a performance bonus for 2005. If his employment is terminated by the Company without cause (as defined in his employment agreement), or if Mr. Zamberlan shall

~~terminate his employment agreement for any reason, he shall be entitled to a termination payment of $1,039,367.~~

~~Supplemental Retirement Benefits~~

The Company has established a nonqualified, unfunded retirement plan for certain key executives. Under the terms of this plan, each participant is entitled to an annual retirement benefit if he remains employed by the Company for a stated period.

Under this plan, James H. Baireuther is entitled to an annual retirement benefit of $50,000, payable commencing on his attainment of sixty years of age or retirement from the Company, whichever is later.

~~Executive Severance~~

We have entered into severance agreements with certain of our executive officers other than Messrs. Grumbacher, Bergren, Zant and Zamberlan, which generally provide for payment of one year’s base salary if the executive officer is terminated without cause (as defined in such agreements).

~~Equity Compensation Plan Information~~

At January 28, 2006, the Amended and Restated 1991 Stock Option and Restricted Stock Plan, The Bon-Ton Stores, Inc. Amended and Restated 2000 Stock Incentive Plan, the Company’s Phantom Equity Replacement Plan and the Management Incentive Plan were in effect. Each of these plans has been approved by the shareholders. There were no other equity compensation plans in effect. The following information concerning these plans is as of January 28, 2006:

Number of securities
Number of shares of remaining available for future
common stock to be Weighted-average issuance under equity
issued upon exercise of exercise price of compensation plans
outstanding options, outstanding options, (excluding securities reflected
warrants and rights warrants and rights in the second column)

Equity compensation plans approved by security holders
Stock options 546,030 $ 13.15 — (1)
Restricted stock 471,647 — — (1)
Restricted stock units 46,375 — — (1)

Total 1,064,052 — 874,448 (2)
Equity compensation plans not approved by security holders — — —
Total 1,064,052 874,448 (2)


~~(1)~~	~~The referenced plans do not allocate available shares among stock options, restricted stock or restricted stock units.~~

~~(2)~~	~~Does not include the additional 700,000 shares under the amendment to the Stock Incentive Plan submitted for approval to shareholders at the June 20, 2006 annual meeting.~~

~~STOCK PERFORMANCE GRAPH~~

The following graph compares the yearly percentage change in the cumulative total shareholder return on common stock from February 3, 2001 through January 28, 2006, the cumulative total return on the CRSP Total Return Index for The Nasdaq Stock Market (U.S. Companies) and the Nasdaq Retail Trade Stocks Index during such period. The comparison assumes $100 was invested on February 3, 2001 in the Company’s common stock and in each of the foregoing indices and assumes the reinvestment of any dividends.

NASDAQ
DATE NASDAQ RETAIL BON-TON

2/3/01 100.00 100.00 100.00
2/2/02 72.33 120.05 80.00
2/1/03 50.52 97.83 132.48
1/31/04 78.55 143.43 398.08
1/29/05 77.70 171.80 502.08
1/28/06 88.52 186.29 691.84

~~REPORT OF THE HUMAN RESOURCES AND COMPENSATION COMMITTEE~~

The following Report of the Human Resources and Compensation Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.

~~General~~

The Human Resources and Compensation Committee (the “HRC Committee”) approves all general policies affecting the compensation of Bon-Ton’s executive officers and determines, within limits established by applicable employment agreements, the compensation of each of the named executive officers in the Summary Compensation Table. The HRC Committee also reviews and approves the recommendations of the Company’s Chief Executive Officer pertaining to his direct reports who do not have employment agreements.

~~Composition of the HRC Committee~~

Each member of the HRC Committee is “independent” pursuant to the listing standards of the Nasdaq Stock Market. No member of the HRC Committee is a former or current officer or employee of the Company or any affiliate of the Company or received compensation from the Company in any capacity other than as a director of the Company or as a member of a Board Committee.

~~Compensation Philosophy~~

The Company’s executive compensation program is designed to attract, motivate and retain executive officers who are critical to the Company’s long-term success and the creation of shareholder value. The HRC Committee’s philosophy is to directly link an increasing portion of the Company’s executive officers’ compensation with corporate performance and increases in shareholder value. The following are the objectives that guide the HRC Committee’s decisions regarding compensation:


•	~~Provide a competitive total compensation package that enables the Company to attract, motivate and retain key personnel.~~

•	~~Provide variable compensation opportunities, primarily on an annual basis, that are directly linked to the attainment of corporate performance goals.~~

•	Provide long-term compensation opportunities, primarily to new hires, upon promotion, to reward significant individual achievement and in connection with evaluations of retention requirements. These opportunities are made through awards of stock options and shares of restricted stock that align executive compensation with increases in shareholder value.

~~Components of Compensation~~

The basic forms of executive compensation are base salary, annual incentive compensation, and long-term incentives consisting of stock options, restricted stock and supplemental retirement benefits. The HRC Committee seeks to achieve a mix of these to be competitive in the marketplace and to attract, motivate and retain the Company’s executive officers. In doing so, the HRC Committee considers various aspects of the Company’s operating results as well as its

financial condition and considers each executive officer’s role in such achievement. The HRC Committee utilizes comparative data developed by independent external compensation specialists to assure the competitiveness of compensation for the named executives.

~~Base Salary~~

The base salaries of the Company’s executive officers are determined by evaluating such executive officers’ roles and responsibilities and compensation data for comparative businesses. The base salary of each executive officer is reviewed annually. If appropriate, the Chief Executive Officer recommends annual salary increases for his direct reports, including Messrs. Zant, Baireuther and Zamberlan. Salary increases are based on promotions, increased responsibilities, the Company’s performance, the executive officer’s individual performance and the executive officer’s compensation compared to similarly situated executives at comparative businesses. Base salary increases are also designed to retain the executive’s services.

The base salaries of Tim Grumbacher, Byron L. Bergren, James H. Baireuther, David B. Zant and James M. Zamberlan for 2005 were established pursuant to employment agreements approved by the HRC Committee and, with respect to Mr. Bergren’s and Mr. Grumbacher’s employment agreements, the Company’s Board of Directors. The base salaries for these executive officers, as established pursuant to the applicable employment agreements, were based on a variety of factors, including the general level of executive compensation of similarly situated executives at comparative businesses, the general level of executive compensation at the Company and an evaluation of each such executive officer’s capacity to positively affect the Company’s performance. Other than Mr. Bergren, none of the named executive officers received a salary increase for 2005.

~~Annual Incentive Compensation~~

Annual compensation is also comprised of a cash bonus based on the achievement of pre-determined goals and objectives. The HRC Committee believes that it is important for a portion of the potential annual compensation for the Company’s executive officers be in the form of an annual bonus which is dependent upon the Company’s performance.

For 2005, the HRC Committee established “minimum,” “target,” and “maximum” payout potentials under the Company’s cash bonus program for each executive officer based on performance criteria, attainment of pre-determined net income performance goals, and the overall evaluation of each executive. Mr. Grumbacher’s “minimum” payout level was set at 56.25% of his base salary, his “target” payout level was set at 75% of his base salary, and his “maximum” payout level was set at 150% of his base salary. Mr. Bergren’s “minimum” payout level was set at 56.25% of his base salary, his “target” payout level at 75% of his base salary, and his “maximum” payout level at 150% of his base salary. Mr. Baireuther’s and Mr. Zamberlan’s “minimum” payout level was set at 30% of base salary, “target” payout level was set at 40% of base salary, and “maximum” payout level was set at 80% of base salary. Mr. Zant’s “minimum” payout level was set at 37.5% of his base salary, his “target” payout level at 50% of his base salary, and his “maximum” payout level was set at 75% of his base salary. For all other officers and executives, the “minimum” payout level was set within the range of 5.6% to 22.5% of base salary, the “target” level payout was set within the range of 7.5% to 30% of base salary, and the “maximum” payout level was set within the range of 12% to 45% of base salary. Generally, if certain threshold performance goals are not attained, no bonus is payable for the period. As indicated in the Summary Compensation Table, Mr. Zant was paid a bonus of $125,000 for 2005. Such amount was the minimum bonus to be paid to Mr. Zant under the terms of his employment agreement. Because the threshold performance goals for the

~~minimum payouts for 2005 performance were not achieved, no named executive was paid a bonus for 2005 other than Mr. Zant.~~

In addition, a cash bonus to an executive may be made at the discretion of the HRC Committee for extraordinary achievement by the executive. No such extraordinary bonus was awarded to any of the named executive officers in 2005.

~~Long-Term Incentives — Stock Options and Restricted Stock Awards~~

The final component of compensation to the Company’s executive officers is long-term incentive compensation in the form of stock options, restricted stock and supplemental retirement benefits. The HRC Committee administers the Stock Incentive Plan, which provides for the grant of stock options and restricted share awards. These options and awards are intended to align the executive officers’ interests with those of shareholders by increasing such officers’ stake in the long-term performance of the Company. These option grants and share awards are made periodically, primarily to new hires, upon promotion, to reward significant individual achievement and in connection with evaluations of retention requirements. The HRC Committee annually reviews the performance of the Chief Executive Officer to determine whether grants of stock options or restricted stock are warranted.

Stock options and restricted share awards generally vest over a number of years. Any vested options are usually forfeited 90 days after termination of the recipient’s employment, and any unvested shares of restricted stock and unvested options are usually forfeited upon termination of employment. Such options and restricted stock, therefore, are also intended to encourage recipients to remain in the employ of the Company over a substantial period of time.

During 2005, there were grants of options with respect to 179,000 shares and awards of 409,905 shares of restricted stock made under the Stock Incentive Plan. Option grants made to named executive officers are reflected in the table of Option Grants in 2005, and awards of restricted stock to named executive officers in 2005 are reflected in the Summary Compensation Table.

In addition, an award of stock options or restricted stock to an executive may be made at the discretion of the HRC Committee for extraordinary achievement by the executive. In November 2005, the HRC Committee approved awards of 27,500 shares of restricted stock to a number of executives to recognize their extraordinary efforts with respect to the acquisition of the Northern Department Store Group from Saks Incorporated.

~~Other Benefits~~

Executive officers participate in benefit programs available to employees generally such as health and dental insurance, life insurance, 401(k) matching, retirement contributions and the Company’s discounted purchase program.

Executive officers may receive additional benefits from the Company such as automobile allowances, club memberships, executive medical benefits and participation in the Company’s supplemental executive retirement plan. Such benefits traditionally have not constituted significant portions of executive compensation.

~~Compensation of the Chief Executive Officer~~

The compensation of the Company’s President and Chief Executive Officer, Mr. Bergren, is based on the criteria described above in this report. Mr. Bergren’s employment agreement provided for an initial annual base salary of $700,000. The amount of the initial base salary established by the employment agreement was based upon a variety of factors, including the general level of executive compensation in the industry, the general level of executive compensation at the Company and an evaluation of the importance of Mr. Bergren’s services to the Company. In March 2005, the HRC Committee approved an increase in the minimum annual base salary for Mr. Bergren to $750,000 based upon his leadership in guiding the successful integration of Elder-Beerman and corresponding increases in responsibilities resulting from that acquisition.

In July 2005, pursuant to the HRC Committee’s policy to annually review the performance of the Chief Executive Officer to determine whether grants of stock options or restricted stock are warranted, the HRC Committee recommended, and the Board of Directors approved, the grant of 95,000 options to Mr. Bergren based upon his efforts in leading the Company’s strategic initiatives and based upon a review of his long-term incentive pay relative to that of the chief executive officers of comparative businesses. These options vest as follows, provided that Mr. Bergren is continuously employed by the Company through each such vesting date: 20,667 options vest on July 6, 2006, 20,667 options vest on July 6, 2007, 20,666 options vest on July 6, 2008, and 33,000 options vest on July 6, 2009.

Mr. Bergren did not receive a cash bonus for 2005 because the minimum net income performance goal established by the HRC Committee and approved by the Board of Directors for the award of a bonus for 2005 performance was not achieved.

~~Review of all Components of Executive Compensation~~

The HRC Committee has reviewed all components of the compensation of the Company’s Chief Executive Officer and the other named executive officers, including salary, bonus, equity and long-term incentive compensation, accumulated realized and unrealized stock option and restricted stock gains, the dollar value to the executive and cost to the Company of all perquisites and other personal benefits and obligations under the Company’s supplemental executive retirement plan. A summary setting forth all the above components and affixing dollar amounts to each component was prepared and reviewed by the HRC Committee.

~~Tax Deductibility of Executive Compensation~~

Section 162(m) of the Internal Revenue Code provides that a publicly-held corporation may not generally deduct compensation for its chief executive officer and certain other executive officers to the extent that compensation for the executive exceeds $1,000,000 unless such compensation is “performance based” as defined in the Code. The HRC Committee recommended compensation amounts and plans which meet the requirements for deductibility, and the HRC Committee expects that Section 162(m) will not materially limit the deductibility of any compensation expense in 2005. The HRC Committee does, however, reserve the right to award non-deductible compensation when it believes it to be in the best interests of the Company.

~~Members of the Human Resources and Compensation Committee:~~

~~Shirley A. Dawe, Chair~~

~~Robert B. Bank~~

~~Philip M. Browne~~

REPORT OF THE AUDIT COMMITTEE

The Audit Committee is comprised of three independent directors. The members of the Audit Committee are not professionally engaged in the practice of auditing or accounting, and rely, without independent verification, on the information provided to them and on the representations made to them by management and the Company’s independent registered public accounting firm.

The role of the Audit Committee is to assist the Board of Directors in its general oversight of the integrity of the Company’s consolidated financial statements and compliance with legal and regulatory requirements. The Audit Committee is directly responsible for the appointment, compensation and oversight of the Company’s independent registered public accounting firm, ~~KPMG LLP (“KPMG”).~~KPMG. Management is responsible for the preparation, presentation and integrity of the Company’s consolidated financial statements, for its accounting and financial reporting principles and for the establishment and effectiveness of internal controls and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. KPMG is responsible for performing an independent audit of the consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board, expressing an opinion as to the conformity of such consolidated financial statements with generally accepted accounting principles and on management’s assessment of the effectiveness of internal control over financial reporting. KPMG has free access to the Audit Committee to discuss any matter it deems appropriate.

The Audit Committee has reviewed and discussed with management and KPMG the audited consolidated financial statements, management’s assessment of the effectiveness of the Company’s internal control over financial reporting and KPMG’s evaluation of the Company’s internal control over financial reporting. Management represented to the Audit Committee that the Company’s audited consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee has discussed with KPMG the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, “Communication with Audit Committees.”

KPMG also provided the Audit Committee with the written disclosures required by Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees,” and the Audit Committee discussed KPMG’s independence with them.

Based on the ~~Committee’s~~reviews and discussions ~~with management and KPMG,~~referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Annual Report onForm 10-K for the fiscal year ended ~~January 28, 2006.~~February 3, 2007.

Members of the Audit Committee:

Philip M. Browne, Chairperson

Robert B. Bank

Robert E. Salerno

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview

During the last four years, the Company has experienced dramatic growth in the size and scope of its operations, primarily through the acquisition of The Elder-Beerman Stores Corp. in October 2003 and the acquisition of the Carson’s division of Saks Incorporated in March 2006. Sales increased from $713 million in 2002 to over $3.3 billion in 2006. During the same period, the number of stores increased from 72 stores operating in nine states to 283 stores operating in 23 states. The Company’s common stock has performed well as the Company has grown, rising in value from $4.14 per share on the last trading day in 2002 to $37.32 on the last trading day in 2006. As the Company has transitioned into a larger organization and the Company’s executives have assumed additional responsibilities, the Human Resources and Compensation Committee (for purposes of this Compensation Discussion and Analysis, the “Committee”) has implemented a compensation program for senior executives designed to recognize these changes by providing compensation that is competitive with similarly sized retail businesses and that attracts, retains and rewards executives for performance. The Committee has increased base salaries for the Company’s Chief Executive Officer and other executives, in some cases substantially. At the same time, the Committee has granted stock options, awarded restricted stock and introduced performance-based restricted stock units with increasing frequency to better align the interests of executives and shareholders. In addition, the Committee has established challenging performance goals in connection with annual cash incentive compensation.

This Compensation Discussion and Analysis addresses the compensation of the Company’s “named executive officers.” Throughout this proxy statement, the individuals set forth in the following table, consisting of the Company’s Chief Executive Officer, Chief Financial Officer and the three other highest paid executive officers, are referred to as the “named executive officers”:


Name		Title

Tim Grumbacher		Executive Chairman of the Board
Byron L. Bergren		President and Chief Executive Officer
Anthony J. Buccina		Vice Chairman and President — Merchandising
Keith E. Plowman		Executive Vice President, Chief Financial Officer and Principal Accounting Officer
David B. Zant		Vice Chairman — Private Brand, Merchandise Planning and Internet Marketing

Compensation Philosophy and Objectives

The Company’s executive compensation program is designed to attract, motivate, reward and retain executive officers who are critical to the Company’s long-term success and the creation of shareholder value. The Committee’s philosophy is to directly link an increasing portion of the Company’s executive officers’ compensation with corporate performance and increases in shareholder value. The following are the objectives that guide the Committee’s decisions regarding compensation:


	•	Provide a competitive total compensation package that enables the Company to attract, motivate and retain key personnel.

	•	Provide variable compensation opportunities, primarily on an annual basis, that are directly linked to the attainment of corporate performance goals that evidence operational success and enhancement of shareholder value.


	•	Provide long-term equity incentive compensation opportunities through the award of stock options, shares of restricted stock and performance-based restricted stock units that align executive compensation with increases in shareholder value. These opportunities are available primarily to those officers who have the capacity to influence the Company’s medium- and long-term results, generate value for shareholders and ensure the long-term growth of the Company. Equity grants also seek to reward significant achievement of top performing officers and to attract new talent.

Based on the foregoing objectives, the Committee has structured the Company’s annual and long-term incentive-based cash and non-cash executive compensation to provide incentives to executives to achieve the business goals set by the Company and reward the executives for achieving such goals.

Role of the Committee in Compensation Decisions

The Committee is responsible for establishing, implementing and monitoring the compensation programs of the Company to ensure that they support the Company’s strategic and financial objectives. The Committee also reviews employee benefits and policies and their impact on and relation to Company culture. Each member of the Committee is an independent director under applicable Nasdaq Stock Market listing standards, a “non-employee director” under applicable SEC rules and an “outside director” under applicable Internal Revenue Service rules. The Committee holds meetings throughout the year and also acts by written consent in lieu of a meeting.

The Committee is authorized to review and approve, and in some cases recommend for the approval of the full Board of Directors, the compensation for the Company’s executive officers, including the named executive officers. The Committee approves the performance goals with respect to annual performance-based compensation and equity awards to executive officers, including the named executive officers. The Committee monitors total compensation paid to the named executive officers and other key executives and considers whether such compensation is fair, reasonable and competitive in consideration of each named executive officer’s capacity to influence shareholder value and to promote the long-term growth of the Company. The Committee annually prepares a review and evaluates the Chief Executive Officer’s performance for the year compared to pre-determined and Committee-approved performance metrics. The total compensation of the Chief Executive Officer is evaluated to ensure that it is competitive in the marketplace and that the compensation package reflects the Committee’s assessment of the Chief Executive Officer’s contributions and value to the Company. The Committee prepares a recommendation for the approval of the Company’s Board of Directors with respect to changes in the compensation of the Chief Executive Officer. The Committee annually reviews the performance of the Executive Chairman and any payout to the Executive Chairman under the Company’s cash bonus program. The Executive Chairman’s base salary, annual bonus and equity awards were established in the Executive Transition Agreement as of February 1, 2005. The Chief Executive Officer annually prepares a review for all of his direct reports, including the named executive officers and other key executives, excluding the Executive Chairman, for the year compared to pre-determined and Committee-approved performance metrics. The total compensation for the respective executives, the performance appraisals and the recommendations made by the Chief Executive Officer are reviewed by the Committee for Committee approval.

Role of Management in Compensation Decisions

Management supports the Committee in its work. Management assists the Chair of the Committee in establishing the agendas for meetings and preparing materials for the review of Committee members in advance of each meeting. With respect to most compensation and benefit matters, including compensation of the named executive officers, management provides recommendations to the Committee. The Committee relies on management to evaluate employee performance and to make recommendations for salary and bonus levels as well as for grants of stock

options or awards of restricted stock. Management also works with the Committee to establish performance goals under the Company’s performance-based annual incentive compensation program that support the Company’s strategic direction. In furtherance of the foregoing activities, members of management including Byron L. Bergren and Dennis R. Clouser, Executive Vice President — Human Resources, attend meetings of the Committee. Each of them is excused from a meeting during discussion and approval of matters regarding his own compensation.

Compensation Consultant and Benchmarking

The Committee has engaged Hewitt Associates, an outside global human resources consulting firm, to conduct an annual review of its total compensation program for the Chief Executive Officer and the other named executive officers except the Executive Chairman. Hewitt Associates provides the Committee with relevant market data and alternatives to consider when making decisions on the compensation of Chief Executive Officer and on the recommendations made by the Company’s management for named executive officers other than the Chief Executive Officer and Executive Chairman.

In making compensation decisions, the Committee compares salary, annual incentive compensation and long-term equity incentive values against all retail companies in Hewitt Associates’ Total Compensation Database (the “Compensation Peer Group”). In 2006, there were 55 retail companies included in the database ranging in size from $200 million to $313 billion in sales. For comparison purposes, the Company’s annual sales are below the median sales of the Compensation Peer Group. Because of the large variance in size among the companies comprising the Compensation Peer Group, regression analysis is used to adjust the compensation data for differences in company sales. This adjusted value is used as the basis of comparison of compensation between the Company and the companies in the Compensation Peer Group.

The Committee has determined that it is appropriate to deliver total compensation at approximately the 50th percentile of the Compensation Peer Group for each element of compensation. However, the Company competes with many larger companies for the best executive-level talent, and the Committee may determine that it is in the best interests of the Company and its shareholders to provide compensation for selected positions that exceeds the targeted compensation levels depending on the circumstances, including the Company’s needs, market factors, and the experience level and contribution of the executive.

Components of Executive Compensation

The principal components of compensation for named executive officers are base salary, performance-based annual cash incentive compensation, long-term equity incentive compensation, perquisites and personal benefits, and retirement and other benefits. The Committee seeks to achieve a mix of these components such that the total is competitive in the marketplace. Traditionally, the Company compensated its executive officers primarily by paying base salary and an annual cash bonus and did not offer significant long-term equity incentive opportunities. The Committee is transitioning the Company’s compensation program from its historical short-term orientation, with a focus on base salary and annual incentive compensation, to a program with an increasing emphasis on long-term equity incentive compensation to better align the interests of the named executive officers with the interests of shareholders in long-term growth. The Committee does not have a pre-established policy for allocation between cash and non-cash or short-term and long-term incentive compensation. Rather, the Committee attempts to provide each named executive officer with a compensation package consisting of a balance of base salary, performance-based annual incentive compensation and long-term equity incentive compensation, in addition to perquisites and retirement benefits, that generally achieves a total compensation value at the 50th percentile of the Compensation Peer Group and addresses retention and competitive requirements. The Committee annually reviews the appropriate level and mix of compensation components.

The table below shows the mix of compensation received in 2006 by the Chief Executive Officer and the average of the other named executive officers as a group based on total compensation as reported in the Summary Compensation Table. As this table demonstrates, 74% of the Chief Executive Officer’s compensation in 2006 was tied to the financial performance of the Company or to the performance of the Company’s common stock. In addition, a majority of the other named executive officers’ compensation in 2006 was tied to the financial performance of the Company or to the performance of the Company’s common stock. The Committee believes that the compensation mix encourages the named executive officers to focus on the Company’s long-term performance and enhancement of shareholder value.


	Percent of Compensation												Percent of Compensation
	Not Tied to Financial Performance												Tied to Financial Performance
	and/or Stock Price Performance												and/or Stock Price Performance
				Changes in Pension												Long-Term
				and Deferred			Other						Annual			and Equity
	Salary			Compensation			Compensation			Subtotal			Bonus			Compensation			Subtotal			Total

Chief Executive Officer		24	%		0	%		2	%		26	%		37	%		37	%		74	%		100	%
Average of the Other Named Executive Officers		27	%		8	%		5	%		40	%		24	%		36	%		60	%		100	%

The Committee has reviewed all components of compensation of the named executive officers, including base salary, performance-based incentive compensation, long-term incentive compensation, accumulated realized and unrealized stock option and restricted stock gains, the dollar value to the executive and cost to the Company of all perquisites and other personal benefits and obligations under the Company’s supplemental executive retirement plans. A summary, or “tally sheet,” setting forth all the above components and affixing dollar amounts to each component was prepared and reviewed by the Committee. The Committee believes that the level of compensation of the Company’s named executive officers reflects the Company’s performance and that total compensation to each of the named executive officers is appropriate.

Base Salary

The base salaries of the Company’s executive officers are determined by evaluating the executive officers’ roles and responsibilities and compensation data regarding the Compensation Peer Group. The base salary of each executive officer is reviewed annually. If appropriate, the Chief Executive Officer recommends annual salary increases for each of the named executive officers and key executives other than himself and the Executive Chairman of the Board. The Committee’s decision to increase base salary for any named executive officer is based on the previously defined compensation philosophy and takes into specific account the level of responsibility of the executive officer, the Company’s performance, the executive officer’s individual performance, which is reviewed by the Committee annually, and the executive officer’s compensation compared to similarly situated executives in the Compensation Peer Group.

Minimum base salaries for Tim Grumbacher, Byron L. Bergren, Anthony J. Buccina and David B. Zant were established pursuant to employment agreements approved by the Committee and, with respect to Mr. Bergren’s and Mr. Grumbacher’s employment agreements, the Company’s Board of Directors. The minimum base salaries for these executive officers, as established pursuant to the applicable employment agreements, were based on a variety of factors, including the general level of executive compensation of similarly situated executives in the Compensation Peer Group, the general level of executive compensation at the Company and an evaluation of each person’s capacity to positively affect the Company’s performance.

During 2006, Mr. Bergren’s base salary was increased from $750,000 to $1,000,000, and Mr. Plowman’s base salary was increased from $300,000 to $390,000. These salary increases were approved by the Committee based upon the increase in the size of the Company’s business, the increase in job responsibilities following the Company’s acquisition of Carson’s, and an evaluation of their individual performances. With respect to Mr. Bergren in particular, the Committee approved the

increase in salary based on its view of Mr. Bergren’s critical value to the Company in guiding the Company through the acquisition and integration of Carson’s. Mr. Buccina joined the Company in fiscal 2006 after working with Carson’s as its chief merchant. Mr. Buccina’s initial base salary was set at $780,000 based upon the Committee’s evaluation of Mr. Buccina’s depth of experience and his ability to positively influence the Company’s performance following the acquisition of Carson’s.

Performance-Based Annual Incentive Compensation

The Company has an annual incentive Cash Bonus Plan in which the named executive officers participate. Awards of cash bonuses under this plan are variable, and the payout of any cash bonus under the plan is dependent upon the achievement of pre-determined Company performance goals which are pre-approved by the Committee.

For 2006, the annual cash bonus program for the named executive officers focused on the achievement of two or three of the following goals: (1) net income, with a “threshold” of approximately $33.6 million, a “target” of approximately $37.3 million, and a “maximum” of approximately $50.2 million; (2) net sales, with a “threshold” of $3,265 million, a “target” of $3,327 million, and a “maximum” of $3,543 million; and (3) a specified level of gross margin return on inventory dollars, or “GMROI dollars.” The calculation methodology utilized to determine the achievement level for GMROI dollars requires that total Company gross margin, total Company average inventory at cost and total Company sales are balanced. The GMROI dollar goal requires achievement of Company sales at pre-determined levels related to the total financial goals of the Company, which is then multiplied by the approved gross margin return on investment rate for the Company. In the view of the Committee, the GMROI dollar goal is challenging but attainable.

The Committee assigns different goals and weightings for each named executive officer depending on the capacity of the named executive officer to influence the goal and the named executive officer’s area of responsibility. Payment of any portion of a bonus under the plan is dependent upon the Company’s achievement of at least the “threshold” level of net income. If the threshold level of net income is not achieved, there is no bonus payout under any of the goals of the plan for that year. In addition, if the net income “threshold” is attained, but the “threshold” performance for a goal other than net income is not attained, the portion of the bonus attributable to such other goal is forfeited.

The Committee reviewed and established competitive “threshold,” “target,” and “maximum” payout potentials under the cash bonus program for each executive officer. The following table sets forth (1) the approximate payouts, stated as a percentage of base salary, that could be earned by each named executive officer under the cash bonus program for 2006, and (2) the cash bonus performance goals and the weighting of such goals for each named executive officer for 2006. The Committee increased the payout potential at target for 2006 from what the payout at target would have otherwise been for Mr. Bergren (from 100% to 150%) and for Mr. Buccina (to 125% of base salary) to provide additional incentive to both of these key executives during the Carson’s integration period.


	Payout at			Payout at			Payout at			Bonus Criteria
Name	Threshold			Target			Maximum			(weighting)

Tim Grumbacher		37.5	%		50	%		100	%		Net income (75	)%
											Net sales (25	)%
Byron L. Bergren		112.5	%		150	%		200	%		Net income (75	)%
											Net sales (25	)%
Anthony J. Buccina		93.75	%		125	%		187.5	%		Net income (50	)%
											GMROI dollars (25	)%
											Net sales (25	)%
Keith E. Plowman		37.5	%		50	%		75	%		Net income (75	)%
											Net sales (25	)%
David B. Zant		56.25	%		75	%		112.5	%		Net income (50	)%
											GMROI dollars (25	)%
											Net sales (25	%)

The Committee reviewed performance data as of the end of 2006 and determined the extent to which the targeted levels of performance were achieved. The effects of unusual or one-time transactions that were not included in the Company’s financial plan for 2006, such as the Company’s acquisition from Belk Inc. of four Parisian stores, were not included in the calculation of whether the performance goals for 2006 were achieved. The amount of annual incentive compensation paid for 2006 to each named executive officer is reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

In addition to bonuses that may be awarded under the Company’s Cash Bonus Plan, a cash bonus may be awarded at the discretion of the Committee for extraordinary individual achievement by the executive or for other reasons, such as a signing bonus upon joining the Company. In 2006, Mr. Buccina received a bonus from the Company with respect to his performance at the Carson’s division of Saks Incorporated and a retention payment following the Company’s acquisition of Carson’s. Other than the payments to Mr. Buccina, no extraordinary bonuses were awarded to any of the named executive officers for 2006.

Long-Term Equity Incentive Compensation

Another component of executive compensation is long-term incentive compensation in the form of stock options, restricted stock and performance-based restricted stock units (“RSUs”). The Committee administers The Bon-Ton Stores, Inc. Amended and Restated 2000 Stock Incentive Plan and Performance-Based Award Plan (the “Stock Incentive Plan”) which provides for the grant of stock options and awards of restricted stock and RSUs. These grants and awards are intended to align the executive officers’ interests with those of shareholders by increasing the portion of their compensation tied to the long-term performance of the Company. The Committee annually reviews the performance of the named executive officers to determine whether grants of options or awards of restricted stock or RSUs are warranted. Option grants and awards of restricted stock and RSUs are made periodically at the discretion of the Committee and on the recommendation of the Company’s Chief Executive Officer, primarily to reward significant individual achievement and to attract and retain key talent. The proportion of long-term equity incentive compensation in relation to base salary

is a function of the named executive officer’s level of responsibility and capacity to enhance shareholder value.

The exercise price of options granted by the Committee is usually set at the closing price of the Company’s common stock on the Nasdaq Stock Market on the date of the Committee meeting at which the grant is approved. In certain instances, the Committee has set the exercise price at the closing price on a date in the future to allow time to notify the grantee of the option grant or to set the exercise price on the same date as the starting date of a new employee. If the Committee sets an option exercise price based on the closing price on the Nasdaq Stock Market on a date in the future, the Committee confirms that management does not anticipate any material announcements during the period from the Committee meeting until such future date. The Company has not issued any options with exercise prices that have been backdated.

Stock options and awards of restricted stock generally vest over a number of years. Any vested options are usually forfeited 90 days after termination of the recipient’s employment, and any unvested shares of restricted stock and unvested options are usually forfeited upon termination of employment. Such options and restricted stock, therefore, are also intended to encourage recipients to remain in the employ of the Company over a substantial period of time.

During 2006, the Committee granted options and awarded restricted stock and performance-based RSUs to the named executive officers as reflected in the “Grants of Plan-Based Awards” table below. The Committee awarded both restricted stock and performance-based RSUs to Byron L. Bergren in 2006. The Committee’s awards to Mr. Bergren were made based upon the Committee’s evaluation of Mr. Bergren’s leadership in completing the acquisition of Carson’s in 2006 and the key role he would play in leading the Carson’s integration. He received restricted shares worth $1 million at the time of grant that will vest at the end of 2008 and performance-based RSUs worth $1 million at the time of grant. One-half of Mr. Bergren’s performance-based RSUs vested at the target level based upon the achievement of the same net income goal set for 2006 under the Cash Bonus Plan. The other one-half of Mr. Bergren’s performance-based RSUs will vest, if earned, based upon the achievement of the net income goals established by the Committee for awards under the Cash Bonus Plan for 2007 performance. The awards of restricted stock and performance-based RSUs to Mr. Bergren reflect the Committee’s objectives to link an increasing portion of compensation to Company performance and to align the interests of executives with those of shareholders.

Perquisites and Other Personal Benefits

The Company provides the named executive officers with perquisites and other personal benefits that the Company and the Committee believe are reasonable and consistent with the Company’s objective to attract and retain superior employees for key positions. The Committee periodically reviews the levels of perquisites and other personal benefits provided to named executive officers. Perquisites consisted of supplemental medical benefits, automobile allowances, club memberships, relocation benefits, and reimbursement of legal fees incurred in connection with the negotiation of employment agreements. In addition, the Company has provided Mr. Bergren with rental housing in Milwaukee, Wisconsin for use during his frequent trips to the Company’s merchandising operations there. Perquisites traditionally have not constituted significant portions of executive compensation.

The named executive officers also participate in benefit programs available to employees generally, such as health and dental insurance, life insurance and the Company’s discounted purchase program.

Retirement and Other Benefits

In connection with the acquisition of Carson’s in March 2006, a subsidiary of the Company assumed the Carson Pirie Scott & Co. Supplemental Executive Retirement Plan (the “Carson’s SERP”). The Carson’s SERP is a nonqualified, unfunded supplemental retirement plan. The only

named executive officer who participates in the Carson’s SERP is Anthony J. Buccina. The Company anticipates that there will be no new participants in the Carson’s SERP.

The Company established the Bon-Ton Supplemental Executive Retirement Plan (the “Bon-Ton SERP”) to provide retirement benefits to certain executives. The Bon-Ton SERP is a nonqualified, unfunded supplemental retirement plan. The only named executive officer who participates in the Bon-Ton SERP is David B. Zant. The Company anticipates that there will be no new participants in the Bon-Ton SERP.

The named executive officers participate in The Bon-Ton Stores, Inc. Retirement Contribution Plan, a tax-qualified plan pursuant to which employees are able to contribute a portion of their annual salaries to the plan on a pre-tax basis. The Company generally has matched 30% of the first 6% of eligible compensation that is contributed to the plan. All employee contributions to the plan are fully vested upon contribution, and Company matching contributions vest after three years with the Company assuming a minimum of 1,000 hours is worked in each year. In addition to the matching contribution, the Company provides a discretionary retirement contribution to each eligible employee who has been employed at least one year, is employed on the last day of the year and worked 1,000 hours in 2006. The Company retirement contributions vest after five years with the Company if a minimum of 1,000 hours is worked in each year. In connection with the acquisition of Carson’s in March 2006, the Company assumed the Carson Pirie Scott & Co. Pension Plan (the “Carson’s Pension Plan”). The Carson’s Pension Plan is a qualified defined-benefit cash-balance plan in which the only named executive officer who participates is Anthony J. Buccina. The Carson’s Pension Plan was frozen to new participants in 2002 and all future benefit accruals were frozen in May 2006.

Employment Agreements and Payments Upon Termination or Change of Control

As discussed more fully below, the Company has entered into employment agreements with Tim Grumbacher, Byron L. Bergren, Anthony J. Buccina and David B. Zant. The decisions to enter into employment agreements and the terms of those agreements were based on the Company’s need to attract and retain talent for the long-term growth of the Company. Following Mr. Grumbacher’s resignation as Chief Executive Officer in 2004, the Committee determined that it would be beneficial to the Company to continue Mr. Grumbacher’s employment as Executive Chairman of the Board, and both Mr. Grumbacher and the Committee desired to evidence the arrangement in a written agreement. With respect to Mr. Bergren, the Committee determined that it is in the best interests of the Company and shareholders to retain Mr. Bergren’s services until at least February 2008, and the Committee designed his employment agreement to provide economic incentives for him to remain with the Company at least until that time. With respect to Mr. Buccina, the Committee and management of the Company determined that his services and merchandising expertise would be critical following the acquisition of Carson’s to ensure a smooth integration and to develop an appropriate merchandising approach for the combined company. With respect to Mr. Zant, the Committee and management of the Company determined that it would be in the best interests of the Company to enter into an employment agreement to retain Mr. Zant due to his private brand and merchandise planning experience. The material terms of employment agreements with the named executive officers are described under the heading “Summary of Employment Agreements with Named Executive Officers” beginning on page 33.

Pursuant to the employment agreements with the foregoing four named executive officers, the Company has agreed to arrangements which will provide severance compensation in the event of a termination, change of control or other triggering event. In addition, Keith E. Plowman, with whom the Company does not have an employment agreement, is a participant in the Company’s Severance Plan. These arrangements are designed to promote stability and continuity of senior management. Stock options and restricted stock will generally vest upon a change in control. The Company adopted “single trigger” treatment for equity awards to retain, focus and motivate executives during change in control discussions and to be competitive with current market practice in order to attract the best

talent. Information regarding applicable payments under such arrangements for the named executive officers is provided under the heading “Potential Payments Upon Termination or Change of Control” on page 35.

Tax and Accounting Implications of Executive Compensation

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code limits the deductibility of compensation in excess of $1,000,000 paid to the Chief Executive Officer and the other named executive officers unless specified criteria are satisfied. The Committee reviews and considers the deductibility of executive compensation under Section 162(m) and believes that compensation recognized by such persons in 2006 is fully deductible for federal income tax purposes. The Committee has generally designed the Company’s compensation program in a manner that permits compensation to be deductible; however, grants of restricted stock, when and if those grants vest for tax purposes, may create compensation for the grantee that may be subject to the limitations on deductibility under Section 162(m). The Committee reserves the right to award non-deductible compensation when it believes such action would be in the best interests of the Company.

Accounting for Stock-Based Compensation

In 2006, the Company began accounting for stock-based payments, including stock options and awards of restricted stock and RSUs, in accordance with the requirements of Financial Accounting Standards Board Statement 123(R) (“SFAS 123R”). The Committee reviews the expenses for stock-based payments under SFAS 123R in connection with the grant of stock options and award of restricted stock and RSUs.

Report of the Human Resources and Compensation Committee

The Human Resources and Compensation Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) ofRegulation S-K with management and, based on such review and discussion, the Human Resources and Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

The Human Resources and Compensation Committee

Shirley A. Dawe, Chair

Robert B. Bank

Marsha M. Everton

Summary Compensation Table


													Change in
													Pension
													Value and
													Nonqualified
											Non-Equity		Deferred
							Stock		Option		Incentive Plan		Compensation		All Other
Name and			Salary		Bonus		Awards		Awards		Compensation		Earnings		Compensation		Total
Principal Position	Year		($)(1)		($)(2)		($)(3)		($)(4)		($)(5)		($)(6)		($)(7)		($)

Tim Grumbacher Executive Chairman of the Board		2006		675,000		—		1,344,830		—		361,563		139,004		13,533		2,533,930
Byron L. Bergren, President and Chief Executive Officer		2006		971,154		—		977,358		553,532		1,500,000		—		91,313		4,093,357
Anthony J. Buccina, Vice Chairman, President — Merchandising		2006		688,750		306,355		603,332		569,379		1,060,313		490,315		28,652		3,747,096
Keith E. Plowman, Executive Vice President, Chief Financial Officer		2006		380,769		—		127,516		29,144		209,625		—		23,103		770,157
David B. Zant, Vice Chairman — Private Brand, Merchandise Planning and Internet Marketing		2006		519,231		—		176,924		147,500		407,813		35,802		53,450		1,340,720


(1)		Salary amounts reflect the actual base salary payments made to the named executive officers in 2006.

(2)		“Bonus” refers to non-performance-based guaranteed cash payments. In 2006, Mr. Buccina received a bonus from the Company with respect to his performance at the Carson’s division of Saks Incorporated in the amount of $184,118 and a retention payment following the Company’s acquisition of Carson’s in the amount of $122,237. Other than the payments to Mr. Buccina, no guaranteed payments were made to any named executive officer. Other cash incentives were performance-based and are reflected under the column labeled “Non-Equity Incentive Plan Compensation.”

(3)		The amounts reported in this column reflect the amount of compensation cost recognized in 2006 for financial statement reporting purposes for restricted stock and RSUs granted in 2006 and prior years for each named executive officer. The calculation of these amounts disregards the estimate of forfeitures related to time-based vesting conditions. The amounts do not reflect compensation actually received by the named executive officers. Assumptions used in the calculation of these amounts are included in Note 17 to our audited financial statements included in ourForm 10-K filed with the SEC on April 19, 2007. The grant date fair market value of the restricted stock granted in 2006 is reflected in Grants of Plan-Based Awards Table on page 28.

(4)		The amounts reported in this column reflect the amount of compensation cost recognized in 2006 for financial statement reporting purposes for stock options granted in 2006 and prior years for each named executive officer. The calculation of these amounts disregards the estimate of forfeitures related to time-based vesting conditions. The amounts do not reflect compensation actually received by the named executive officers. Assumptions used in the calculation of these amounts are included in Note 17 to our audited financial statements included in ourForm 10-K filed with the SEC on April 19, 2007. The grant date fair market value of the stock options granted in 2006 is reflected in Grants of Plan-Based Awards Table on page 28.

(5)		The amounts reported in this column reflect the annual performance-based bonus awards to the named executive officers under the Company’s Cash Bonus Plan, which is addressed on page 21 of the Compensation Discussion and Analysis.

(6)		The amounts reported in this column reflect the following: (i) the increase in value during 2006 of Mr. Grumbacher’s retiree continuing medical benefits, (ii) the increase in value during 2006 of Mr. Buccina’s benefits under the Carson’s Pension Plan and the Carson’s SERP; and (iii) the increase in value during 2006 of Mr. Zant’s benefits under the Bon-Ton SERP. See the Pension Benefits Table on page 30 for more information about these benefits.


(7)		The compensation reflected in the “All Other Compensation” column for each of the named executive officers for 2006 includes Company matching contributions under our Retirement Contribution Plan and the incremental cost to the Company of perquisites, as follows:

													��
																401(k) Plan
											Rental					Company
			Supplemental		Club						Housing in			Life		Match and
	Automobile		Medical		Membership		Reimbursement of		Relocation		Milwaukee			Insurance		Profit
Name	Usage($)		Benefits($)		Expenses($)		Legal Expenses($)		Benefits($)		($)			Premiums($)		Sharing($)

Tim Grumbacher		—		—		—		—		—		—			472		13,061
Byron L. Bergren		14,132		8,500		3,270		8,354		—		39,418			4,578		13,061
Anthony J. Buccina		7,291		1,710		—		10,000		—		—			592		9,059
Keith E. Plowman		6,444		2,383		—		—		—		—			1,215		13,061
David B. Zant		9,926		2,328		2,602		2,787		21,711		—			1,035		13,061

Grants of Plan-Based Awards

The table below provides information regarding grants of options and awards of restricted stock and RSUs to the named executive officers under the Company’s Cash Bonus Plan and Stock Incentive Plan.


																		All				Grant
																All		Other				Date
																Other		Option				Fair
																Stock		Awards;		Exercise or		Value of
				Estimated Possible							Estimated Future					Awards;		Number of		Base		Stock
		HRC		Payouts Under Non-Equity							Payouts Under Equity					Number of		Securities		Price of		and
		Committee		Incentive Plan Awards(1)							Incentive Plan Awards(2)					Shares of		Underlying		Option		Option
	Grant	Approval		Threshold		Target		Maximum			Threshold		Target			Stock or		Options		Awards		Awards
Name	Date	Date		($)		($)		($)			(#)		(#)			Units (#)(3)		(#)(4)		($/share)		($)(5)

Tim Grumbacher	N/A				243,750		325,000		650,000			—		—			—		—		—		—

Byron L. Bergren	N/A				1,125,000		1,500,000		1,500,000	(6)		—		—			—		—		—		—

	5/23/2006		4/17/2006		—		—		—			—		—			40,519		—		—		1,000,009

	6/20/2006		4/17/2006		—		—		—			15,194		20,259	(7)		—		—		—		443,672

Anthony J. Buccina	N/A				731,250		975,000		1,462,500			—		—			—		—		—		—

	6/1/2006		5/5/2006		—		—		—			—		—			—		96,000		27.15		1,222,080

	6/1/2006		5/25/2006		—		—		—			—		—			65,000		—		—		1,764,750

Keith E. Plowman	N/A				146,250		195,000		292,500

	4/3/2006		4/3/2006		—		—		—			—		—			8,000		—		—		254,720

David B. Zant	N/A				281,250		375,000		562,500			—		—			—		—		—		—


(1)		These columns report the range of cash payouts that were targeted for 2006 performance under the Company’s Cash Bonus Plan as described in the Compensation Discussion and Analysis on page 21. The amounts shown in the “Threshold” column reflect the minimum payout opportunity provided under the Cash Bonus Plan if threshold performance is achieved. If performance thresholds are not met, it is possible to have no payout under the Cash Bonus Plan. Actual payout amounts for 2006 performance are included under “Non-Equity Incentive Compensation” in the Summary Compensation Table.

(2)		These columns report the range of performance RSU payouts targeted for 2006 and 2007 performance. These performance-based RSUs are earned based on the achievement of net income goals for 2006 and 2007 established by the HRC Committee. If performance thresholds are not met, it is possible to have no payout of these performance-based RSUs under the Stock Incentive Plan. The Company achieved the target amount of the net income performance goal in 2006, and 20,259 RSUs vested. Each RSU entitles the executive to receive one share of our common stock without the payment of an exercise price or other consideration.

(3)		These amounts represent awards of restricted stock made under the Stock Incentive Plan. Information regarding the vesting schedules of these awards is included in the footnotes to the Outstanding Equity Awards at Fiscal Year-End table below. Dividends are generally paid on unvested shares of restricted stock when the Board of Directors declares dividends on Company common stock. Restricted stock will vest on an accelerated basis upon the executive’s termination of employment under certain circumstances. Additional information regarding the vesting acceleration provisions applicable to equity awards granted to our named executive officers is included under the heading “Potential Payments upon Termination or Change in Control.”

(4)		These amounts represent options issued under the Stock Incentive Plan. Information regarding the vesting schedules and expiration of these options is included in the footnotes to the Outstanding Equity Awards at Fiscal Year End table below. Options will vest on an accelerated basis upon the executive’s termination of employment under certain circumstances. Additional information regarding the vesting acceleration provisions applicable to equity awards granted to our named executive officers is included under the heading “Potential Payments upon Termination or Change in Control.”


(5)		Amounts represent the full grant date fair value of each equity award computed in accordance with SFAS 123R. The dollar value of the options shown represents the grant date fair value estimated using the Black-Scholes option pricing model to determine grant date fair value, in accordance with the provisions of SFAS 123R. For a discussion of valuation assumptions used in the SFAS 123R calculations, see Note 17 to our audited financial statements included in ourForm 10-K filed with the SEC on April 19, 2007. The actual value, if any, that an executive may realize on each option will depend on the excess of the stock price over the exercise price on the date the option is exercised and the shares underlying such option are sold. The dollar value of restricted stock and RSUs shown represents the grant date fair value calculated based on the fair market value of our common stock on the respective grant dates.

(6)		This amount represents the current maximum amount available for award to any individual in any year under the Cash Bonus Plan.

(7)		This number of shares represents the target award of the first tranche of two tranches of performance-based RSUs granted to Mr. Bergren effective on June 20, 2006. The performance goals for the first tranche were established by the HRC Committee in 2006. The performance goals for the second tranche were not established by the HRC Committee until March 26, 2007. The second tranche of such performance-based RSUs is not reflected in this table because, for purposes of SFAS 123R, performance RSUs are not considered to be “granted” until the performance goals have been established. As of March 26, 2007, the grant date fair value of the second tranche of the performance-based RSUs, as determined in accordance with SFAS 123R, was $1,140,379.

Outstanding Equity Awards at Fiscal Year-End


	Option Awards											Stock Awards
																				Equity
																	Equity			Incentive
																	Incentive			Plan
																	Plan			Awards:
																	Awards:			Market
																	Number			or Payout
						Equity									Market		of			Value of
						Incentive									Value of		Unearned			Unearned
						Plan									Shares		Shares,			Shares,
						Awards:						Number of			or		Units or			Units or
						Number						Shares or			Units of		Other			Other
	Number of		Number of			of Securities						Units of			Stock		Rights			Rights
	Securities		Securities			Underlying						Stock			That		That			That
	Underlying		Underlying			Unexercised		Option				That			Have		Have			Have
	Unexercised		Unexercised			Unearned		Exercise		Option		Have Not			Not		Not			Not
	Options-		Options-			Options		Price		Expiration		Vested			Vested		Vested			Vested
Name	Exercisable		Unexercisable			(#)		($)		Date		(#)			($)(1)		(#)			($)(1)

Tim Grumbacher		—		—			—		—		—		365,205	(2)		13,629,451		—			—
Byron L. Bergren		83,333		41,667	(3)		—		13.05		8/23/2014		—			—		—			—
		20,667		74,333	(4)		—		20.44		7/6/2012		—			—		—			—
		—		—			—		—		—		35,000	(5)		1,306,200		—			—
		—		—			—		—		—		40,519	(6)		1,512,169		—			—
		—		—			—		—		—		20,259	(7)		756,066		20,259	(7)		756,066
Anthony J. Buccina		—		96,000	(8)		—		27.15		5/31/2013		—			—		—			—
		—		—			—		—		—		65,000	(9)		2,425,800		—			—
Keith E. Plowman		—		10,000	(10)		—		17.91		5/26/2012		—			—		—			—
		—		—			—		—		—		6,000	(11)		223,920		—			—
		—		—			—		—		—		8,000	(12)		298,560		—			—
David B. Zant		40,000		20,000	(13)		—		15.75		12/31/2014		—			—		—			—
		—		—			—		—		—		25,000	(14)		933,000		—			—
		—		—			—		—		—		6,000	(15)		223,920		—			—


(1)		Market values reflect the closing price of the Company’s common stock on the Nasdaq Stock Market on February 2, 2007 (the last business day of the fiscal year), which was $37.32 per share.

(2)		Restricted shares vest 100% on February 1, 2010.

(3)		Stock options vest 100% on January 31, 2008.

(4)		Stock options vest as follows: 20,667 on July 6, 2007, 20,666 on July 6, 2008, and 33,000 on July 6, 2009.

(5)		Restricted shares vest 100% on January 31, 2008.

(6)		Restricted shares vest 100% on February 8, 2008.

(7)		These performance-based RSUs vest based on performance criteria established by the HRC Committee. 20,259 RSUs vested on March 26, 2007 based on the achievement of certain performance goals during 2006. The remaining 20,259 RSUs vest on February 2, 2008 as follows: 100% of these RSUs will vest if the Company achieves the target net income established by the HRC Committee for 2007; 87.5% of these RSUs will vest if the Company achieves 95% of the net


		income target established by the HRC Committee for 2007; 75% of these RSUs will vest if the Company achieves 90% of the target net income established by the HRC Committee for 2007; and none of these RSUs will vest if the Company achieves less than 90% of the target net income established by the HRC Committee for 2007.


(8)		Stock options vest 1/3 on June 1, 2007, 1/3 on June 1, 2008, and 1/3 on January 31, 2009.

(9)		Restricted shares vest as follows: 10,000 on June 1, 2007, 21,666 on June 1, 2008, and 33,334 shares on January 31, 2009.

(10)		Stock options vest 1/3 on May 27, 2007, 1/3 on May 27, 2008, and 1/3 on May 27, 2009.

(11)		Restricted shares vest 100% on November 18, 2007.

(12)		Restricted shares vest 100% on April 2, 2009.

(13)		Stock options vest on January 31, 2008.

(14)		Restricted shares vest as follows: 10,000 on August 31, 2007 and 15,000 on August 31, 2008.

(15)		Restricted shares vest 100% on November 28, 2007.

Pension Benefits

The Pension Benefits Table below shows the actuarial present value of accumulated benefits payable to each of our named executive officers and the number of years credited to each such named executive officer, under each of the Bon-Ton SERP, Carson’s SERP, Carson’s Pension Plan and the Executive Transition Agreement dated February 1, 2005 between the Company and Mr. Grumbacher (the “Executive Transition Agreement”), pursuant to which Mr. and Mrs. Grumbacher are entitled to continue participation in the Company’s group medical plan upon cessation of Mr. Grumbacher’s employment with the Company.

The present values set forth below have been calculated for all named executive officers assuming that each will remain in service until normal retirement age as defined under each plan. The Assumptions set forth in Note 9 to our audited financial statements included in ourForm 10-K filed with the SEC on April 19, 2007 are used below and are incorporated by reference.


					Present Value of
		Number of Years			Accumulated		Payments During
Name	Plan Name	Credited Service			Benefit ($)		Last Fiscal Year ($)

Tim Grumbacher	Retiree Medical Benefits		N/A			139,004		—
Byron L. Bergren	—		—			—		—
Anthony J. Buccina	Carson’s Pension Plan		13	(1)		207,736		—
	Carson’s SERP		14			2,096,223		—
Keith E. Plowman	—		—			—		—
David B. Zant	Bon-Ton SERP		2			68,174		—


(1)		Although Mr. Buccina has 14 years of actual service, he is credited with only 13 years of service under the terms of the Carson’s Pension Plan.

Description of Plans Named in Pension Benefits Table

Bon-Ton Supplemental Executive Retirement Plan

The Bon-Ton SERP is a nonqualified, unfunded supplemental retirement plan intended to provide executives with competitive retirement benefits, protect against reductions in retirement benefits due to tax law limitations on qualified plans, and encourage the continued employment of such employees with the Company. The only named executive officer who participates in the Bon-Ton SERP is David B. Zant.

A participant who retires is entitled to receive a monthly benefit payable for such participant’s lifetime, commencing on the first day of the month coinciding with or next following the date of such retirement (the “Normal Retirement Benefit”). However, the Board of Directors reserves the right to authorize lump-sum benefit distributions that are the actuarial equivalent of the forms of benefit

otherwise provided for in the Bon-Ton SERP. A participant’s Normal Retirement Benefit is calculated according to the benefit formula determined by the Board with respect to the participant.

If a participant dies after benefit commencement but prior to the tenth anniversary of the date as of which such benefits commenced, and if such Participant is survived by his spouse, such surviving spouse shall receive monthly benefit payments in the same amount as previously paid to the participant until such tenth anniversary or until her death, whichever is earlier.

If a participant dies before such participant retires and is survived by a spouse, then such spouse shall be entitled to receive from the Company a death benefit in the form of a lump sum payable in cash within 60 days after such participant’s death equal to the actuarial equivalent of the Normal Retirement Benefit that would have been payable to such participant had he retired on his date of death. Mr. Zant shall be entitled to a benefit under the SERP equal to $50,000 annually. Such benefit shall become vested if he remains continuously employed with the Company through the date that he attains 60 years of age. The distribution provisions of the Bon-Ton SERP may be modified to ensure compliance with certain changes in federal tax laws related to nonqualified deferred compensation.

Carson’s Supplemental Executive Retirement Plan

In connection with the acquisition of Carson’s in March 2006, the Company assumed the Carson’s SERP. The Carson’s SERP is a nonqualified, unfunded supplemental retirement plan intended to provide supplemental retirement benefits to a select group of management or highly compensated employees. The only named executive officer who participates in the Carson’s SERP is Anthony J. Buccina.

As a result of the acquisition of Carson’s, participants under the Carson’s SERP who remained employed with the Company after the acquisition became fully vested in their entire accrued benefit. As such, Mr. Buccina is fully vested in his entire accrued benefit under the Carson’s SERP.

Participants who remained employed by the Company at the time of the acquisition but who do not terminate employment within two years after the acquisition are entitled to receive their accrued benefits after attaining the age of 62 and following a termination of their employment. However, the participant may request certain alternative, actuarially equivalent benefits (other than a lump sum). Accrued benefits are generally payable in the form of an annuity for the life of the participant. The participant may elect an optional form of payment which may include (i) a joint and 50% survivor annuity or (ii) a joint and 100% survivor annuity.

Benefits are calculated based on a percentage multiplied by the participant’s average compensation, which is the average of the five most-highly compensated calendar years out of the participant’s previous ten years as an employee, the product of which is multiplied by the number of calendar months of service. The amount of a participant’s accrued benefit will be offset against certain other benefits to which the participant is entitled. The distribution provisions of the Carson’s SERP may be modified to ensure compliance with certain changes in federal tax laws related to nonqualified deferred compensation.

Carson Pirie Scott Pension Plan

In connection with the acquisition of Carson’s in March 2006, the Company assumed the Carson’s Pension Plan. The Carson’s Pension Plan is a qualified defined-benefit cash-balance plan in which the only named executive officer who participates is Anthony J. Buccina. The Carson’s Pension Plan was frozen to new participants in 2002 and all future benefit accruals were frozen in May 2006.

Requirements For Retirement Benefits

Normal Retirement: Employees who terminate employment with five or more years of service and have attained age 65 qualify for normal retirement. Payment of the full benefit commences as soon as practicable following termination. Mr. Buccina is not currently eligible for normal retirement under the Carson’s Pension Plan.

Early Retirement: Employees who have completed five or more years of service and are age 55 or older upon termination are eligible for early retirement. In addition, employees who participated in Carson’s previous plan which was merged into the Carson’s Pension Plan are eligible for early retirement after 30 years of service. Payment of pension benefits will commence at age 65, unless the employee elects to begin such payments earlier in which case the pension benefit amount may be reduced. Mr. Buccina is currently eligible for early retirement under the Carson’s Pension Plan.

Termination Other than Normal Retirement or Early Retirement: Employees who terminate employment with five years or more of service prior to attaining age 55 or have attained age 55 but have fewer than five years of service upon termination qualify to receive a deferred vested pension. Payment of deferred vested pension benefits will commence at age 65, unless the employee elects to begin such payments earlier in which case the deferred vested pension benefit amount may be reduced. Mr. Buccina is currently eligible for deferred vested pension benefits under the Carson’s Pension Plan.

Disability Retirement: An employee with ten or more years of service who is deemed permanently and totally disabled is entitled to receive a disability benefit commencing as of his normal retirement date, with payment to commence generally as soon as practicable thereafter. Mr. Buccina is currently eligible for disability retirement under the Carson’s Pension Plan.

Form of Payment

For an unmarried employee, the normal form of payment is a life annuity. For a married employee, the normal form of payment is a qualified joint and surviving spouse annuity; however, the married employee may elect to receive payment in the form of a single life annuity. Any employee may elect to receive pension benefits in the form of a life annuity, 50% joint and survivor annuity, or ten-year annuity with specified monthly payments. An employee whose accrued benefit value is more than $5,000 may elect to receive a lump sum distribution that is the actuarial equivalent of the forms of benefit otherwise provided for in the Carson’s Pension Plan.

Calculation of Benefits

Effective May 1, 2002, the Carson’s Pension Plan was amended and restated to convert the plan’s benefit formula to a cash-balance design. Under this design, the pension benefit is expressed as a cash-balance account. Each year, a participant’s cash-balance account is credited with (i) a pension credit based on the participant’s age, years of service and eligible pay for that year, and (ii) an interest credit based on the participant’s account balance as of the beginning of the year and an interest rate that equals the average30-year U.S. Treasury bond rate for October of the prior calendar year. For 2006, the interest rate was 4.68%. For purposes of the Carson’s Pension Plan, eligible pay is generally base pay and certain other forms of cash compensation, including annual performance bonuses, but excluding long-term incentive compensation and proceeds from stock option exercises. Effective January 1, 2007, the pension credit was significantly reduced for all eligible employees to a maximum of 4%.

Employees with accrued pension benefits as of April 30, 2002, including Mr. Buccina, are considered continued participants under the current Carson’s Pension Plan. Retirement benefits accrued as of such date were calculated under Carson’s previous pension plan’s formula on the basis of (i) the number of years of credited service and (ii) the employee’s compensation during each such

year of credited service. After May 1, 2002, retirement benefits for such continued participants are calculated in accordance with the cash-balance account design set forth above.

Retiree Medical Benefits for Tim Grumbacher

Pursuant to the Executive Transition Agreement, Mr. Grumbacher and his spouse are entitled to continue participation in the Company’s group medical plan following the cessation of Mr. Grumbacher’s employment with the Company for any reason. Such participation will occur at no cost to the Grumbachers for the duration of their respective lifetimes. If Mr. Grumbacherand/or his spouse are unable to participate in the active employee plan, heand/or she shall either (i) receive cash payments from the Company to enable the purchase of similar coverage on an individual basis, or (ii) the Company shall purchase an insurance policy to provide similar coverage.

Option Exercises and Stock Vested

None of the named executive officers exercised any options in 2006, nor did any shares of restricted stock held by the named executive officers vest in 2006.

Summary of Employment Agreements with Named Executive Officers

Tim Grumbacher, Executive Chairman of the Board

Effective as of February 1, 2005, Mr. Grumbacher and the Company entered into an Executive Transition Agreement. Pursuant to the agreement, which runs through the first day of the Company’s fiscal year commencing on or about February 1, 2010, Mr. Grumbacher will serve as the Company’s Executive Chairman of the Board and as a member of the Executive Committee of the Board through January 31, 2008. For the remaining term of the agreement, Mr. Grumbacher will serve in such capacity as the Board and Mr. Grumbacher may agree. During the initial three-year period, Mr. Grumbacher will receive an annual base salary of $650,000 and will be eligible to earn an annual cash bonus in accordance with pre-determined criteria established by the HRC Committee under the Company’s Cash Bonus Plan for senior executives of the Company.

Under his agreement, Mr. Grumbacher was granted 365,205 restricted shares of the Company’s common stock pursuant to the terms of the Stock Incentive Plan. The shares will vest on or about February 1, 2010, subject to accelerated vesting under certain circumstances. The Company has agreed to provide Mr. Grumbacher and his wife with medical insurance for the duration of each of their lives. In addition, for the duration of Mr. Grumbacher’s life, the Company will provide him with secretarial support and office space and allow him to participate in the Company’s discount program that allows executives to make “at-cost” purchases from the Company. For information regarding potential severance payments and accelerated vesting of equity awards to which Mr. Grumbacher may be entitled upon certain termination eventsand/or a change in control, see “Potential Payments Upon Termination or Change in Control.”

Byron L. Bergren, President and Chief Executive Officer

Mr. Bergren’s employment agreement with the Company was entered into on August 24, 2004 and amended on May 1, 2005 and May 23, 2006. The term of his employment agreement continues to February 8, 2008, and thereafter from year to year unless terminated by Mr. Bergren or the Company. Mr. Bergren’s employment agreement, as amended, provides for a minimum annual base salary of $1,000,000 and a bonus in accordance with the Company’s Cash Bonus Plan. Mr. Bergren’s agreement provides that he will be nominated to serve as a director of the Company for as long as he is employed as President and Chief Executive Officer of the Company.

Pursuant to the May 23, 2006 amendment to his employment agreement, Mr. Bergren was granted 40,519 shares of the Company’s common stock, which had an aggregate value of

$1,000,000 as of the effective date of that amendment. Such shares vest in full on February 8, 2008, provided Mr. Bergren is continuously employed by the Company through such date, except that vesting of such shares may be accelerated in certain circumstances. Pursuant to the May 23, 2006 amendment to his employment agreement, Mr. Bergren was also granted performance-based RSUs with a value of $1,000,000 as of May 23, 2006. One-half of the RSUs vested based upon the achievement of net income performance targets for 2006. The other one-half of the RSUs vest, if at all, based upon the achievement of performance targets for 2007. Mr. Bergren’s employment agreement contains a non-competition clause that, during Mr. Bergren’s employment and for a period of one year after termination of his employment, prohibits Mr. Bergren from engaging in or being financially interested in the retail department stores business of any competitor of the Company identified in the employment agreement. For information regarding potential severance payments and accelerated vesting of equity awards to which Mr. Bergren may be entitled upon certain termination eventsand/or a change in control, see “Potential Payments Upon Termination or Change in Control.”

Anthony J. Buccina, Vice Chairman, President — Merchandising

On June 1, 2006, the Company entered into an employment agreement with Anthony Buccina. The agreement terminates on January 31, 2009, unless sooner terminated in accordance with its terms. Mr. Buccina’s initial base salary under his employment agreement is $780,000 per year. This base salary is subject to review during the term of the employment agreement and may be increased in the sole discretion of the Company upon approval of the HRC Committee.

Pursuant to his employment agreement, Mr. Buccina received a grant of options to purchase 96,000 shares of the Company’s common stock at a purchase price equal to the fair market value of the Company’s common stock on June 1, 2006, or $27.15 per share. Mr. Buccina also received a grant of 65,000 restricted shares of the Company’s common stock. Under the employment agreement, Mr. Buccina is eligible to participate in other plans and programs that are generally made available to the other employees of the Company who were previously employed by the Carson’s division of Saks Incorporated and are now employed by the Company. The employment agreement also provides that Mr. Buccina will continue his participation in the Carson’s SERP. Mr. Buccina is entitled to receive an immediate single sum distribution of the entire present value of his accrued benefit within 60 days after his termination of employment for any reason.

Mr. Buccina’s employment agreement contains a non-competition clause that, during Mr. Buccina’s employment and for a period of one year after termination of his employment, prohibits Mr. Buccina from engaging in or being financially interested in the retail department stores business of any competitor of the Company named in the employment agreement. For information regarding potential severance payments and accelerated vesting of equity awards to which Mr. Buccina may be entitled upon certain termination eventsand/or a change in control, see “Potential Payments Upon Termination or Change in Control.”

David B. Zant, Vice Chairman — Private Brand, Merchandise Planning and Internet Marketing

The Company entered into an employment agreement with Mr. Zant on December 13, 2004, amended effective May 1, 2006, that continues to January 31, 2008. Mr. Zant’s minimum annual base salary is $500,000. If Mr. Zant is discharged without Cause or resigns for Good Reason (as defined in the agreement), he will continue to receive his base salary for one year. Upon a change in control of the Company, all options and shares of restricted stock held by Mr. Zant will immediately vest and, upon termination of his employment under certain circumstances after a change in control, Mr. Zant will be entitled to a payment equal to the lesser of (i) 2.99 times his base salary at the time of the change in control, and (ii) the maximum amount permitted by Section 280G of the Internal Revenue Code.

Pursuant to the original December 13, 2004 employment agreement, Mr. Zant was granted options to purchase 60,000 shares of the Company’s common stock with an exercise price of $15.75, of which 40,000 options have vested and the remaining 20,000 options shall vest on January 31, 2008 if Mr. Zant is continuously employed with the Company through that date. In addition, Mr. Zant was granted 40,000 restricted shares of the Company’s common stock, 15,000 of which have vested, 10,000 shall vest on August 31, 2007 and 15,000 shall vest on August 31, 2008, provided Mr. Zant is still employed on these respective dates. Mr. Zant’s employment agreement contains a non-competition clause that, during Mr. Zant’s employment and for a period of one year after termination of his employment, prohibits Mr. Zant from engaging in or being financially interested in the retail department stores business of any competitor of the Company named or otherwise identified in the employment agreement. For information regarding potential severance payments and accelerated vesting of equity awards to which Mr. Zant may be entitled upon certain termination eventsand/or a change in control, see “Potential Payments Upon Termination or Change in Control.”

Potential Payments Upon Termination or Change in Control

The Company has entered into agreements and maintains plans that will require the Company to provide compensation to the named executive officers in the event of a termination of employment or a change in control of the Company. The amount of compensation payable to each named executive officer in each situation is set forth in the tables below. The amounts shown in the tables assume that termination of the named executive officerand/or a change in control occurred on February 3, 2007. The actual amounts to be paid will depend on the circumstances and time of the termination or change in control.

The following table describes the potential payments upon termination or a change in control of the Company for Tim Grumbacher, the Executive Chairman of the Board.


				Mr. Grumbacher
				Ceases to Serve as
				Chairman of the			Change in
	Mr. Grumbacher			Board by Mutual			Control			Change in
	Ceases to Serve as			Consent with the			Without			Control and
	Chairman of the			Company or as a			Termination of			Mr. Grumbacher
	Board not as a			Result of the			Mr. Grumbacher’s			Ceases to be the
	Result of Breach of			Company’s			Position as			Executive Chairman
	the Agreement by			Breach of			Executive			by Reason of Such
Executive Benefits and Payments Upon Termination	the Company			the Agreement			Chairman			Change in Control			Disability			Death

Cash Severance		—			—			—		$	650,000			—			—
Pro-rated Non-Equity Incentive Compensation (Cash Bonus)	$	361,563	(1)	$	361,563	(1)		—		$	621,563		$	361,563	(1)	$	361,563	(1)
Value of Accelerated Restricted Stock(2)		—		$	13,629,451		$	13,629,451		$	13,629,451		$	13,629,451		$	13,629,451
Continuing Health and Welfare Benefits for Mr. Grumbacher and his Spouse for Life(3)	$	139,004		$	139,004			—		$	139,004		$	139,004		$	139,004
Office Space and Secretarial Support(4)	$	312,021		$	312,021			—		$	312,021		$	312,021			—
280G TaxGross-up		—			—		$	3,000,590	(5)	$	3,461,582	(5)		—			—
Company Provided Life Insurance		—			—			—			—			—		$	487,500
Total	$	812,588		$	14,442,039		$	16,630,041		$	18,813,621		$	14,442,039		$	14,617,518


(1)		This calculation is subject to reduction by the HRC Committee but assumes no such reduction.

(2)		Represents the intrinsic value of unvested restricted stock subject to accelerated vesting, based on the closing price of the Company’s common stock on the Nasdaq Stock Market on February 2, 2007 ($37.32 per share).

(3)		Represents the actuarial present value of continuing health and welfare benefits for Mr. Grumbacher and his wife for their lifetimes.

(4)		Represents the actuarial present value of office space and secretarial support for Mr. Grumbacher’s lifetime at the Company’s office in York, Pennsylvania.


(5)		Pursuant to Mr. Grumbacher’s Executive Transition Agreement, the Company agreed to make a taxgross-up payment to Mr. Grumbacher if any amounts paid or payable to him would be subject to the excise tax imposed on “excess parachute payments,” as that term is defined for purposes of Section 280G of the Internal Revenue Code of 1986 and Treasury Regulations promulgated pursuant thereto (“Section 280G”), and such taxgross-up amount is presented for each instance involving a change in control.

The following table describes the potential payments upon termination or a change in control of the Company for Byron L. Bergren, President and Chief Executive Officer.


					Involuntary
					Termination
			Voluntary		Without
			Termination		Cause or		Change in		Change in
	Termination		without		Resignation		Control		Control
	for		Good		for Good		Without		with
Executive Benefits and Payments Upon Termination	Cause		Reason		Reason(1)		Termination		Termination(2)			Retirement		Disability		Death

Cash Severance		—		—	$	2,000,000		—	$	3,553,367	(3)		—		—		—
Pro-rated Non-Equity Incentive Compensation (Cash Bonus)(4)		—	$	1,500,000	$	1,500,000	$	1,500,000	$	1,500,000		$	1,500,000	$	1,500,000	$	1,500,000
Value of Accelerated Options(5)		—		—		—	$	2,265,999	$	2,265,999			—		—		—
Value of Accelerated Restricted Stock(6)		—		—	$	1,512,169	$	2,818,369	$	2,818,369			—	$	2,818,369	$	2,818,369
Value of Performance RSUs(7)		—	$	756,066	$	756,066	$	1,512,132	$	1,512,132		$	756,066	$	756,066	$	756,066
Accrued Vacation Pay		—		—		—		—		—			—		—		—
Continuing Health and Welfare Benefits		—		—	$	26,639		—		—			—		—		—
Life Insurance		—		—		—		—		—			—		—	$	750,000
Total		—	$	2,256,066	$	5,794,874	$	8,096,500	$	11,649,867		$	2,256,066	$	5,074,435	$	5,824,435


(1)		Payment requires the execution of a general release.

(2)		With regard to change in control, “termination” means either (i) Mr. Bergren’s employment ceases for any reason after the expiration of three months following the change in control, including, without limitation, resignation by Mr. Bergren with or without “Good Reason” or (ii) during the three months immediately following the change in control he is terminated other than for “Cause.” If Mr. Bergren resigns for “Good Reason” during the first three months following a change in control, he would receive the payments under involuntary termination without cause or resignation for good reason.

(3)		Pursuant to Mr. Bergren’s employment agreement, as amended, if the aggregate present value of the “parachute payments” determined under Section 280G exceeds three times his “base amount,” as defined in Section 280G, the payouts upon a change in control shall be reduced to be less than three times his base amount. The cash severance amount presented for a change in control with termination has been reduced to be less than three times Mr. Bergren’s base amount.

(4)		This calculation is subject to reduction by the HRC Committee, but assumes no such reduction.

(5)		Represents the intrinsic value of unvested options subject to accelerated vesting, based on the difference between the exercise price of the options and the closing price of the Company’s common stock on the Nasdaq Stock Market on February 2, 2007 ($37.32 per share).

(6)		Represents the intrinsic value of unvested restricted stock subject to accelerated vesting, based on the closing price of the Company’s common stock on the Nasdaq Stock Market on February 2, 2007 ($37.32 per share).

(7)		The 2006 RSUs vested on February 3, 2007 without regard to acceleration and their vesting would not be affected by Mr. Bergren’s termination as of February 3, 2007 or by a change in control. If terminated on February 4, 2007 or later, Mr. Bergren would be entitled to full vesting of his 2007 RSUs, depending on the performance of the Company in fiscal year 2007, as if Mr. Bergren had been involuntarily terminated without cause or resigned for good reason.

The following table describes the potential payments upon termination or a change in control of the Company for Anthony J. Buccina, Vice Chairman and President-Merchandising.


			Voluntary
			Termination			Involuntary			Resignation		Change in		Change in
			without			Termination			for		Control		Control
	For Cause		Good			Without			Good		Without		With
Executive Benefits and Payments Upon Termination	Termination		Reason			Cause			Reason		Termination		Termination(1)		Retirement		Disability		Death

Cash Severance		—		—		$	1,560,000		$	1,560,000		—	$	1,560,000		—		—		—

Pro-rated Non-Equity Incentive Compensation (Cash Bonus)(2)(3)		—	$	1,060,313	(4)	$	1,060,313	(4)	$	1,060,313	$	1,060,313	$	1,060,313	$	1,060,313	$	1,060,313	$	1,060,313

Value of Accelerated Options(5)		—		—		$	412,638	(6)		—	$	976,320	$	976,320		—		—		—

Value of Accelerated Restricted Stock(7)		—		—			—			—	$	2,425,800	$	2,425,800		—	$	2,425,800	$	2,425,800

Carson’s SERP(8)	$	2,096,223	$	2,096,223		$	2,096,223		$	2,096,223		—	$	2,096,223	$	2,096,223	$	2,096,223	$	2,096,223

Carson’s Pension Plan(8)	$	207,736	$	207,736		$	207,736		$	207,736		—	$	207,736	$	207,736	$	207,736	$	207,736

Company Provided Life Insurance		—		—			—			—		—		—		—		—	$	1,560,000

Total	$	2,303,959	$	3,364,272		$	5,336,910		$	4,924,272	$	4,462,433	$	8,326,392	$	3,364,272	$	5,790,072	$	7,350,072


(1)		If Mr. Buccina leaves the Company for any reason other than termination without cause within the six months immediately following a change in control, he may not collect any additional benefits.

(2)		This calculation is subject to reduction by the HRC Committee, but assumes no such reduction.

(3)		Pursuant to his employment agreement with the Company, Mr. Buccina is entitled to a guaranteed bonus of $157,123 as of February 3, 2007, which is paid regardless of termination or change in control and is not specifically reflected in the table to the extent it would be the only amount payable. However, this guaranteed bonus amount does offset any bonus awarded pursuant to the Company’s Cash Bonus Plan and any dollar amount provided has been offset by Mr. Buccina’s guaranteed bonus.

(4)		Receipt of this benefit requires that Mr. Buccina be employed for a minimum of six months in the fiscal year.

(5)		Represents the intrinsic value of unvested options subject to accelerated vesting, based on the difference between the exercise price of the options and the closing price of the Company’s common stock on the Nasdaq Stock Market on February 2, 2007 ($37.32 per share).

(6)		Payment requires the execution of a general release.

(7)		Represents the intrinsic value of unvested restricted stock subject to accelerated vesting, based on the closing price of the Company’s common stock on the Nasdaq Stock Market on February 2, 2007 ($37.32 per share).

(8)		Represents the actuarial equivalent present value of the accrued benefit.

The following table describes the potential payments upon termination or a change in control of the Company for Keith E. Plowman, Executive Vice President, Chief Financial Officer and Principal Accounting Officer.


											Change in
											Control
					Involuntary			Change in			With
Executive Benefits					Termination			Control			Termination
and Payments Upon	For Cause		Voluntary		Without			Without			Without
Termination	Termination		Termination		Cause			Termination			Cause			Retirement		Disability		Death

Cash Severance		—		—	$	67,500	(1)		—		$	67,500	(1)		—		—		—
Pro-rated Non-Equity Incentive Compensation (Cash Bonus)(2)		—	$	209,625	$	209,625		$	209,625		$	209,625		$	209,625	$	209,625	$	209,625
Value of Accelerated Options(3)		—		—		—		$	194,100	(4)	$	194,100	(4)		—		—		—
Value of Accelerated Restricted Stock(5)		—		—		—		$	522,480	(4)	$	522,480	(4)		—	$	522,480	$	522,480
Company Provided Life Insurance		—		—		—			—			—			—		—	$	515,000
Total		—	$	209,625	$	277,125		$	926,205		$	993,705		$	209,625	$	732,105	$	1,247,105


(1)		Assumes Mr. Plowman signs a general release and is not rehired by the Company.

(2)		This calculation is subject to reduction by the HRC Committee, but assumes no such reduction.

(3)		Represents the intrinsic value of unvested options subject to accelerated vesting, based on the difference between the exercise price of the options and the closing price of the Company’s common stock on the Nasdaq Stock Market on February 2, 2007 ($37.32 per share).


(4)		The HRC Committee has discretion to fully vest the options and restricted stock of the Company upon a change in control. This calculation assumes that the HRC Committee would choose to fully vest all outstanding options and restricted stock upon a change in control on February 3, 2007.

(5)		Represents the intrinsic value of unvested restricted stock subject to accelerated vesting, based on the closing price of the Company’s common stock on the Nasdaq Stock Market on February 2, 2007 ($37.32 per share).

The following table describes the potential payments upon termination or a change in control of the Company for David B. Zant, Vice Chairman — Private Brand, Merchandise Planning and Internet Marketing.


			Voluntary											Change in
			Resignation			Involuntary			Resignation			Change in		Control
			Without			Termination			for			Control		with
	For Cause		Good			Without			Good			Without		Related
Executive Benefits and Payments Upon Termination	Termination		Reason			Cause(1)			Reason(1)			Termination		Termination(2)		Retirement			Disability		Death

Cash Severance		—	$	500,000	(3)	$	500,000		$	500,000			—	$	1,495,000	$	500,000	(3)		—		—
Pro-rated Non-Equity Incentive Compensation (Cash Bonus)(4)		—	$	407,813		$	407,813	(5)	$	407,813	(5)		—	$	407,813	$	407,813		$	407,813	$	407,813
Value of Accelerated Options(6)		—		—			—			—		$	431,400	$	431,400		—			—		—
Value of Accelerated Restricted Stock(7)		—		—			—			—		$	1,156,920	$	1,156,920		—		$	1,156,920	$	1,156,920
Continuing Health and Welfare Benefits		—	$	5,100	(8)	$	5,100	(8)	$	5,100	(8)		—		—	$	5,100	(8)		—		—
Bon-Ton SERP		—		—			—			—			—		—		—			—	$	68,174
Life Insurance		—		—			—			—			—		—		—			—	$	625,000
Total		—	$	912,913		$	912,913		$	912,913		$	1,588,320	$	3,491,133	$	912,913		$	1,564,733	$	2,257,907


(1)		Payment requires the execution of a general release.

(2)		For the purposes of change in control, “termination” means either (i) Mr. Zant’s employment ceases for any reason after the expiration of three months following the change in control or (ii) during the three months immediately following the change in control he is terminated other than for “Cause.”

(3)		If Mr. Zant is subsequently employed by another employer, the cash severance payment is subject to reduction in the amount of any earnings from subsequent employment. This calculation assumes Mr. Zant did not have any earnings from such subsequent employment.

(4)		This calculation is subject to reduction by the HRC Committee, but assumes no such reduction.

(5)		Receipt of this benefit requires that Mr. Zant be employed with the Company for a minimum of three months in the fiscal year.

(6)		Represents the intrinsic value of unvested options subject to accelerated vesting, based on the difference between the exercise price of the options and the closing price of the Company’s common stock on the Nasdaq Stock Market on February 2, 2007 ($37.32 per share).

(7)		Represents the intrinsic value of unvested restricted stock subject to accelerated vesting, based on the closing price of the Company’s common stock on the Nasdaq Stock Market on February 2, 2007 ($37.32 per share).

(8)		This benefit is calculated for a full 12 months. However, in the event Mr. Zant found other employment with similar benefits within 12 months of his termination, such benefit would cease.

Equity Compensation Plan Information

At February 3, 2007, the Amended and Restated 1991 Stock Option and Restricted Stock Plan, the 2000 Stock Incentive and Performance-Based Award Plan and the Company’s Phantom Equity Replacement Plan were in effect. Each of these plans has been approved by the shareholders. There were no other equity compensation plans in effect. The following information concerning these plans is as of February 3, 2007:


					Number of
					securities
	Number of shares of				remaining available
	common stock to be				for future issuance
	issued upon		Weighted-average		under equity
	exercise of		exercise price of		compensation plans
	outstanding		outstanding		(excluding
	options, warrants		options, warrants		securities
	and rights		and rights		reflected in
	(a)		(b)		column (b))

Equity compensation plans approved by security holders
Stock options		608,667	$	19.66		—	(1)
Restricted stock		610,416		—		—	(1)
Restricted stock units		83,483		—		—	(1)

Subtotal		1,302,566		—		1,180,812
Equity compensation plans not approved by security holders		—		—		—

Total		1,302,566		—		1,180,812


(1)		The referenced plans do not allocate available shares among stock options, restricted stock or restricted stock units.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Executive officers, directors and persons who own more than 10% of the Company’s common stock are required to file reports of their holdings and transactions in Company stock with the Securities and Exchange Commission. To our knowledge, all ~~2005 filing requirements~~such filings were made in a timely ~~made.~~manner, except as follows: (1) Deborah M. Rivera, who is no longer employed by the Company, filed a late Form 4 with respect to the sale of 1,632 shares of common stock; (2) Anthony J. Buccina filed a late Form 4 with respect to a grant of options and shares of restricted stock; and (3) James H. Baireuther, who is no longer employed by the Company, filed a late Form 4 with respect to the forfeiture of shares of restricted stock.

RELATED PARTY TRANSACTIONS

The Company’s Code of Ethical Standards and Business Conduct provides that no director or associate of the Company shall engage in any transactions with the Company unless approved by the Audit Committee. The Audit Committee Charter provides that the Audit Committee shall have the responsibility to review and approve all such related party transactions. All executive officers and directors are required to disclose any possible related party transaction in which such executive officer or director may participate and each such transaction must be approved by the Audit Committee.

The Company leases its Oil City, Pennsylvania store from Nancy T. Grumbacher, Trustee of the 2002 Indenture of Trust of M. Thomas Grumbacher, pursuant to a lease entered into on January 1, 1981. The ~~rental payments during 2005 under this lease were $223,500. The~~ Oil City lease terminates on July 31, 2011, and the Company has four five-year renewal options. The rental payments during 2006 under this lease were $223,500. The aggregate amount of all payments due under the terms of the lease on or after the beginning of the Company’s last fiscal

year through the remainder of the current term is approximately $1,229,250. Ms. Grumbacher is the wife of Tim Grumbacher, our Executive Chairman of the Board.

During 2005, the Company purchased approximately $1.1 million of merchandise from The Pfaltzgraff Co. Marsha M. Everton, a director of the Company, is President of The Pfaltzgraff Co. The transactions noted above were on substantially the same terms as comparable transactions with other vendors of merchandise to the Company.

Michael L. Gleim, a non-employee ~~director,~~Director, rendered consulting services to ~~Bon-Ton~~the Company during ~~2005~~2006 for which he was paid ~~$75,000.~~$180,000. In addition, Mr. Gleim received a $50,000 supplemental retirement benefit during ~~2005~~2006 from the Company which was paid pursuant to the terms of an employment agreement with Mr. Gleim with respect to his employment as Vice Chairman of the Company from 1995 to 2002.

SHAREHOLDER PROPOSALS

Shareholder proposals for the ~~2007~~2008 Annual Meeting of Shareholders must be received by the Company by January ~~23, 2007~~17, 2008 in order to be considered at the meeting and included in the Company’s proxy statement and form of proxy relating to that meeting.

If notice of any proposal with respect to a matter to be addressed at the ~~2007~~2008 Annual Meeting of Shareholders is received by the Company after April ~~8, 2007,~~1, 2008, the proposals with respect to such matter shall be deemed “untimely” for purposes ofRule 14a-4(c) under the Securities Exchange Act and, therefore, the Company will have the right to exercise discretionary voting authority with respect to such proposal.

HOUSEHOLDING OF PROXY MATERIALS

SEC regulations permit the Company to send a single set of proxy materials, including this Proxy Statement and the Annual Report to Shareholders, to two or more shareholders that share the same address. Each shareholder will continue to receive his or her own separate proxy card. The Company will deliver promptly upon written or oral request a separate set of proxy materials to a shareholder at a shared address that only received a single set of proxy materials for this year. If a shareholder would prefer to receive his or her own copy, please contact Mary Kerr by telephone at(717) 757-7660, by U.S. mail at 2801 E. Market Street, York, Pennsylvania 17402 or bye-mail at ir@bonton.com. Similarly, if a shareholder would like to receive his or her own set of the Company’s proxy materials in future years or if a shareholder shares an address with another shareholder and both would like to receive only a single set of the Company’s proxy materials in future years, please contact Ms. Kerr.

Appendix A

~~AUDIT COMMITTEE CHARTER~~

This Charter has been adopted by the Board of Directors (the “Board”) of The Bon-Ton Stores, Inc. (the “Company”) to govern its Audit Committee (the “Committee”), which shall have the authority, responsibility and specific powers described below.

~~Purposes~~

~~The Committee shall be directly responsible for the appointment, compensation and oversight of the Company’s independent auditors (the “Auditors”).~~

The Committee shall monitor (1) the integrity of the financial statements of the Company, (2) the Company’s compliance with legal and regulatory requirements, (3) the Auditors’ qualifications and independence, (4) the performance of the Company’s internal audit function and (5) the performance of the Auditors.

~~The Committee shall prepare the report required by the rules of the Securities and Exchange Commission to be included in the Company’s annual proxy statement.~~

~~The Committee shall oversee the financial reporting processes of the Company and the audits of the Company’s financial statements.~~

~~Organization~~

~~The Committee shall be composed of three or more directors who shall: (i) meet the independence and experience requirements of the Nasdaq National Market (“Nasdaq”) and Rule~~ ~~10A-3(b)(1)~~ of the Securities Exchange Act of 1934, as amended; (ii) not have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the past three years; and (iii) be able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement. At least one member of the Committee shall be an “audit committee financial expert,” as such term is defined by the applicable regulations of the Securities and Exchange Commission (“SEC”) and shall meet any applicable standards promulgated by Nasdaq related to enhanced financial expertise applicable to at least one member of the Committee.

~~The members of the Committee shall be appointed and removed by the Board. A member of the Committee shall be selected by the Board to serve as the Committee’s chairperson.~~

~~Meetings~~

The Committee shall meet at least quarterly, or more frequently as circumstances dictate. The Committee shall meet at least annually with management, the internal auditors and the Auditors in separate executive sessions to discuss any matters that the Committee or any of these groups believes should be discussed privately. In addition, the Committee will meet with the Auditors and management to review the Company’s financial statements as provided under the sub-heading “Document Review” below. Minutes or other records of meetings and activities of the Committee shall be maintained.

~~A-1~~

~~Responsibilities~~

The Committee shall have the sole authority to appoint or replace and oversee the Auditors, including the authority to resolve disagreements between management and the Auditors regarding financial reporting. The Auditors shall report directly to the Committee.

The Committee shall pre-approve (1) all audit engagement fees and terms and (2) all non audit services provided by the Auditors which are not proscribed by applicable law. The Committee may delegate pre-approval responsibilities to a member of the Committee, and the decisions of any Committee member to whom pre-approval authority is delegated must be presented to the full Committee at its next scheduled meeting.

The Committee shall, at least annually, obtain and review a report by the Auditors describing the following: (1) the Auditor’s internal quality-control procedures; (2) any material issues raised by the most recent internal quality-control review, or peer review, of the Auditors, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the Auditors, and any steps taken to deal with any such issues; and (3) in order to assess the Auditors’ independence, all relationships between the Auditors and the Company.

The Committee shall review and concur in the appointment, replacement, reassignment or dismissal of the Director of Internal Audit. The Director of Internal Audit will report directly to the Committee.

The Committee shall have the authority to engage and determine funding for outside legal, accounting or other consultants to advise the Committee and shall, as appropriate, obtain advice and assistance from such advisors. The Committee may request any officer or employee of the Company or the Company’s outside counsel or the Auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.

The Committee shall have the authority to determine, and the Company shall provide, appropriate funding for, (1) compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company and (2) payment for the ordinary administrative expenses of the Audit Committee that are necessary or appropriate for carrying out its duties.

The Committee shall make regular reports to the Board. The Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval. The Committee shall annually review the Committee’s own performance.

The Committee shall (1) discuss the annual audited financial statements and quarterly financial statements with management and the Auditors, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in reports filed with the SEC; (2) discuss earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies; (3) discuss policies with respect to risk assessment and risk management; (4) review with the Auditors any audit problems or difficulties and management’s response; and (5) set clear hiring policies for the Company concerning employees or former employees of the Auditors.

The Committee shall approve the overall scope of the internal audit program, the annual plan and budget. The Committee shall ensure the internal audit function is structured so that it achieves organizational independence and permits full and unrestricted access to the Committee, management and the Board.

~~A-2~~

~~In carrying out its duties and responsibilities, the Committee, to the extent it deems necessary or appropriate, will:~~

~~Document Review~~


	1.	Review with management and the Auditors the financial statements and disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to be included in the Company’s Annual Report on Form 10K (or the annual report to shareholders if distributed prior to the filing of Form 10K), including their judgment about the quality, not just the acceptability, of accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements. Also, the Committee shall discuss the results of the annual audit and any other matters required to be communicated to the Committee by the Auditors under generally accepted auditing standards.

	2.	Review the interim financial statements and disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” with management and the Auditors prior to the filing of the Company’s Quarterly Report on Form 10Q. Also, the Committee shall discuss the results of the quarterly review and any other matters required to be communicated to the Committee by the Auditors under generally accepted auditing standards.

~~Auditors~~


	3.	Review the proposed scope of the audit, the proposed staffing of the audit to ensure adequate coverage, as well as appropriate coverage consistent with Sections 203 and 206 of the Sarbanes Oxley Act of 2002, and the fees proposed to be charged for such audit.

	4.	Select the Auditors, considering independence and effectiveness, and approve the fees and other compensation to be paid the Auditors. On an annual basis, the Committee should ensure receipt from the Auditors, and review, the Auditors’ formal written statement delineating all relationships between the Auditors and the Company, consistent with Independence Standards Board Standard 1. In addition, the Committee shall actively engage in dialogue with the Auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the Auditors and the Committee shall take, or recommend that the full Board take, appropriate action to oversee the independence of the Auditors.

	5.	~~Review the performance of the Auditors and approve any proposed discharge of the Auditors when circumstances warrant.~~

	6.	~~Discuss with the Auditors any communications with the Auditors’ national office respecting auditing or accounting issues presented by the engagement.~~

	7.	~~Review and evaluate the lead partner on the audit team. Ensure the rotation of the lead partner having primary responsibility for the audit and the partner responsible for reviewing the audit.~~

	8.	~~Periodically consult with the Auditors, without management present, regarding the Company’s internal controls and the fullness and accuracy of the Company’s financial statements.~~

~~A-3~~


	9.	~~Receive and review regular reports from the Auditors with respect to:~~


	•	~~the critical accounting policies and practices of the Company,~~

	•	all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the Auditors, and

	•	~~other material written communications between the Auditors and management, such as any management letter or schedule of unadjusted differences.~~

~~Internal Auditor~~


	~~10.~~	~~Discuss with the independent auditor and management the Company’s auditing responsibilities, budget and staffing and any recommended changes in the planned scope of the internal audit program.~~

	~~11.~~	~~Review the significant reports to management prepared by the internal auditors and management’s responses.~~

~~Financial Reporting Processes~~


	~~12.~~	Review with the Auditors (i) the Company’s financial and accounting personnel, (ii) the adequacy and effectiveness of the accounting and financial controls of the Company, and (iii) elicit any recommendations for the improvement of such internal controls or particular areas where new or more detailed controls or procedures are desirable.

	~~13.~~	~~Review management’s assertion on its assessment of the effectiveness of internal controls as of the end of the most recent fiscal year and the Auditors’ report on management’s assertions.~~

	~~14.~~	Review reports from management on material weaknesses or deficiencies in the design or operation of internal controls and on any fraud that involves personnel having a significant role in the internal controls.

	~~15.~~	~~In consultation with the Auditors, review the integrity of the financial reporting processes, both internal and external.~~

	~~16.~~	~~Consider the Auditors’ judgments about the quality and appropriateness of the Company’s accounting principles as applied in its financial reporting.~~

	~~17.~~	~~Inquire of management, internal audit and the Auditors about significant risks or exposures and assess the steps management has taken to minimize such risks to the Company.~~

	~~18.~~	~~Consider and approve, if appropriate, major changes to the Company’s auditing and accounting principles and practices as suggested by the Auditors or management.~~

~~A-4~~

~~Process Improvement~~


	~~19.~~	Following completion of the annual audit, review separately with management and with the Auditors any significant difficulties encountered during the course of the audit, including any restrictions on the scope of the work or access to required information.

	~~20.~~	~~Review any significant disagreement between management and the Auditors in connection with the preparation of the financial statements.~~

	~~21.~~	Review with the Auditors and with management the extent to which changes or improvements in financial or accounting practices, as approved by the Committee, have been implemented. (This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as determined by the Committee.)

~~Ethical and Legal Compliance~~


	~~22.~~	~~Review and approve all related-party transactions.~~

	~~23.~~	~~Review management’s periodic update of the Company’s Code of Ethical Standards and Business Practices and ensure that management has established a system to enforce such code.~~

	~~24.~~	Review management’s monitoring of the Company’s compliance with such code and periodically determine that management has the proper review system in place to ensure that the Company’s financial statements, reports and other financial information disseminated to governmental organizations and the public satisfy legal requirements.

	~~25.~~	~~Review legal compliance matters, including corporate securities trading policies, with Company counsel.~~

	~~26.~~	~~Review with Company counsel any legal matter that could have a significant impact on the financial statements.~~

	~~27.~~	Review and update periodically the Company’s procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or audit matters.

	~~28.~~	~~Review annually the travel and entertainment expenses of the Company’s Chief Executive Officer and a summary of all other executive officers’ travel and entertainment expenses.~~

	~~29.~~	~~Perform any other activities consistent with this Charter, the Company’s By-laws and governing law, as the Committee or the Board deems necessary or appropriate.~~

~~A-5~~

~~Appendix B~~

THE BON-TON STORES, INC. AMENDED AND RESTATED
CASH BONUS PLAN

~~2000 STOCK INCENTIVE AND PERFORMANCE-BASED AWARD PLAN~~

(Amended and Restated Effective as of ~~June 20, 2006)~~February 1, 2007)

1. ~~Purpose.~~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~~purpose 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~~subject to shareholder approval, is to provide performance-based cash bonus compensation for key executives in accordance with a formula that is related to the ~~provisions~~financial success of ~~Section 16, has been disclosed~~the Bon-Ton Stores, Inc., a Pennsylvania corporation, (the “Company”) as part of an integrated compensation program which is intended to assist the Company in motivating and ~~approved by~~retaining employees of superior ability, industry and loyalty. The terms of the Plan, as herein set forth, are intended to provide greater flexibility in furtherance of the purposes of the Plan as compared with the Company’s ~~shareholders.~~prior cash bonus plan.

2. ~~Definitions.~~Definitions ~~Unless the context clearly indicates otherwise, the~~. The following ~~terms~~words and phrases as used herein shall have the following ~~meanings:~~meanings, unless a different meaning is plainly required by the context:


	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~~shall mean the Board of Directors of the Company.

	B.	“Bonus Base” shall mean a percentage of a Participant’s base salary in effect for the Plan Year that may be any percentage between zero (0%) and one hundred percent (100%). For these purposes, the Participant’s base salary for the Plan Year shall be the Participant’s actual annual base salary, unless otherwise specified by the Committee when establishing the Earned Percentage Schedule for the Plan Year.

	C.	“Code” shall mean the Internal Revenue Code of 1986, as amended.

	D.	“Committee” shall mean the Compensation Committee of the Board of Directors, consisting of two or more Outside Directors, to act as the Committee with respect to the Plan, or such other committee as may be appointed by the Board of Directors to act as the Committee with respect to the Plan.


	E.	“~~Change of Control”~~Company” shall ~~have~~mean the ~~meaning as set forth in Section 10.~~Bon-Ton Stores, Inc., a Pennsylvania corporation, and any successor thereto.


	F.	“~~Code” means~~Designated Beneficiary” shall mean the ~~Internal Revenue Code~~person, if any, specified in writing by the Participant to receive any payments due to the Participant in the event of ~~1986, as amended.~~the Participant’s death. In the event no person is specified by the Participant, the Participant’s estate shall be deemed to be the Designated Beneficiary.


	G.	“~~Committee”~~Earned Percentage” shall ~~have~~mean the ~~meaning set forth in Section 3.A.~~percentage determined by reference to the schedule established for each Plan Year by the Committee, which percentage may be up to a maximum of three hundred percent (300%).


	H.	“~~Company” means The Bon-Ton Stores, Inc.,~~Earned Percentage Schedule” shall mean the schedule pursuant to which a ~~Pennsylvania corporation.~~determination of the Participant’s Earned Percentage is determined based on the extent to which the performance goals set forth therein have been achieved during the Plan Year.


	I.	“~~Disability”~~Effective Date” shall ~~have~~mean the ~~meaning set forth in Section 22(e)(3)~~first day of the ~~Code.~~Company’s taxable year that commenced on or about February 1, 2007.


	J.	“~~Fair Market Value”~~Outside Director” shall ~~have~~mean a member of the ~~meaning set forth in~~Board of Directors who is treated as an “outside director” for purposes of Code Section ~~8.B.~~162(m).


	K.	“~~Grantee” means a person who is granted Restricted Stock.~~Participant” shall mean those key executives as may be designated by the Committee to participate in the Plan from time to time.

A-1

~~B-1~~


	L.	“~~ISO” means an Option granted~~Performance-Based Bonus” shall mean the cash bonus payable to a Participant under ~~the Plan that is intended to qualify as an “incentive stock option” within the meaning of~~ Section ~~422(b) of the Code.~~6(a).


	M.	“~~Non-qualified Stock Option” means an Option granted under~~Performance Based Compensation Rules” shall mean those provisions of Code Section 162(m) and Treasury Regulations promulgated thereunder that provide the ~~Plan~~rules pursuant to which compensation that is ~~not intended~~paid to ~~qualify, or otherwise does not qualify, as an “incentive stock option” within~~executives on the ~~meaning~~basis of ~~Section 422(b)~~performance is exempt from the limitations on deductibility applicable to certain compensation paid to executives in excess of ~~the Code.~~$1,000,000.


	N.	“~~Option” means either an ISO or a Non-qualified Stock Option granted under the Plan.~~Plan” shall mean The Bon-Ton Stores, Inc. Cash Bonus Plan, as amended and restated herein.

	O.	“~~Optionee” means a person to whom an Option has been granted under~~Plan Year” shall mean the ~~Plan, which Option has not been exercised and has not expired or terminated.~~


	P.	~~“Option Document” means~~taxable year of 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.~~Company.

3. ~~Administration~~Participation. Those key executives as may be designated by the Committee to participate in the Plan from time to time are the participants in the Plan. Participants under the Plan for each Plan Year shall be specified no later than the time the Earned Percentage Schedule (as described in Section 6(a) below) is established by the Committee and may be set forth as part of that schedule.

4. Term Of Plan. Subject to approval of the ~~Plan.~~Plan by the shareholders of the Company, the Plan shall be in effect as of the Effective Date, and shall continue until terminated by the Board of Directors.

5. Bonus Entitlement. The Participant shall be entitled to receive a bonus in accordance with the provisions of Section 6 of the Plan only after certification in writing by the Committee that the performance goals set forth in Section 6 have been satisfied. The bonus payment with respect to a Plan Year shall be payable to the Participant in the next Plan Year on or before April 15 of such Plan Year. Notwithstanding anything to the contrary contained herein, no bonus shall be payable under the Plan without the prior disclosure of the terms of the Plan to the shareholders of the Company and the approval of the Plan by such shareholders.

6. Determination of Performance-Based Compensation Bonus


	A.	~~Committee.~~Performance-Based Bonus ~~The Plan~~. Each Participant, or the Designated Beneficiary of a deceased Participant, shall be ~~administered by~~entitled to a bonus with respect to such Plan Year that is equal to the ~~Board of Directors, or, in the discretion~~“Earned Percentage” of the ~~Board of Directors,~~Bonus Base, determined by ~~a committee composed of two (2) or more of the members of the Board of Directors. To the extent possible, and~~reference 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~~Earned Percentage Schedule 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 administereffect for 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

~~B-2~~

~~to, the Committee. Vacancies on the Committee, however caused, shall be filled by the Board of Directors.~~Year.

     B. ~~Meetings.~~Performance Goals.  The ~~Committee shall hold meetings at such times and places as it may determine. Acts approved at a meeting by a majority of~~Earned Percentage is 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~~percentage derived from the ~~Company to the fullest extent provided by applicable law and the Company’s Articles of Incorporation~~ formulaand/or ~~Bylaws in connection with or arising out of any action, suit or proceeding with respect to the administration of the~~ schedule established for each 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.

~~B-3~~

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

~~B-4~~

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~~

~~B-5~~

~~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.

~~B-6~~


	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~~Year 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.~~

~~B-7~~


	F.	~~Dividends.~~ ~~The Committee may, in its sole discretion, provide in an Award Document~~on 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,Plan Years Earned Percentage Schedule, 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

~~B-8~~

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.

~~B-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

~~B-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 either by reference to ~~(i)~~ the Company as a whole ~~(ii)~~or by reference to any one or more of ~~the Company’s~~its subsidiaries, operating divisions ~~business segments~~ or other operating ~~units, or (iii) any combination thereof)~~units): ~~earnings before interest, taxes, depreciation, and amortization; profit before taxes;~~ stock ~~price;~~price, market ~~share;~~share, gross ~~revenue;~~sales, gross revenue, net ~~revenue;~~revenues, pretax ~~income; net~~income, operating ~~income;~~income, cash ~~flow;~~flow, earnings per ~~share;~~share, return on ~~equity;~~equity, return on invested capital or ~~assets;~~assets, cost reductions and ~~savings;~~savings, return on revenues or ~~productivity; loss ratio; expense ratio; combined ratio; product spread;~~productivity, or any ~~variations~~variation or ~~combinations~~combination of the preceding business ~~criteria, which may also be modified at the discretion of~~criteria. In addition, the Committee ~~to take into account extraordinary items~~may utilize as an additional performance measure (to the extent consistent with the Performance Based Compensation Rules) the attainment by a Participant of one or ~~which may be adjusted to reflect such costs~~ more personal objectivesand/or ~~expense as~~ goals that the Committee deems ~~appropriate.~~appropriate, including, but not limited to, implementation of Company policies, negotiation of significant corporate transactions, development of long- term business goals or strategic plans for the Company, or the exercise of specific areas of managerial responsibility; provided, however, that the measurement of the Company’s or a participant’s achievement of any of such goals must be objectively

A-2


	F.	~~Performance-Based Award Limitation.~~ ~~Notwithstanding anything~~determinable and shall be determined, to the ~~contrary herein,~~extent applicable, according to generally accepted accounting principles as in existence on the date on which the Earned Percentage Schedule for the Plan Year is established. In all cases, the Committee shall establish the Earned Percentage Schedule for each Plan Year no ~~Participant shall receive a Performance-Based Award for Shares having a Fair Market Value, as~~later than 90 days after the beginning of the ~~date of grant,~~Plan Year and shall endeavor to establish such Earned Percentage Schedule in ~~excess of $3,000,000.~~a manner that is consistent with the Performance Based Compensation Rules. In the event no Earned Percentage Schedule is established for a Plan Year, the Earned Percentage Schedule for the prior Plan Year shall be treated as the Earned Percentage Schedule for the current Plan Year.


	1.C.	~~The limitation set forth~~Maximum Permissible Performance-Based Bonus. Notwithstanding anything contained in ~~this Section 16.F~~the Plan to the contrary, no Participant shall be ~~applied~~entitled to a Performance-Based Bonus 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~~any Plan Year in excess of ~~full calendar months in the Performance Period divided by twelve (12).~~$5,000,000.

	2.D.	IfTermination of Employment During Plan Year. Notwithstanding anything contained herein to the contrary, in the event a ~~Performance Period~~Participant is ~~less than a full year, the limitation of this Section 16.F shall apply without adjustment;~~~~provided, however,~~~~that any~~

~~B-11~~

~~such short Performance Period shall be treated as though it were a Performance Period that extends until the end~~not an employee of the ~~one year period that starts~~Company as of the ~~first~~last day of the ~~short Performance Period, and any other Performance Periods~~Plan Year, the Performance-Based Bonus payable to such a Participant shall be equal to the Performance-Based Bonus 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,~~would otherwise have been payable under the ~~limitations of~~Plan (without taking into account 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,6(d)), multiplied by a fraction, the numerator of which is equal to the number of ~~full calendar months occurring~~days the Participant was employed by the Company 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,Plan Year, and the denominator of which is ~~twelve (12).~~365.


	E.	Committee Discretion. Notwithstanding the determination of a Participant’s bonus or bonuses under the provisions of this Section 6 (without regard to this Section 6(f)), the Committee may, at its sole discretion, reduce the amount of or totally eliminate any such bonus or bonuses to the extent the Committee determines that such reduction or elimination is appropriate under such facts and circumstances as the Committee deems relevant. In no event shall the Committee have the authority to increase the amount any Participant’s bonus or bonuses as determined under the provisions of the Plan and taking into account the Earned Percentage Schedule as initially established for a Plan Year and the terms and conditions initially established with respect to a Transaction Bonus.

7. Committee


	A.	Powers. The Committee shall have the power and duty to do all things necessary or convenient to effect the intent and purposes of the Plan and not inconsistent with any of the provisions hereof, whether or not such powers and duties are specifically set forth herein, and, by way of amplification and not limitation of the foregoing, the Committee shall have the power to:


	(i)	provide rules and regulations for the management, operation and administration of the Plan, and, from time to time, to amend or supplement such rules and regulations;


	(ii)	construe the Plan, which construction, as long as made in good faith, shall be final and conclusive upon all parties hereto; and


	(iii)	correct any defect, supply any omission, or reconcile any inconsistency in the Plan in such manner and to such extent as it shall deem expedient to carry the same into effect, and it shall be the sole and final judge of when such action shall be appropriate.

A-3


		The resolution of any questions with respect to payments and entitlements pursuant to the provisions of the Plan shall be determined by the Committee, and all such determinations shall be final and conclusive.


	B.	Indemnity. No member of the Committee shall be directly or indirectly responsible or under any liability by reason of any action or default by him as a member of the Committee, or the exercise of or failure to exercise any power or discretion as such member. No member of the Committee shall be liable in any way for the acts or defaults of any other member of the Committee, or any of its advisors, agents or representatives. The Company shall indemnify and save harmless each member of the Committee against any and all expenses and liabilities arising out of his own membership on the Committee.

	C.	Compensation and Expenses. Members of the Committee shall receive no separate compensation for services other than compensation for their services as members of the Board of Directors, which compensation can include compensation for services at any committee meeting attended in their capacity as members of the Board of Directors. Members of the Committee shall be entitled to receive their reasonable expenses incurred in administering the Plan. Any such expenses, as well as extraordinary expenses authorized by the Company, shall be paid by the Company.

	D.	Participant Information. The Company shall furnish to the Committee in writing all information the Company deems appropriate for the Committee to exercise its powers and duties in administration of the Plan. Such information shall be conclusive for all purposes of the Plan and the Committee shall be entitled to rely thereon without any investigation thereof; provided, however, that the Committee may correct any errors discovered in any such information.


	E.	Inspection of Documents. The Committee shall make available to each Participant and his Designated Beneficiary, for examination at the principal office of the Company (or at such other location as may be determined by the Committee), a copy of the Plan and such of its records, or copies thereof, as may pertain to any benefits of such Participant and beneficiary under the Plan.


	8.	Effective Date, Termination And Amendment


	A.	Effective Date of Participation in Plan. Subject to shareholder and Committee approval of the Plan, the Plan shall be effective as of the Effective Date, and Participants who have been designated by the Committee as eligible for bonuses with respect to the Plan Year that commenced as of the Effective Date shall participate in the Plan pursuant to the terms of the Earned Percentage Schedule as applicable to each such Participant.

	B.	Amendment and Termination of the Plan. The Plan may be terminated or revoked by the Board at any time and amended by the Board from time to time, provided that neither the termination, revocation or amendment of the Plan may, without the written approval of the Participant, reduce the amount of a bonus payment that has been determined by the Committee to be due and payable, but has not yet been paid; and provided further that no modification to the Plan that would increase the amount of any bonus payable hereunder beyond the amount determined pursuant to Section 6 of the Plan shall be effective without (i) approval by the Committee, (ii) disclosure to the shareholders of the Company of such modification, and (iii) approval of such modification by the shareholders of the Company in a separate vote that takes place prior to the payment of any bonuses under such modified Plan provisions. The Plan may also be modified or amended by the Committee, as it

A-4


		deems appropriate, in order to comply with the Performance Based Compensation Rules.


	9.	Miscellaneous Provisions


	A.	Unsecured Creditor Status. A Participant entitled to a bonus payment hereunder, shall rely solely upon the unsecured promise of the Company, as set forth herein, for the payment thereof, and nothing herein contained shall be construed to give to or vest in a Participant or any other person now or at any time in the future, any right, title, interest, or claim in or to any specific asset, fund, reserve, account, insurance or annuity policy or contract, or other property of any kind whatever owned by the Company, or in which the Company may have any right, title, or interest, now or at any time in the future.

	B.	Other Company Plans. It is agreed and understood that any benefits under this Plan are in addition to any and all benefits to which a Participant may otherwise be entitled under any other contract, arrangement, or voluntary pension, profit sharing or other compensation plan of the Company, whether funded or unfunded, and that this Plan shall not affect or impair the rights or obligations of the Company or a Participant under any other such contract, arrangement, or voluntary pension, profit sharing or other compensation plan.

	C.	Separability. If any term or condition of the Plan shall be invalid or unenforceable to any extent or in any application, then the remainder of the Plan, with the exception of such invalid or unenforceable provision, shall not be affected thereby, and shall continue in effect and application to its fullest extent.

	D.	Continued Employment. Neither the establishment of the Plan, any provisions of the Plan, nor any action of the Committee shall be held or construed to confer upon any Participant the right to a continuation of employment by the Company. The Company reserves the right to dismiss any employee (including a Participant), or otherwise deal with any employee (including a Participant) to the same extent as though the Plan had not been adopted.


	E.	Incapacity. If the Committee determines that a Participant or Beneficiary is unable to care for his affairs because of illness or accident, or is a minor, any benefit due such Participant or Beneficiary under the Plan may be paid to his spouse, child, parent, or any other person deemed by the Committee to have incurred expense for such Participant or Beneficiary (including a duly appointed guardian, committee, or other legal representative), and any such payment shall be a complete discharge of the Company’s obligation hereunder.


	F.	Jurisdiction. The Plan shall be construed, administered, and enforced according to the laws of the Commonwealth of Pennsylvania, except to the extent that such laws are preempted by the Federal laws of the United States of America.


	G.	Claims. If, pursuant to the provisions of the Plan, the Committee denies the claim of a Participant for benefits under the Plan, the Committee shall provide written notice, within 60 days after receipt of the claim, setting forth in a manner calculated to be understood by the claimant:


	(i)	the specific reasons for such denial;


	(ii)	the specific reference to the Plan provisions on which the denial is based;


	(iii)	a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is needed; and

A-5


	(iv)	an explanation of the Plan’s claim review procedure and the time limitations of this subsection applicable thereto.


		A Participant whose claim for benefits has been denied may request review by the Committee of the denied claim by notifying the Committee in writing within 60 days after receipt of the notification of claim denial. As part of said review procedure, the claimant or his authorized representative may review pertinent documents and submit issues and comments to the Committee in writing. The Committee shall render its decision to the claimant in writing in a manner calculated to be understood by the claimant not later than 60 days after receipt of the request for review, unless special circumstances require an extension of time, in which case decision shall be rendered as soon after the sixty day period as possible, but not later than 120 days after receipt of the request for review. The decision on review shall state the specific reasons therefor and the specific Plan references on which it is based.


	H.	Withholding. The Participant or the Designated Beneficiary shall make appropriate arrangements with the Company for satisfaction of any federal, state or local income tax withholding requirements and Social Security or other tax requirements applicable to the accrual or payment of benefits under the Plan. If no other arrangements are made, the Company may provide, at its discretion, for any withholding and tax payments as may be required.


	I.	Interpretation. The Plan is intended to pay compensation only on the attainment of the performance goals set forth above in a manner that will exempt such compensation from the limitations on the deduction of certain compensation payments under Code Section 162(m). To the extent that any provision of the Plan would cause a conflict with the conditions required for such an exemption or would cause the administration of the Plan to fail to satisfy the applicable requirements for the performance-based compensation exemption under Code Section 162(m), such provision shall be deemed null and void to the extent permitted by applicable law.

A-6

THE BON-TON STORES, INC.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The ~~intent~~undersigned shareholder of ~~subsections 1 through 3~~THE BON-TON-STORES, INC. (the “Company”) hereby appoints Byron L. Bergren and Keith E. Plowman, or either of them, with full power of substitution, to act as attorneys and proxies for the undersigned and to vote all shares of stock of the Company which the undersigned is entitled to vote if personally present at the Annual Meeting of Shareholders of the Company, to be held at Bon-Ton’s Corporate Office, 2801 E. Market Street, York, PA 17402 on June 19, 2007, at 9:00 a.m., provided that said proxies are authorized and directed to vote as indicated below with respect to the matters set forth on the opposite side of this ~~Section 16.F is~~proxy.

UNLESS OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED “FOR” THE ELECTION OF ALL NOMINATED DIRECTORS, “FOR” AMENDMENT OF THE BON-TON STORES, INC. CASH BONUS PLAN, AND “FOR” RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. This proxy also delegates discretionary authority to ~~cause each Performance-Based Award~~vote with respect to ~~satisfy~~any other business which may properly come before 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.meeting.

(To be signed on reverse side)


n		14475 n

~~B-12~~

ANNUAL MEETING OF SHAREHOLDERS OF

THE BON-TON STORES, INC.

June ~~20, 2006~~19, 2007

~~PROXY VOTING INSTRUCTIONS~~

~~MAIL~~ —~~Date,~~Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.

~~- OR -~~â Please detach along perforated line and mail in the envelope provided. â

~~TELEPHONE~~ —~~Call toll-free~~~~1-800-PROXIES~~
~~(1-800-776-9437) from any touch-tone telephone and follow~~
~~the instructions. Have your proxy card available when you call.~~

~~- OR -~~

~~INTERNET~~ —~~Access “~~~~www.voteproxy.com~~~~” and follow the~~
~~on-screen instructions. Have your proxy card available when you access the web page.~~

20833000000000000000 1

061907

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND “FOR” PROPOSALS 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREý

FOR

AGAINST

ABSTAIN

1. Election of Directors:

Amendment of The Bon-Ton Stores, Inc. Cash Bonus Plan.

~~COMPANY NUMBER~~

NOMINEES:

Ratification of appointment of KPMG LLP as the Company’s Independent Registered Public Accounting Firm.

FOR ALL NOMINEES

Robert B. Bank

Byron L. Bergren

WITHHOLD AUTHORITY
~~ACCOUNT NUMBER~~FOR ALL NOMINEES

¡
¡

Philip M. Browne
Shirley A. Dawe

Marsha M. Everton

FOR ALL EXCEPT
(See Instructions below)

¡
¡

Michael L. Gleim
Tim Grumbacher

~~You may enter your voting instructions at 1-800-PROXIES or www.voteproxy.com up until 11:59 PM Eastern Time the day before the meeting date.~~

ê~~Please detach along perforated line and mail in the envelope provided~~ IF ~~you are not voting via telephone or the Internet.~~ê

~~THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND “FOR” PROPOSALS 2 AND 3.~~
~~PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE~~x

Robert E. Salerno

~~1. Election of Directors:~~

~~FOR ALL NOMINEES~~

~~WITHHOLD AUTHORITY~~
~~FOR ALL NOMINEES~~INSTRUCTION:

~~FOR ALL EXCEPT~~
~~(See instructions below)~~


~~NOMINEES:~~
O		~~Robert B. Bank~~
O		~~Byron L. Bergren~~
O		~~Philip M. Browne~~
O		~~Shirley A. Dawe~~
O		~~Marsha M. Everton~~
O		~~Michael L. Gleim~~
O		~~Tim Grumbacher~~
O		~~Robert E. Salerno~~
O		~~Thomas W. Wolf~~

~~INSTRUCTION:~~

To withhold authority to vote for any individual nominee(s), mark“FOR ALL EXCEPT”and fill in the circle next to each nominee you wish to withhold, as shown here:l=

To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.


		~~FOR~~	~~AGAINST~~	~~ABSTAIN~~
2.	~~Amendment of The Bon-Ton Stores, Inc. Amended and Restated 2000 Stock Incentive Plan.~~	o	o	o
3.	~~Ratification of appointment of KPMG LLP as the Company’s independent auditor.~~	o	o	o

Signature of Shareholder

Date:

~~Date:~~ Signature of Shareholder

Date:

~~Signature of Shareholder~~

~~Date:~~


Note:		Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.

~~THE BON-TON STORES, INC.~~

~~THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS~~

The undersigned shareholder of THE BON-TON-STORES, INC. (the “Company”) hereby appoints Byron L. Bergren and James H. Baireuther, or either of them, with full power of substitution, to act as attorneys and proxies for the undersigned and to vote all shares of stock of the Company which the undersigned is entitled to vote if personally present at the Annual Meeting of Shareholders of the Company, to be held at the Yorktowne Hotel, 48 E. Market Street, York, PA 17401 on June 20, 2006, at 9:00 a.m., provided that said proxies are authorized and directed to vote as indicated below with respect to the matters set forth on the opposite side of this proxy.

UNLESS OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED “FOR” THE ELECTION OF ALL NOMINATED DIRECTORS, “FOR” AMENDMENT OF THE BON-TON STORES, INC. AMENDED AND RESTATED 2000 STOCK INCENTIVE PLAN, AND “FOR” RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT AUDITOR. This proxy also delegates discretionary authority to vote with respect to any other business which may properly come before the meeting.

~~(To be signed on reverse side)~~

~~14475~~

ANNUAL MEETING OF SHAREHOLDERS OF

THE BON-TON STORES, INC.

June ~~20, 2006~~
19, 2007



		PROXY VOTING INSTRUCTIONS

~~Please date,~~

MAIL - - Date, sign and mail
your proxy card in the
envelope provided as soon
as possible.

- or -

TELEPHONE - - Call toll-free1-800-PROXIES (1-800-776-9437) from anytouch-tonetelephone and follow the instructions. Have your proxy card available when you call.

- or - -

INTERNET - - Access “www.voteproxy.com” and follow theon-screeninstructions. Have your proxy card available when you access the web page.


	COMPANY NUMBER
	ACCOUNT NUMBER

You may enter your voting instructions at 1-800-PROXIES or www.voteproxy.com up until 11:59 PM Eastern Time the day before the meeting date.

êâPlease detach along perforated line and mail in the envelope ~~provided.~~provided IF you are not voting via telephone or the Internet. âê

~~1. Election of Directors:~~n 20833000000000000000 1
0 6 1 9 0 7

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND “FOR” PROPOSALS 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREý
FOR AGAINST ABSTAIN
1. Election of Directors: 2. Amendment of The Bon-Ton Stores, Inc. Cash Bonus Plan. o o o
NOMINEES: 3. Ratification of appointment of KPMG LLP as the Company’s Independent Registered Public Accounting Firm. o o o
o FOR ALL NOMINEES
¡ Robert B. Bank
¡ Byron L. Bergren
o WITHHOLD AUTHORITY
FOR ALL NOMINEES
¡
¡ Philip M. Browne
Shirley A. Dawe
¡ Marsha M. Everton
o FOR ALL EXCEPT
(See instructions below)

¡
¡ Michael L. Gleim
Tim Grumbacher
~~NOMINEES:~~
O ~~Robert B. Bank~~
O ~~Byron L. Bergren~~
O ~~Philip M. Browne~~
O ~~Shirley A. Dawe~~
O ~~Marsha M. Everton~~
O ~~Michael L. Gleim~~
O ~~Tim Grumbacher~~
O ¡ Robert E. Salerno
O ~~Thomas W. Wolf~~

INSTRUCTION:

To withhold authority to vote for any individual nominee(s), mark“FOR ALL EXCEPT”and fill in the circle next to each nominee you ~~wish~~with to withhold, as shown here:l=

~~FOR~~ ~~AGAINST~~ ~~ABSTAIN~~
2. ~~Amendment of The Bon-Ton Stores, Inc. Amended and Restated 2000 Stock Incentive Plan.~~ o o o
3. ~~Ratification of appointment of KPMG LLP as the Company’s independent auditor.~~ o o o

Signature of Shareholder

Date:

~~Date:~~ Signature of Shareholder

Date:

~~Signature of Shareholder~~

~~Date:~~


Note:		Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.

o
~~Filed by the Registrant~~þ
~~Filed by a Party other than the Registrant~~o




~~Check the appropriate box:~~		Preliminary Proxy Statement

o ~~Preliminary Proxy Statement~~

oConfidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ		Definitive Proxy Statement
o
oDefinitive Additional Materials
o
oSoliciting Material Pursuant to Section 240.14a-12

þ		No fee required.
o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)		Title of each class of securities to which transaction applies:




	(2)		Aggregate number of securities to which transaction applies:




	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 ~~(Set~~(set forth the amount on which the filing fee is calculated and state how it was determined):





	(4)		Proposed maximum aggregate value of transaction:




	(5)		Total fee paid:

o		Fee paid previously with preliminary materials.

o	o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the ~~form~~Form or ~~schedule~~Schedule and the date of its filing.

	(1)		Amount Previously Paid:




	(2)		Form, Schedule or Registration Statement No.:




	(3)		Filing Party:




	(4)		Date Filed:


	~~Sincerely,~~


	~~Tim Grumbacher~~
	~~Executive Chairman of the Board~~


	1.	~~To elect a nine-member Board of Directors for a one-year term.~~

	2.	To approve an amendment and restatement of The Bon-Ton Stores, Inc. ~~Amended and Restated 2000 Stock Incentive~~Cash Bonus Plan.

	3.	To ratify the appointment of KPMG LLP as independent registered public accounting firm for ~~2006.~~

	4.	~~To consider any other matters as may properly come before the meeting.~~2007.



	~~Robert E. Stern~~
	~~Vice President,~~
	~~General Counsel and Secretary~~


		Page

Proxy Statement			1
Voting Procedures and Security Ownership			1
	Outstanding Shares and Voting Rights			1
	Principal Shareholders			3
	Security Ownership of Directors and Executive Officers			5
Proposal One: Election of Directors			6
Corporate Governance and Board of Directors Information		8	7
	Governing Documents		8	7
	Director Independence		8	7
	Attendance at Board Meetings		8	7
	Board Committees		8	7
	Director Nominations Process and Director Qualifications		10	9
	Director Attendance at Annual Meetings		11	10
	Shareholder Communication with Board of Directors		11	10
	Compensation of Directors		11	10
Proposal Two: Amendment and Restatement of The Bon-Ton Stores, Inc. ~~Amended and Restated 2000 Stock Incentive~~ Cash Bonus Plan		13	12
Proposal Three: Ratification of the Appointment of the Independent Registered Public Accounting Firm		19	15
~~Executive Compensation~~Report of the Audit Committee		20	16
	~~Summary~~Executive Compensation ~~Table~~		20	17
	~~Stock Option Grants~~Compensation Discussion and Analysis		21
	~~Stock Option Exercises and Holdings~~ 17		21
	~~Employment Agreements~~		22
	~~Supplemental Retirement Benefits~~		24
	~~Executive Severance~~		24
	~~Equity Compensation Plan Information~~		24
~~Stock Performance Graph~~		25
Report of the Human Resources and Compensation Committee				26
~~Report of the Audit Committee~~Summary Compensation Table		30	27
Grants of Plan-Based Awards			28
Outstanding Equity Awards at Fiscal Year-End			29
Pension Benefits			30
Option Exercises and Stock Vested			33
Summary of Employment Agreements with Named Executive Officers			33
Potential Payments Upon Termination or Change in Control			35
Section 16(a) Beneficial Ownership Reporting Compliance		31	39
Related Party Transactions		31	39
Shareholder Proposals		31	40
~~Appendix A — Audit Committee Charter~~Householding of Proxy Materials		~~A-1~~
~~Appendix B — Amended and Restated 2000 Stock Incentive Plan~~		40	~~B-1~~


			Annual
	Annual Cash		Restricted		Committee
Name	Retainer		Stock Units		Fees		Other Fees			Total

Robert B. Bank	$	40,000	$	50,000	$	15,000		3,750	(1)	$	108,750
Philip M. Browne		40,000		50,000		25,000		—			115,000
Shirley A. Dawe		40,000		50,000		25,000		—			115,000
Marsha M. Everton		40,000		50,000		5,000		—			95,000
Michael L. Gleim		40,000		50,000		30,000		—			120,000
Robert E. Salerno		40,000		50,000		5,000		—			95,000
Thomas W. Wolf		40,000		50,000		20,000		—			110,000


		~~shares possessing more than 10% of the total combined voting power of all classes of stock of the Company;~~

	b.	The expiration of 90 days from the date the optionee’s employment or service with the Company terminates for any reason other than disability (as defined in the Code) or death or as otherwise specified in subparagraphs d. or e. below;


	2005		2004

Audit Fees(1)	$	1,192,200	$	1,386,400
Audit-Related Fees(2)		722,711		23,400
Tax Fees(3)		217,020		308,100
All Other Fees		—		—


									Long-Term
			Annual Compensation						Compensation Awards

							Other		Restricted		Securities
Name and							Annual		Stock		Underlying		All Other
Position	Year		Salary		Bonus		Compensation(1)		Awards(2)		Options(#)		Compensation(3)

Tim Grumbacher		2005	$	650,000	$	—	$	22,584	$	6,588,298		—	$	11,590
Executive Chairman		2004		712,500		845,025		—		—		—		12,217
of the Board		2003		625,000		817,500		—		—		—		11,425

Byron L. Bergren(4)		2005		736,538		—		55,075		—		95,000		127,374
President and CEO		2004		605,662		247,143		—		456,750		125,000		1,838,760
		2003		148,741		878,750		—		—		—		1,413

James H. Baireuther		2005		400,000		—		18,421		178,100		—		14,416
Vice Chairman and		2004		394,564		149,900		—		—		—		14,719
Chief Administrative Officer		2003		402,300		210,000		—		—		—		13,927

David B. Zant(5)		2005		500,000		125,000		24,716		106,860		—		24,108
Vice Chairman and		2004		28,846		225,000		—		630,000		60,000		—
Chief Merchandising Officer		2003		—		—		—		—		—		—

James M. Zamberlan(6)		2005		400,000		—		5,602		71,240		—		15,491
Executive Vice President —		2004		370,350		114,900		—		104,090		5,000		10,269
Stores		2003		99,000		131,400		—		—		—		931


	Individual Grants										Potential Realizable Value at
											Assumed Annual Rate of
	Securities			% of Total							Stock Price Appreciation for
	Underlying			Options Granted							Option Term(1)
	Options			to Employees in			Exercise		Expiration
Name	Granted			2005			Price(2)		Date		5%		10%

Tim Grumbacher		—			—			—		—		—		—

Byron L. Bergren		95,000	(3)		53.07	%	$	20.44		7-6-12	$	790,508	$	1,842,219

James H. Baireuther		—			—			—		—		—		—

David B. Zant		—			—			—		—		—		—

James M. Zamberlan		—			—			—		—		—		—


					Number of Securities
					Underlying Unexercised				Value of Unexercised
					Options at				In-the-Money Options
	Shares				January 28, 2006				at January 28, 2006(1)
	Acquired		Value
	On Exercise		Realized		Exercisable		Unexercisable		Exercisable		Unexercisable

Tim Grumbacher		44,550	$	627,634		—		—		—		—

Byron L. Bergren		—		—		—		220,000		—	$	1,086,550

James H. Baireuther		—		—		—		—		—		—

David B. Zant		—		—		—		60,000		—		325,800

James M. Zamberlan		—		—		5,000		—	$	31,550		—


								Number of securities
				Number of shares of				remaining available for future
				common stock to be		Weighted-average		issuance under equity
				issued upon exercise of		exercise price of		compensation plans
				outstanding options,		outstanding options,		(excluding securities reflected
				warrants and rights		warrants and rights		in the second column)

Equity compensation plans approved by security holders
		Stock options			546,030	$	13.15		—	(1)
		Restricted stock			471,647		—		—	(1)
		Restricted stock units			46,375		—		—	(1)

			Total		1,064,052		—		874,448	(2)
Equity compensation plans not approved by security holders					—		—		—
	Total				1,064,052				874,448	(2)



				NASDAQ
DATE		NASDAQ		RETAIL		BON-TON

	2/3/01		100.00		100.00		100.00
	2/2/02		72.33		120.05		80.00
	2/1/03		50.52		97.83		132.48
	1/31/04		78.55		143.43		398.08
	1/29/05		77.70		171.80		502.08
	1/28/06		88.52		186.29		691.84


		~~to, the Committee. Vacancies on the Committee, however caused, shall be filled by the Board of Directors.~~Year.

	B.	~~Meetings.~~Performance Goals. The ~~Committee shall hold meetings at such times and places as it may determine. Acts approved at a meeting by a majority of~~Earned Percentage is 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.


		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.


		~~such short Performance Period shall be treated as though it were a Performance Period that extends until the end~~not an employee of the ~~one year period that starts~~Company as of the ~~first~~last day of the ~~short Performance Period, and any other Performance Periods~~Plan Year, the Performance-Based Bonus payable to such a Participant shall be equal to the Performance-Based Bonus 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,~~would otherwise have been payable under the ~~limitations of~~Plan (without taking into account 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,6(d)), multiplied by a fraction, the numerator of which is equal to the number of ~~full calendar months occurring~~days the Participant was employed by the Company 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,Plan Year, and the denominator of which is ~~twelve (12).~~365.