Document:

Exhibit 10.1

 

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (“Agreement”) is entered into as of the 1st day of February, 2004,
by and among Big Lots, Inc., an Ohio corporation (“BLI”), Big Lots Stores, Inc., an Ohio
corporation (“BLSI”) (BLI, BLSI and their respective affiliates, predecessor, successor,
subsidiaries and other related companies are hereinafter jointly referred to as “Employer”), and
Lisa M. Bachmann (“Executive”).

WITNESSETH:

     WHEREAS, the Employer desires to engage Executive to perform services for the Employer and
Executive desires to perform such services, on the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the
sufficiency of which is hereby mutually acknowledged, the Parties hereby agree as follows:

	1.	 	EMPLOYMENT.

	 	(a)	 	Duties and Services. Employer hereby employs Executive as a Senior
Vice President (or other appropriate title as designated by the Employer in its sole
discretion) and Executive hereby accepts such employment, and shall perform services of
a business, professional or commercial nature for the Employer in furtherance of the
Employer’s business. In performance of these duties, Executive shall be subject to the
direction of and report to an individual holding one or more of the following titles:
Chief Executive Officer, President, Chief Administrative Officer and/or Executive Vice
President of Employer. Employer agrees that

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	 	 	 	whoever Executive reports to will hold one or more of the above titles and that such
person will also have responsibility for merchandising.

     Any material adverse modification or diminution of Executive’s duties shall be
considered to be a constructive discharge of Executive by Employer and shall entitle
Executive, in addition to any other rights she may have, to the rights and remedies
provided in Paragraph 7(a) hereof; provided, however, that Executive
shall notify Employer of any alleged such modification or diminution, specifying
same, and Employer shall have a period of thirty (30) days after such notice to cure
such alleged modification or diminution before Executive shall be entitled to
exercise any such rights under Paragraph 7(a) below.

	 	(b)	 	Additional Positions. Executive shall, without any compensation in
addition to that which is specifically provided in this Agreement, serve as an officer
of the Employer and in such substitute or further offices or positions with Employer as
shall from time to time be reasonably requested by the Employer. Each office and
position with the Employer, in which Executive may serve or to which she may be
appointed, shall be consistent in title and duties with Executive’s position. For
service as a director or officer of Employer, which service shall in each instance be
deemed to be at the request of the Employer and its Board of Directors, Executive shall
be entitled to the protection of the applicable indemnification provisions of the
charter and code of regulations of Employer and Employer agrees to indemnify and hold
harmless Executive from and against any claims, liabilities, damages or expenses
incurred by Executive in or arising out of the status, capacities and activities as an
officer or director of the Employer, to the

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	 	 	 	maximum extent permitted by law and in accordance with any agreement for
indemnification. On any termination of her employment, Executive shall be deemed to
have resigned from all offices and directorships held by Executive.

	 	(c)	 	Full Time and Attention. Executive agrees to her employment as
described herein and agrees to devote all of her time and best efforts to the
performance of her duties under this Agreement. Except as expressly permitted herein,
Executive shall not, without the prior written consent of Employer, directly or
indirectly during the term of this Agreement, render services of a business,
professional or commercial nature to any other person or firm, whether for compensation
or otherwise. So long as it does not interfere with her full-time employment
hereunder, Executive may attend to outside investments and serve as a director, trustee
or officer of or otherwise participate in educational, welfare, social, religious and
civic organizations.

	2.	 	TERM.
	 
	 	 	Subject to the provisions for termination provided in this Agreement, the term of this
Agreement shall commence on February 1, 2004 and shall continue thereafter until Executive’s
employment is terminated.

	3.	 	COMPENSATION AND BENEFITS.

	 	(a)	 	Base Salary. As compensation for her services hereunder, the Employer
shall pay Executive, an annual base salary (the “Base Salary”) payable in equal
installments on regular payroll dates designated by the Employer, an annual rate of
Three Hundred Twenty Five Thousand Dollars ($325,000). At least annually, the
Compensation Committee of the BLI Board of Directors shall review Executive’s

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	 	 	 	performance and determine whether an increase in the Executive’s Base Salary is
merited. Provided, however, that in no event shall the Base Salary be adjusted to
an amount lower than the annual rate initially enumerated in this Paragraph.
	 
	 	(b)	 	Benefits. Executive shall be entitled to participate in any group
health care, hospitalization, life insurance, dental, disability or other benefit plans
(“Benefit Plans”) available to executives in the same or similar job classification
(other than bonus compensation or performance plans to the extent that such plans, in
the case of Executive, are in lieu of the bonus plan set forth in Paragraph 4 herein).
Executive’s participation in and benefits under any such Benefit Plans shall be in
accordance with the terms and subject to the conditions specified in the governing
document of the particular Benefit Plan(s).
	 
	 	(c)	 	Vacation and Sick Leave. Executive shall be entitled to such periods
of vacation and sick leave each year as provided under Employer’s Vacation and Sick
Leave Policy for executives of the same or similar job classification.
	 
	 	(d)	 	Automobile Allowance. During the term of this Agreement, Employer
shall provide Executive with an automobile or a monthly automobile allowance, in
accordance with applicable policies of the Employer for executives of the same or
similar job classification.

	4.	 	BONUS.
	 
	 	 	Executive shall be eligible to participate in the 1998 Big Lots, Inc. Key Associate Annual
Compensation Plan, as amended (or any such successor plan, hereinafter “Bonus Program”).
Executive shall be eligible to receive a bonus for the fiscal year beginning February 1,
2004, and for each subsequent fiscal year of employment completed during

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	 	 	the term of this Agreement. Executive’s bonus shall be an amount equal to the Base Salary
at the end of such fiscal year multiplied by the Bonus Payout percentage as determined by
the Bonus Program set each fiscal year by the Compensation Committee of BLI’s Board of
Directors. The Bonus Program is based upon the achievement of Employer’s annual financial
plan. The Target Bonus for Executive is 50% of Base Salary and the Stretch Bonus for
Executive is 100% of Base Salary, both of which are defined by the Compensation Committee of
BLI’s Board of Directors and are subject to adjustment by BLI’s Board of Directors; provided
however, Executive’s Target Bonus shall never fall below 50% of Base Salary and Executive’s
Stretch Bonus shall never fall below 100% of base salary. Payment of the Bonus described in
this Paragraph is subject to the terms of the Bonus Program and any agreements issued
thereunder.
	 
	5.	 	EXPENSES.
	 
	 	 	Employer shall reimburse Executive during the term of this Agreement for travel,
entertainment and other expenses reasonably incurred by Executive in the promotion of
Employer’s business. Executive shall furnish such documentation and/or receipts with
respect to reimbursement to be paid as requested by the Employer.
	 
	6.	 	TERMINATION.
	 
	 	 	The employment of Executive under this Agreement and term hereof shall be controlled by this
Agreement, exclusively and without regard to any termination, severance, income
continuation, or similar policies of Employer. Such employment may be terminated:

	 	(a)	 	Without Cause, Employer Termination. By Employer without cause at any
time upon thirty (30) days notice to the Executive of such termination, or

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	 	(b)	 	Without Cause, Executive Termination. By Executive without cause at
any time upon thirty (30) days notice to the Employer of such termination, or
	 
	 	(c)	 	Upon Death or Long-Term Disability of Executive. By Employer upon the
death or long-term disability of Executive, or
	 
	 	(d)	 	For Cause, Employer Termination. By Employer for cause at any time.
For purposes hereof, the term “cause” shall mean:

	 	(i)	 	Executive’s conviction of fraud, a felony or other crime
involving moral turpitude or Executive’s commission of acts of embezzlement or
theft in connection with her duties or in the course of her employment.
	 
	 	(ii)	 	Executive engaging in Competitive Activities, disclosing
confidential information, or her willful breach of any material provision of
this Agreement.
	 
	 	(iii)	 	The term “Competitive Activities” shall mean Executive’s
participation, without the written consent of the Board of Directors of the
Employer, in any business enterprise if such business enterprise engages in
direct competition with the Employer. For purposes of this Agreement, a
business enterprise shall be considered in direct competition with the
Employer, if such business enterprise’s sales, related to any activity then
engaged in by the Employer, amount to ten percent (10%) or more of such
business enterprise’s total sales or one percent (1%) of Employer’s annual
sales. “Competitive Activities” shall not include the mere ownership of
securities in any publicly-traded enterprise and the exercise of rights
appurtenant thereto.

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	 	(iv)	 	Any termination of Executive for “cause” shall not be effective
until Employer delivers written notice to Employee pursuant to the terms of
Paragraph 11 of this Agreement.
	 
	 	(v)	 	Any termination by reasons of the foregoing Subparagraphs
(i)-(iv) shall not be in limitation of any other right or remedy the Employer
may have under this Agreement, at law, in equity or otherwise.

	7.	 	EFFECT OF TERMINATION.

	 	(a)	 	Without Cause Effect, Employer Termination. In the event of the
termination of Executive’s employment by Employer pursuant to Paragraph 6(a) above,
except as otherwise provided in Paragraph 5 of this Agreement, Employer shall have no
obligation to pay any compensation or benefits of any kind to Executive other than,

	 	(i)	 	Base Salary that has been earned but not been paid up to and
including the date of termination;
	 
	 	(ii)	 	A prorata portion of the Bonus under this Agreement based upon
the amount of time worked by the Executive in the fiscal year when such
termination is effective, provided, however, that such prorata portion will be
determined in the ordinary course of business and paid at such time following
the close of the fiscal year that such other eligible executives receive such
payment;
	 
	 	(iii)	 	A continuation of Base Salary, automobile allowance (or use of
present company automobile), any Benefit Plans for which Executive is eligible

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	 	 	 	and enrolled, for twelve (12) months following the termination of this
Agreement;
	 
	 	(iv)	 	The Benefit Plans and automobile allowance/use contained in
Subparagraph (iii), above, shall cease if during the twelve (12) months
following termination, Executive is entitled to receive the same or similar
benefits from another employer.

	 	(b)	 	Without Cause Effect, Executive Termination. In the event of the
termination of Executive’s employment by Executive pursuant to Paragraph 6(b) above,
Employer shall have no obligation to pay any compensation or benefits of any kind to
Executive other than Base Salary that has been earned but not been paid up to and
including the date of termination, and Executive shall not be entitled to receive any
Bonus under this Agreement or otherwise.
	 
	 	(c)	 	Death or Long-Term Disability. In the event of the termination of
Executive’s employment by reason of death or long-term disability pursuant to Paragraph
6(c) above, Employer shall have no obligation to pay any compensation or benefits of
any kind to Executive or the Executive’s estate, other than as follows:

	 	(i)	 	Base Salary that has been earned but not been paid up to and
including the date of termination;
	 
	 	(ii)	 	A prorata portion of the Bonus under this Agreement based upon
the amount of time worked by the Executive in the fiscal year when such
termination is effective, provided, however, that such prorata portion will be
determined in the ordinary course of business and paid at such time

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	 	 	 	following the close of the fiscal year that such other eligible executives
receive such payment;
	 
	 	(iii)	 	In the case of long-term disability, a continuation of Base
Salary and any Benefit Plans for which Executive is eligible and enrolled for
six (6) months following the termination of this Agreement and any long-term
disability benefits for which Executive is eligible under the Employer’s
long-term disability group insurance plan.
	 
	 	(iv)	 	The term “Long-Term Disability” shall be construed as it is
defined in the Employer’s long-term disability group insurance plan.

	 	(d)	 	For Cause Effect. In the event of termination for any of the reasons
for cause set forth in Paragraph 6(d) above, except as otherwise provided in Paragraph
5 of this Agreement, Executive shall not be entitled to further compensation or other
benefits under this Agreement (other than as provided by law), except as to Base Salary
that has been earned but not been paid up to and including the date of termination.
Further, Executive shall not be entitled to receive any Bonus determined under this
Agreement or otherwise.

	8.	 	CHANGE IN CONTROL.
	 
	 	 	If there is a Change in Control (as defined herein) and Executive’s employment is thereupon
terminated or terminated within twenty four (24) months after the effective date thereof,
Executive shall be entitled to the termination benefits as set forth in this Paragraph and
its subparagraphs in lieu of other provisions of this Agreement. For purposes of this
Paragraph, Executive’s employment shall be deemed to have been terminated following a change
in control only if Employer terminates such employment

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	 	 	without cause (as defined in paragraph 6(a) above), or if a Constructive Termination occurs.
“Constructive Termination” shall mean a resignation by Executive because of any material
adverse change or material diminution in Executive’s then current reporting relationships,
job description, duties, responsibilities, compensation, perquisites, office or location of
employment (as reasonably determined by Executive in her good faith discretion); provided,
however, that Executive shall notify Employer in writing at least forty five (45) days in
advance of any election by Executive to terminate her employment because of a Constructive
Termination hereunder, specifying the nature of the alleged adverse change or diminution and
Employer shall have a period of ten (10) business days after the receipt of such notice to
cure such alleged adverse change or diminution before Executive shall be entitled to
exercise any such rights and remedies. Executive shall not be entitled to the benefits
available hereunder unless such notice is timely given.

	 	(a)	 	Change in Control Benefits. The benefits payable to Executive are as
follows:

	 	(i)	 	Employer shall pay to Executive a lump sum cash payment, net of
any applicable withholding taxes, in an amount equal to two (2) times her Base
Salary immediately prior to the effective date of such Change in Control (the
“Lump Sum Payment”); provided, that if there are fewer than twenty four (24)
months remaining from the date of Executive’s termination to Executive’s normal
retirement date at age 65, Employer shall instead pay Executive a prorata
amount of the Lump Sum Payment based upon the number of months remaining until
Executive’s normal retirement date at age 65. The applicable amount shall be
paid on or before the next regular payroll date following the termination of
the Executive’s employment.

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	 	(ii)	 	In addition to the payment described in Paragraph 8(a)(i)
above, Employer shall pay to Executive a lump sum cash payment, net of any
applicable withholding taxes, in an amount equal to two (2) times the
Executive’s then current Stretch Bonus, as defined in and determined annually
by the Compensation Committee of BLI’s Board of Directors; provided, that:

	 	(A)	 	In the event the Executive’s Bonus is undefined
or is not subject to a maximum payout, the Executive’s Bonus shall be
deemed to be 200% of the Executive’s then current Base Salary, and
	 
	 	(B)	 	If there are fewer than twenty four (24) months
remaining from the date of Executive’s termination to Executive’s
normal retirement date at age 65, Employer shall instead pay Executive
a prorata amount of the Lump Sum Bonus Payment based upon the number of
months remaining until Executive’s normal retirement date at age 65.
Executive shall receive the Lump Sum Bonus Payment at the same time
Executive receives the Lump Sum Payment described above.

	 	(iii)	 	A continuation of any Benefit Plans for which Executive (and
her spouse and/or dependents, if their participation is permitted under the
terms of the subject plan) is eligible and enrolled for twelve (12) months
following the termination of this Agreement; provided, that Executive’s
participation in the plans referred to herein shall be terminated (other than
as provided by law) when and to the extent that Executive is entitled to
receive the same or similar benefits from another employer during such period.
Executive’s

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	 	 	 	participation in and benefits under any such plan shall be on the terms and
subject to the conditions specified in the governing document of the
particular Benefit Plan(s).
	 
	 	(iv)	 	If all or any portion of the amount payable under paragraph
8(a)(i) and 8(a)(ii) of this Agreement, either alone or together with other
amounts that Executive is entitled to receive in connection with a Change in
Control, constitutes “excess parachute payments” within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the “Code”), or any
successor provision, that are subject to the excise tax imposed by Section 4999
of the Code (or any similar tax or assessment), the amounts payable hereunder
shall be increased to the extent necessary to place Executive in the same
after-tax position as Executive would have been had no such excise tax or
assessment been imposed on any such payment paid or payable to Executive under
Paragraph 8(a)(i) and 8(a)(ii) of this Agreement or any other payment that
Executive may receive as a result of such Change in Control. The determination
of the amount of any such tax or assessment and the resulting amount of
incremental payment required hereby in connection therewith shall be made by
the independent accounting firm employed by Employer immediately prior to the
applicable Change in Control, within thirty (30) calendar days after the
payment of the amount payable pursuant to Paragraph 8(a)(i) and 8(a)(ii) of
this Agreement. Said incremental payment shall be made within five (5)
business days after said determination has been made.

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	 	(v)	 	If, after the date upon which any payment is to be made under
this Paragraph, it is determined (pursuant to final judgment of a court of
competent jurisdiction or an agreed upon tax assessment) that the amount of
excise or other similar taxes or assessments payable by Executive is greater
than the amount initially so determined, then Employer shall pay Executive an
amount equal to the sum of (i) such additional excise or other similar taxes,
plus (ii) any interest, fines and penalties resulting from such underpayment,
plus (iii) an amount necessary to reimburse Executive for any income, excise or
other tax or assessment payable by Executive with respect to the amounts
specified in (i) and (ii) above, and the reimbursement provided by this clause
(iii). Payment thereof shall be made within five (5) business days after the
date upon which such subsequent determination is made.
	 
	 	(vi)	 	In addition to the benefits described above, Executive shall be
entitled to all rights derived under the Big Lots, Inc. 1996 Performance
Incentive Plan, as Amended (f/k/a Consolidated Stores Corporation 1996
Performance Incentive Plan, as Amended) in the event of a “Change in Effective
Control” (as defined in that plan).

	 	(b)	 	Change in Control Defined. As used herein, “Change in Control” means
any of the following events:

	 	(i)	 	Any person or group (as defined for purposes of Section 13(d)
of the Securities Exchange Act of 1934) becomes the beneficial owner of, or has
the right to acquire (by contract, option, warrant, conversion of convertible

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	 	 	 	securities or otherwise), 20% or more of the outstanding equity securities
of BLI entitled to vote for the election of directors;
	 
	 	(ii)	 	A majority of the Board of Directors of BLI is replaced within
any period of two (2) years or less by directors not nominated and approved by
a majority of the directors of BLI in office at the beginning of such period
(or their successors so nominated and approved), or a majority of the Board of
Directors of BLI at any date consists of persons not so nominated and approved;
	 
	 	(iii)	 	The stockholders of BLI approve an agreement to reorganize,
merge or consolidate with another corporation (other than BLSI or an
affiliate); or
	 
	 	(iv)	 	The stockholders of BLI adopt a plan or approve an agreement to
sell or otherwise dispose of all or substantially all of BLI’s assets
(including without limitation, a plan of liquidation or dissolution), in a
single transaction or series of related transactions.

	 	(c)	 	Effective Date/Terms. The effective date of any such Change in Control
shall be the date upon which the last event occurs or last action taken such that the
definition of such Change in Control (as set forth above) has been met. For purposes
of this Agreement, the term “affiliate” shall mean:

	 	(i)	 	Any person or entity qualified as part of an affiliated group
which includes BLSI and BLI pursuant to Section 1504 of the Code; or
	 
	 	(ii)	 	Any person or entity qualified as part of a parent-subsidiary
group of trades and businesses under common control within the meaning of
Treasury Regulation Section 1.414(c-2)(b). Determination of affiliate

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	 	 	 	shall be tested as of the date immediately prior to any event constituting a
Change in Control. The other provisions of this Paragraph notwithstanding,
the term “Change in Control” shall not mean any transaction, merger,
consolidation, or reorganization in which BLI exchanges or offers to
exchange newly issued or treasury shares in an amount less than 50% of the
then outstanding equity securities of BLI entitled to vote for the election
of directors, for 51% or more of the outstanding equity securities entitled
to vote for the election of at least the majority of the directors of a
corporation other than BLI or an affiliate thereof (the “Acquired
Corporation”), or for all or substantially all of the assets of the Acquired
Corporation.

	 	(d)	 	Legal Counsel. If Executive hires legal counsel with respect to any
alleged failure of Employer to comply with any terms of Paragraph 8 of this Agreement,
or institutes any negotiation or institutes or responds to any legal action to assert
or defend the validity of or to enforce Executive’s rights under Paragraph 8 of this
Agreement, or to recover damages for breach of Paragraph 8 of this Agreement, Employer
shall pay Executive’s actual expenses for attorneys’ fees and disbursements, together
with such additional payments, if any, as may be necessary so that the net after-tax
payments so made to Executive equal such fees and disbursements; provided, however,
that Executive shall be responsible for her own fees and expenses with respect to any
lawsuit between Executive and Employer to enforce rights or obligations under this
Paragraph 8 in which Employer is the prevailing party. The fees and expenses incurred
by Executive in

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	 	 	 	instituting or responding to any such negotiation or legal action shall be paid by
Employer as they are incurred, in advance of the final disposition of the action or
proceeding, upon receipt of an undertaking by Executive to repay such amounts if
Employer is ultimately determined to be the prevailing party.
	 
	 	(e)	 	Interest. If any amount due Executive by the terms of this Paragraph 8
is not paid when due, then Employer shall pay interest on said amount at an annual rate
equal to the base lending rate of National City Bank, Cleveland, Ohio, or successor, as
in effect from time to time, for the period between the date on which such payment is
due and the date said amount is paid.
	 
	 	(f)	 	No Right of Setoff. Employer’s obligation to pay Executive the
compensation and to make the arrangement required in this Paragraph 8 shall be absolute
and unconditional and shall not be affected by any circumstance, including, without
limitation, any setoff, counterclaim, recoupment, defense or other right that Employer
may have against Executive or otherwise. All amounts payable by Employer hereunder
shall be paid without notice or demand. Subject to the proviso in this Paragraph 8,
each and every payment made hereunder by Employer shall be final and Employer shall not
seek to recover all or any part of such payment from Executive or from whosoever may be
entitled thereto, for any reason whatsoever. Executive shall not be obligated to seek
other employment or compensation or insurance in mitigation of any amount payable or
arrangement made under this Paragraph 8, and the obtaining of any such other employment
or compensation or insurance, except as otherwise provided in this Agreement, shall

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	 	 	 	in no event effect any reduction of Employer’s obligations to make the payments and
arrangements required under this Paragraph 8.

	9.	 	COVENANTS OF EXECUTIVE.

	 	(a)	 	Covenants. Executive acknowledges that the principal businesses of
Employer include the operation of its “Big Lots” discount general merchandise consumer
goods retail outlets, the inventories of which are acquired primarily through special
purchase situations such as overstocks, closeouts, liquidations, bankruptcies,
wholesale distribution of overstock, distress, liquidation and other volume
inventories, the operation of its Big Lots Furniture Stores, and its wholesale
operations (the “Company Business”); and Employer is one of the limited number of
entities who have developed such business; and the Company Business is national in
scope; and Executive’s work for Employer will give her access to the confidential
affairs of Employer; and the agreements and covenants of Executive contained in
Subparagraphs (i)-(iii) herein (“Restrictive Covenants”) are essential to the business
and goodwill of Employer. Accordingly, Executive covenants and agrees that:

	 	(i)	 	During the term of Executive’s employment with Employer and for
a period of one (1) year (the “Restricted Period”) following the termination of
her employment in any manner, Executive shall not in any location where
Employer’s retail stores are located throughout the United States, directly or
indirectly, (1) engage in the Company Business for Executive’s own account
(other than pursuant to this Agreement), or (2) in any manner become employed,
by Kmart, Dollar General, Family Dollar, Dollar Tree,

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	 	 	 	Retail Ventures, Inc., Fred’s, 99¢ Stores, Canned Foods, Tuesday Morning,
or TJX Corporation. Further, Employee agrees not to become employed by, any
parent, subsidiary or other related entity of the above listed entities.
However, in the event of a Change in Control as defined in this Agreement,
the Restricted Period shall be for a period of six (6) months.
	 
	 	(ii)	 	During the term of Executive’s employment with Employer and for
a period of two (2) years following the termination of her employment in any
manner, Executive shall keep secret and retain in strictest confidence, and
shall not use for her benefit or the benefit of others, all confidential
matters relating to the Company Business hereafter learned by Executive, and
shall not disclose them to anyone except with Employer’s express written
consent and except for information which is at the time of receipt or
thereafter, becomes publicly known through no wrongful act of Executive, or is
received from a third party not under an obligation to keep such information
confidential and without breach of this Agreement.
	 
	 	(iii)	 	During the term of Executive’s employment with Employer and
for a period of two (2) years following the termination of her employment in
any manner, without Employer’s prior written consent, Executive will not
directly or indirectly, solicit, encourage to leave the employment of Employer
or hire any employee of Employer.

	 	(b)	 	Acknowledgment. Executive acknowledges that the foregoing restrictions
are reasonable in light of the nature of the services the Employer provides. Executive

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	 	 	 	and the Employer agree that the Employer has legitimate reasons for requiring such
Restrictive Covenants from Executive. Executive acknowledges that he understands
the restrictions and has had an opportunity to fully discuss these restrictions with
the Employer and accepts the restrictions.
	 
	 	(c)	 	Maximum Enforceable Restriction. In the event that any or all of the
Restrictive Covenants contained in this Paragraph shall be determined by a court of
competent jurisdiction to be unenforceable by reason of the temporal restrictions being
too great, or by reason that the range of activities covered are too great, or for any
other reason, they shall be interpreted to extend over the maximum period of time,
range of activities or other restrictions as to which they may be enforceable.
	 
	 	(d)	 	Injunctive Relief. The Parties agree that a breach of the Restrictive
Covenants contained in this Paragraph may cause irreparable damage to the Employer, the
extent of which may be difficult to ascertain, and that the award of damages may not be
adequate relief. Therefore, Executive agrees that, in the event of a breach or a
threatened breach of the Restrictive Covenants, the Employer may institute an action to
compel the specific performance of same and obtain injunctive relief, without bond;
Executive agrees not to assert adequacy of money damages as a defense and agrees that
such remedy shall be cumulative, not exclusive, and in addition to any other available
remedies, and that the Employer may require Executive to account for and pay over to
Employer all compensation, profits, monies, accruals, increments, or other benefits
derived or received by her as the result of any transactions constituting a breach of
the Restrictive Covenants.

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	 	 	 	Employer may set off any amounts finally determined by a court of competent
jurisdiction to be due it under this Paragraph against any amounts owed to
Executive. The Parties agree that any action for breach of the Restrictive
Covenants and/or injunctive relief shall be venued in the Court of Common Pleas,
Franklin County, Ohio, and that Ohio law governs the terms of this Agreement.
	 
	 	(e)	 	Tolling Period. Executive acknowledges that under the terms of the
Restrictive Covenants contained in this Paragraph, the Employer is entitled to receive
a period of one (1) year of non-competition, and two (2) years of non-solicitation and
confidentiality immediately following termination of Executive’s employment. Executive
agrees that if any of these obligations to the Employer are breached during the one (1)
year period or non-competition, and/or the two (2) year period of non-solicitation and
confidentiality, then the time period will be extended for the length of time that
Executive failed to fulfill her obligations.

	10.	 	WITHHOLDING TAXES.
	 
	 	 	Except as otherwise provided, all payments to Executive, including the bonus compensation
under this Agreement, shall be subject to withholding on account of federal, state, and
local taxes as required by law.
	 
	11.	 	NOTICES.
	 
	 	 	Any notice or other communication required or permitted hereunder shall be in writing and
shall be delivered personally, sent by facsimile transmission or sent by certified or
priority mail, postage prepaid. Any such notice shall be deemed given when so delivered
personally, or sent by facsimile transmission or, if mailed, five (5) days after the date of
deposit in the United States mail as follows:

20

 

	 	 	 	 	 	 	 
	 

	 	(a)
	 	If to the Employer to:
	 	Big Lots Stores, Inc.
	 

	 	 	 	 	 	300 Phillipi Road
	 

	 	 	 	 	 	Columbus, Ohio 43228-1310
	 

	 	 	 	 	 	Attention: General Counsel
	 
	 	 	 	 	 	 
	 

	 	 	 	With a copy to:
	 	Big Lots Stores, Inc.
	 

	 	 	 	 	 	300 Phillipi Road
	 

	 	 	 	 	 	Columbus, Ohio 43228-1310
	 

	 	 	 	 	 	Attention: Chief Executive Officer
	 
	 	 	 	 	 	 
	 

	 	(b)
	 	If to the Executive to:
	 	Lisa M. Bachmann
	 

	 	 	 	 	 	7551 Ross Avenue
	 

	 	 	 	 	 	Dublin, Ohio 43017

	 	(c)	 	Change of Address. Any such person may by notice given in accordance with this Paragraph to the other parties
hereto, designate another address or person for receipt by such person of notices hereunder.

	12.	 	SEVERABLE PROVISIONS.
	 
	 	 	The provisions of this Agreement are severable, and if any one or more provisions may be
determined to be invalid or otherwise unenforceable, in whole or in part, the remaining
provisions and any partially unenforceable provision, to the maximum extent enforceable,
shall, nevertheless, be binding and enforceable.
	 
	13.	 	MODIFICATION.
	 
	 	 	This Agreement collectively sets forth the entire understanding of the Parties with respect
to the subject matter hereof, supersedes all existing agreements between them concerning
such subject matter, and may be modified only by a written instrument duly executed by each
party.

21

 

	14.	 	WAIVER.
	 
	 	 	Any waiver by either party of a breach of any provision of this Agreement shall not operate
as or be construed to be a waiver of any other breach of such provision or of any breach of
any other provision of this Agreement. The failure of a party to insist upon strict
adherence to any term of this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict adherence to that
term or any other term of this Agreement. Any waiver must be in writing.
	 
	15.	 	BINDING EFFECT.
	 
	 	 	Executive’s rights and obligations under this Agreement shall not be transferable by
assignment or otherwise, such rights shall not be subject to commutation, encumbrance, or
the claims of Executive’s creditors, and any attempt to do any of the foregoing shall be
void. The provisions of this Agreement shall be binding upon and inure to the benefit of
Executive and her heirs and personal representatives, and shall be binding upon and inure to
the benefit of the Employer and its successors.
	 
	16.	 	NO THIRD-PARTY BENEFICIARIES.
	 
	 	 	This Agreement does not create, and shall not be construed as creating, any rights
enforceable by any person not a party to this Agreement.
	 
	17.	 	HEADINGS.
	 
	 	 	The headings in this Agreement are solely for the convenience of reference and shall be
given no effect in the construction or interpretation of this Agreement.

22

 

	18.	 	COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
	 
	19.	 	GOVERNING LAW, JURISDICTION AND ARBITRATION.
	 
	 	 	This Agreement shall be governed by and construed in accordance with the laws of the State
of Ohio, without giving effect to conflict of laws. Any dispute arising out of or relating
to this Agreement or any breach of this Agreement, with the exceptions of the Restrictive
Covenants contained in Paragraph 9, shall be submitted to and determined in binding
arbitration, and such method shall be the exclusive method for resolving such disputes.
This provision includes any and all claims and remedies that the Executive could bring
against the Employer arising out of her employment, including, but not limited to, claims
for negligence, wrongful discharge, discrimination, harassment, intentional tort, infliction
of emotional distress, defamation, or loss of consortium. Submission may be made by either
party and must be made within thirty (30) days subsequent to the dispute arising.
Thereafter, the parties hereto shall take such steps as are necessary to assure that the
dispute will be promptly settled by arbitration, in accordance with the then-current
Commercial Arbitration Rules of the American Arbitration Association, within ninety (90)
days of its submission. The arbitration shall be conducted by a single arbitrator selected
by the parties. If the parties have not selected an arbitrator within ten (10) days of
written demand for arbitration, the arbitrator shall be selected by the American Arbitration
Association. Each party shall bear all its own legal fees and expenses. All arbitration
proceedings shall be conducted in the federal judicial district where Executive maintains
her principal place of employment for the Company.

23

 

	 	 	Judgment upon any award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
	 
	20.	 	EMPLOYER PROPERTY.
	 
	 	 	Upon termination of Executive’s employment for any reason, or at any time at the Employer’s
request, Executive shall deliver up to the Employer, all property, keys, materials,
documents, records, manuals, notebooks, or papers and any copies thereof maintained in any
form that in any way relate to the business and activities of the Employer that may be in
the possession, or under the control of Executive.
	 
	21.	 	CONFLICTING AGREEMENTS.
	 
	 	 	Executive represents and warrants that he is free to enter into this Agreement and that
Executive has not made and will not make any agreements in conflict with this Agreement.
	 
	22.	 	SURVIVAL.
	 
	 	 	The covenants, agreements, representations, and warranties contained in or made pursuant to
this Agreement shall survive Executive’s termination of employment, whatever the reason for
termination of such employment, and shall survive any termination of this Agreement,
irrespective of any investigation made by or on behalf of any party.

24

 

     WHEREUPON, the Parties hereto voluntarily enter into this Agreement as of this 29th
day of March, 2004.

	 	 	 
	Big Lots, Inc.

	 	Executive
	 
	 	 
	/s/ Albert J. Bell

	 	/s/ Lisa M. Bachmann
	 

	 	 
	 
	 	 
	By: Albert J. Bell

	 	Printed Name: Lisa M. Bachmann
	 
	Its: Chief Administrative Officer
	 	 
	 
	 	 
	Big Lots Stores, Inc.
	 	 
	 
	 	 
	/s/ Brad A. Waite
	 	 
	 

	 	 
	By: Brad A. Waite
	 	 
	 
	 	 
	Its: Executive Vice President
	 	 

25<PAGE>

                                                                  Exhibit 4.1

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY..

                          COMMON STOCK PURCHASE WARRANT

                  To Purchase 250,000 Shares of Common Stock of

                             PDG ENVIRONMENTAL, INC.

                  THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies
that, for value received, FLAGSHIP SERVICE GROUP, INC., FLAGSHIP RECONSTRUCTION
PARTNERS, LTD., FLAGSHIP RECONSTRUCTION ASSOCIATES - COMMERCIAL, LTD., AND
FLAGSHIP RECONSTRUCTION ASSOCIATES - RESIDENTIAL, LTD., (the "Holder"), is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date hereof (the
"Initial Exercise Date") and on or prior to the close of business on the fifth
anniversary of the Initial Exercise Date (the "Termination Date") but not
thereafter, to subscribe for and purchase from PDG Environmental, Inc., a
Delaware corporation (the "Company"), up to 250,000 shares (the "Warrant
Shares") of Common Stock, par value $0.02 per share, of the Company (the "Common
Stock"). The purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in Section 2(b).

         Section 1. Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Asset Purchase
Agreement (the "Purchase Agreement"), dated August 24, 2005, among the Company
and the purchaser signatories thereto.

         Section 2. Exercise.

                  a) Exercise of Warrant. Exercise of the purchase rights
         represented by this Warrant may be made, in whole or in part, at any
         time or times on or after the Initial Exercise Date and on or before
         the Termination Date by delivery to the Company of a duly executed
         facsimile copy of the Notice of Exercise Form annexed hereto (or such
         other office or agency of the Company as it may designate by notice in
         writing to the registered Holder at the address of such Holder
         appearing on the books of the Company); provided, however, within 5
         Trading Days of the date said Notice of Exercise is delivered to the
         Company, the Holder shall have surrendered this Warrant to the Company
         and the Company shall have received payment of the aggregate Exercise
         Price of the shares thereby purchased by wire transfer or cashier's
         check drawn on a United States bank.

                                        1
<PAGE>

                  b) Exercise Price. The exercise price of the Common Stock
         under this Warrant shall be $1.00 (the "Exercise Price").

                  c) Exercise Limitations.

                           i. Holder's Restrictions. The Holder shall not have
                  the right to exercise any portion of this Warrant, pursuant to
                  Section 2(a) or otherwise, to the extent that after giving
                  effect to such issuance after exercise, the Holder (together
                  with the Holder's affiliates), as set forth on the applicable
                  Notice of Exercise, would beneficially own in excess of 9.99%
                  of the number of shares of the Common Stock outstanding
                  immediately after giving effect to such issuance. For purposes
                  of the foregoing sentence, the number of shares of Common
                  Stock beneficially owned by the Holder and its affiliates
                  shall include the number of shares of Common Stock issuable
                  upon exercise of this Warrant with respect to which the
                  determination of such sentence is being made, but shall
                  exclude the number of shares of Common Stock which would be
                  issuable upon (A) exercise of the remaining, nonexercised
                  portion of this Warrant beneficially owned by the Holder or
                  any of its affiliates and (B) exercise or conversion of the
                  unexercised or nonconverted portion of any other securities of
                  the Company (including, without limitation, any other Shares
                  or Warrants) subject to a limitation on conversion or exercise
                  analogous to the limitation contained herein beneficially
                  owned by the Holder or any of its affiliates. Except as set
                  forth in the preceding sentence, for purposes of this Section
                  2(c), beneficial ownership shall be calculated in accordance
                  with Section 13(d) of the Exchange Act, it being acknowledged
                  by Holder that the Company is not representing to Holder that
                  such calculation is in compliance with Section 13(d) of the
                  Exchange Act and Holder is solely responsible for any
                  schedules required to be filed in accordance therewith. To the
                  extent that the limitation contained in this Section 2(c)
                  applies, the determination of whether this Warrant is
                  exercisable (in relation to other securities owned by the
                  Holder) and of which a portion of this Warrant is exercisable
                  shall be in the sole discretion of such Holder, and the
                  submission of a Notice of Exercise shall be deemed to be such
                  Holder's determination of whether this Warrant is exercisable
                  (in relation to other securities owned by such Holder) and of
                  which portion of this Warrant is exercisable, in each case
                  subject to such aggregate percentage limitation, and the
                  Company shall have no obligation to verify or confirm the
                  accuracy of such determination. For purposes of this Section
                  2(c), in determining the number of outstanding shares of
                  Common Stock, the Holder may rely on the number of outstanding
                  shares of Common Stock as reflected in (x) the Company's most
                  recent Form 10-Q or Form 10-K, as the case may be, (y) a more
                  recent public announcement by the Company or (z) any other
                  notice by the Company or the Company's Transfer Agent setting
                  forth the number of shares of Common Stock outstanding. Upon
                  the written or oral request of the Holder, the Company shall
                  within two Trading Days confirm orally and in writing to the
                  Holder the number of

                                       2
<PAGE>

                  shares of Common Stock then outstanding. In any case,
                  the number of outstanding shares of Common Stock shall be
                  determined after giving effect to the conversion or exercise
                  of securities of the Company, including this Warrant, by the
                  Holder or its affiliates since the date as of which such
                  number of outstanding shares of Common Stock was reported. The
                  provisions of this Section 2(c) may be waived by the Holder
                  upon, at the election of the Holder, not less than 61 days'
                  prior notice to the Company, and the provisions of this
                  Section 2(c) shall continue to apply until such 61st day (or
                  such later date, as determined by the Holder, as may be
                  specified in such notice of waiver).

                  d) Mechanics of Exercise.

                           i. Authorization of Warrant Shares. The Company
                  covenants that all Warrant Shares which may be issued upon the
                  exercise of the purchase rights represented by this Warrant
                  will, upon exercise of the purchase rights represented by this
                  Warrant, be duly authorized, validly issued, fully paid and
                  nonassessable and free from all taxes, liens and charges in
                  respect of the issue thereof (other than taxes in respect of
                  any transfer occurring contemporaneously with such issue).

                           ii. Delivery of Certificates Upon Exercise. If
                  permitted by law and regulation, certificates for shares
                  purchased hereunder shall be transmitted by the transfer agent
                  of the Company to the Holder by crediting the account of the
                  Holder's prime broker with the Depository Trust Company
                  through its Deposit Withdrawal Agent Commission ("DWAC")
                  system if the Company is a participant in such system, and
                  otherwise by physical delivery to the address specified by the
                  Holder in the Notice of Exercise within 7 Trading Days from
                  the delivery to the Company of the Notice of Exercise Form,
                  surrender of this Warrant and payment of the aggregate
                  Exercise Price as set forth above ("Warrant Share Delivery
                  Date"). This Warrant shall be deemed to have been exercised on
                  the date the Exercise Price is received by the Company. The
                  Warrant Shares shall be deemed to have been issued, and Holder
                  or any other person so designated to be named therein shall be
                  deemed to have become a holder of record of such shares for
                  all purposes, as of the date the Warrant has been exercised by
                  payment to the Company of the Exercise Price and all taxes
                  required to be paid by the Holder, if any, pursuant to Section
                  2(d)(v) prior to the issuance of such shares, have been paid.

                           iii. Delivery of New Warrants Upon Exercise. If this
                  Warrant shall have been exercised in part, the Company shall,
                  at the time of delivery of the certificate or certificates
                  representing Warrant Shares, deliver to Holder a new Warrant
                  evidencing the rights of Holder to purchase the unpurchased
                  Warrant Shares called for by this Warrant,

                                        3
<PAGE>

                  which new Warrant shall in all other respects be identical
                  with this Warrant.

                           iv. No Fractional Shares or Scrip. No fractional
                  shares or scrip representing fractional shares shall be issued
                  upon the exercise of this Warrant. As to any fraction of a
                  share which Holder would otherwise be entitled to purchase
                  upon such exercise, the Company shall pay a cash adjustment in
                  respect of such final fraction in an amount equal to such
                  fraction multiplied by the Exercise Price.

                           v. Charges, Taxes and Expenses. Issuance of
                  certificates for Warrant Shares shall be made without charge
                  to the Holder for any issue or transfer tax or other
                  incidental expense in respect of the issuance of such
                  certificate, all of which taxes and expenses shall be paid by
                  the Company, and such certificates shall be issued in the name
                  of the Holder or in such name or names as may be directed by
                  the Holder; provided, however, that in the event certificates
                  for Warrant Shares are to be issued in a name other than the
                  name of the Holder, this Warrant when surrendered for exercise
                  shall be accompanied by the Assignment Form attached hereto
                  duly executed by the Holder; and the Company may require, as a
                  condition thereto, the payment of a sum sufficient to
                  reimburse it for any transfer tax incidental thereto.

                           vi. Closing of Books. The Company will not close its
                  stockholder books or records in any manner which prevents the
                  timely exercise of this Warrant, pursuant to the terms hereof,
                  unless required by applicable law.

         Section 3. Transfer of Warrant.

                  a) Transferability. Subject to compliance with any applicable
         securities laws and the conditions set forth in Sections 4(a) and 3(d)
         hereof, this Warrant and all rights hereunder are transferable, in
         whole or in part, upon surrender of this Warrant at the principal
         office of the Company, together with a written assignment of this
         Warrant substantially in the form attached hereto duly executed by the
         Holder or its agent or attorney and funds sufficient to pay any
         transfer taxes payable upon the making of such transfer. Upon such
         surrender and, if required, such payment, the Company shall execute and
         deliver a new Warrant or Warrants in the name of the assignee or
         assignees and in the denomination or denominations specified in such
         instrument of assignment, and shall issue to the assignor a new Warrant
         evidencing the portion of this Warrant not so assigned, and this
         Warrant shall promptly be cancelled. A Warrant, if properly assigned,
         may be exercised by a new holder for the purchase of Warrant Shares
         without having a new Warrant issued.

                  b) New Warrants. This Warrant may be divided or combined with
         other Warrants upon presentation hereof at the aforesaid office of the
         Company, together with a written notice specifying the names and
         denominations in which new Warrants are to be issued, signed by the
         Holder or its agent or attorney. Subject to compliance with Section

                                        4
<PAGE>

         3(a), as to any transfer which may be involved in such division or
         combination, the Company shall execute and deliver a new Warrant or
         Warrants in exchange for the Warrant or Warrants to be divided or
         combined in accordance with such notice.

                  c) Warrant Register. The Company shall register this Warrant,
         upon records to be maintained by the Company for that purpose (the
         "Warrant Register"), in the name of the record Holder hereof from time
         to time. The Company may deem and treat the registered Holder of this
         Warrant as the absolute owner hereof for the purpose of any exercise
         hereof or any distribution to the Holder, and for all other purposes,
         absent actual notice to the contrary.

                  d) Transfer Restrictions. If, at the time of the surrender of
         this Warrant in connection with any transfer of this Warrant, the
         transfer of this Warrant shall not be registered pursuant to an
         effective registration statement under the Securities Act and under
         applicable state securities or blue sky laws, the Company may require,
         as a condition of allowing such transfer (i) that the Holder or
         transferee of this Warrant, as the case may be, furnish to the Company
         a written opinion of counsel (which opinion shall be in form, substance
         and scope customary for opinions of counsel in comparable transactions)
         to the effect that such transfer may be made without registration under
         the Securities Act and under applicable state securities or blue sky
         laws, (ii) that the holder or transferee execute and deliver to the
         Company an investment letter in form and substance acceptable to the
         Company and (iii) that the transferee be an "accredited investor" as
         defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8)
         promulgated under the Securities Act or a qualified institutional buyer
         as defined in Rule 144A(a) under the Securities Act.

         Section 4. Miscellaneous.

                  a) Title to Warrant. Prior to the Termination Date and subject
         to compliance with applicable laws and Section 3 of this Warrant, this
         Warrant and all rights hereunder are transferable, in whole or in part,
         at the office or agency of the Company by the Holder in person or by
         duly authorized attorney, upon surrender of this Warrant together with
         the Assignment Form annexed hereto properly endorsed. The transferee
         shall sign an investment letter in form and substance reasonably
         satisfactory to the Company.

                  b) No Rights as Shareholder Until Exercise. This Warrant does
         not entitle the Holder to any voting rights or other rights as a
         shareholder of the Company prior to the exercise hereof. Upon the
         surrender of this Warrant and the payment of the aggregate Exercise
         Price (or by means of a cashless exercise), the Warrant Shares so
         purchased shall be and be deemed to be issued to such Holder as the
         record owner of such shares as of the close of business on the later of
         the date of such surrender or payment.

                  c) Loss, Theft, Destruction or Mutilation of Warrant. The
         Company covenants that upon receipt by the Company of evidence
         reasonably satisfactory to it of the loss, theft, destruction or
         mutilation of this Warrant or any stock certificate relating to the
         Warrant Shares, and in case of loss, theft or destruction, of indemnity
         or security reasonably satisfactory to it (which, in the case of the
         Warrant, shall not include the posting of any bond), and upon surrender
         and cancellation of such Warrant or stock

                                       5
<PAGE>

         certificate, if mutilated, the Company will make and deliver a new
         Warrant or stock certificate of like tenor and dated as of such
         cancellation, in lieu of such Warrant or stock certificate.

                  d) Saturdays, Sundays, Holidays, etc. If the last or appointed
         day for the taking of any action or the expiration of any right
         required or granted herein shall be a Saturday, Sunday or a legal
         holiday, then such action may be taken or such right may be exercised
         on the next succeeding day not a Saturday, Sunday or legal holiday.

                  e) Restrictions. The Holder acknowledges that the Warrant
         Shares acquired upon the exercise of this Warrant, if not registered,
         will have restrictions upon resale imposed by state and federal
         securities laws.

                  f) Notices. Any notice, request or other document required or
         permitted to be given or delivered to the Holder by the Company shall
         be delivered in accordance with the notice provisions of the Purchase
         Agreement.

                  g) Successors and Assigns. Subject to applicable securities
         laws, this Warrant and the rights and obligations evidenced hereby
         shall inure to the benefit of and be binding upon the successors of the
         Company and the successors and permitted assigns of Holder. The
         provisions of this Warrant are intended to be for the benefit of all
         Holders from time to time of this Warrant and shall be enforceable by
         any such Holder or holder of Warrant Shares.

                  h) Amendment. This Warrant may be modified or amended or the
         provisions hereof waived with the written consent of the Company and
         the Holder.

                  i) Severability. Wherever possible, each provision of this
         Warrant shall be interpreted in such manner as to be effective and
         valid under applicable law, but if any provision of this Warrant shall
         be prohibited by or invalid under applicable law, such provision shall
         be ineffective to the extent of such prohibition or invalidity, without
         invalidating the remainder of such provisions or the remaining
         provisions of this Warrant.

                  j) Headings. The headings used in this Warrant are for the
         convenience of reference only and shall not, for any purpose, be deemed
         a part of this Warrant.

                              ********************

                                       6
<PAGE>

                  IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.

Dated:  August 24, 2005

                                        PDG ENVIRONMENTAL, INC.

                                        By: /s/ John C. Regan
                                            ----------------------------------
                                            Name: John C. Regan
                                            Title: President & CEO

                                       7

<PAGE>

                               NOTICE OF EXERCISE

To:      PDG Environmental, Inc.

         (1) The undersigned hereby elects to purchase ________ Warrant Shares
of the Company pursuant to the terms of the attached Warrant (only if exercised
in full), and tenders herewith payment of the exercise price in full, together
with all applicable transfer taxes, if any.

         (2) Payment shall take the form of (check applicable box):

                  [ ] in lawful money of the United States; or

                  [ ] the cancellation of such number of Warrant Shares
                  as is necessary, in accordance with the formula set
                  forth in subsection 2(c), to exercise this Warrant
                  with respect to the maximum number of Warrant Shares
                  purchasable pursuant to the cashless exercise
                  procedure set forth in subsection 2(c).

         (3) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:

                  ----------------------------------------

The Warrant Shares shall be delivered to the following:

                  ----------------------------------------

                  ----------------------------------------

                  ----------------------------------------

         (4) Accredited Investor. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity:
                          -----------------------------------------------------
Signature of Authorized Signatory of Investing Entity:
                                                       ------------------------
Name of Authorized Signatory:
                              -------------------------------------------------
Title of Authorized Signatory:
                               ------------------------------------------------
Date:
      -------------------------------------------------------------------------

<PAGE>

                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                 Do not use this form to exercise the warrant.)

         FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to

                                               whose address is
----------------------------------------------

---------------------------------------------------------------.

---------------------------------------------------------------

                                              Dated:               ,
                                                     --------------  ---------

                           Holder's Signature:
                                               -----------------------------
                           Holder's Address:
                                               -----------------------------

                                               -----------------------------

Signature Guaranteed:
                      --------------------------------

NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

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