Document:

exv10w1

 

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

     THIS AGREEMENT (“Agreement”) is by and between THE BON-TON STORES, INC., a Pennsylvania
corporation (the “Company”), and ANTHONY BUCCINA (“Employee”).

W I T N E S S E T H:

     WHEREAS, Employee is currently party to an Employment Agreement dated April 1, 2004 with Saks
Incorporated (“Saks”) pursuant to which Employee served as President of the Carson Pirie Scott
operating division (“Prior Employment Agreement”); and

     WHEREAS, effective as of March 5, 2006 the Company became the owner of the Carson Pirie Scott
operating division;

     WHEREAS, the Company and Employee have agreed upon terms upon which Employee will continue his
employment in the Company following the acquisition.

     NOW THEREFORE, in consideration of the mutual promises and covenants contained herein and
intending to be legally bound hereby, the Company and Employee agree as follows:

     1. Position and Responsibilities.

          (a) The Company hereby employs Employee and Employee hereby accepts employment by the Company
as the Company’s Vice Chairman, President — Merchandising. Following a transition period estimated
to end after the Company’s spring season has concluded, as specified by the Chief Executive Officer
of the Company, during which Employee will continue to perform duties under his Prior Employment
Agreement, Employee shall have responsibilities for the Company’s merchandising operations and
shall report directly to the Chief Executive Officer of the Company or such other senior executive
officer of the Company designated by the Chief Executive Officer or the person performing the
duties of the Chief

 

Executive Officer. In addition, Employee shall be a member of the Management Committee and
the Operating Committee.

          (b) Throughout the term of this Agreement, Employee shall devote his entire working time,
energy, attention, skill and best efforts to the affairs of the Company and to the performance of
his duties hereunder in a manner that will faithfully and diligently further the business and
interests of the Company. Employee may not, directly or indirectly, do any work for or on behalf
of a competitor or any other company while employed by the Company. However, nothing herein
contained shall be deemed to prevent or limit the right of Employee to invest any of his personal
funds in less than one percent of any class of the capital stock or other securities of any
corporation or other entity whose stock or securities are publicly owned or are regularly traded on
any public securities exchange, nor shall this clause be construed as preventing Employee from
investing his assets in such other form or manner as will not require any services on the part of
the Employee in the operation or the affairs of entities in which such investments are made.
Approval of board memberships and participation in lectures and teaching activities will be at the
discretion of the Chief Executive Officer, however, such approval will not be unreasonably
withheld, provided that such activities do not significantly interfere with Employee’s duties under
this Agreement.

          (c) Employee shall not obtain goods or services or otherwise deal on behalf of the Company
with any business or entity in which Employee or a member of his family has a financial interest or
from which Employee or a member of his immediate family may derive a financial benefit as a result
of such transaction, except that this prohibition shall not apply to any public company in which
Employee or a member of his immediate family owns less than one percent of any class of the
outstanding capital stock or other securities.

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     2. Term of Agreement. Employee’s employment hereunder shall commence on the date when
this Agreement has been signed by Employee and the Company and its terms approved by the Human
Resources and the Compensation Committee (“HRCC”) of the Company’s Board of Directors (the
“Effective Date”), and shall continue through and terminate on January 31, 2009, unless sooner
terminated in accordance with paragraph 10 below.

     3. Place of Performance. Employee shall be based at the office of the Company in
Milwaukee, Wisconsin, except for travel required for Company business.

     4. Compensation.

          (a) Salary. Employee shall receive a base salary at the annual rate of $780,000,
effective May 1, 2006. This base salary, less taxes and normal deductions, shall be paid to
Employee in substantially equal installments in accordance with the Company’s regular executive
payroll practices in effect from time to time. The annual base salary may be reviewed from time to
time, but no less than annually, during the term of this Agreement by the Chief Executive Officer
(subject to review by the HRCC of the Company’s Board) to ascertain whether, in the Company’s sole
discretion, such base salary should be increased, and once increased, such base salary shall not be
decreased. The first such salary review shall occur in 2007. This base salary shall be referred
to hereinafter as “Base Salary.”

          (b) Bonus.

               (i) Guaranteed Bonus: For the Company’s fiscal year ending on or about February 3,
2007 (“2006 Fiscal Year”), Employee shall receive a one time minimum bonus payment (“Guaranteed
Bonus”) in the gross amount of One Hundred Fifty-Seven Thousand, One Hundred and Twenty-Three
Dollars ($157,123.00), provided he is employed on the last day of the 2006 Fiscal Year unless
discharged without Cause in accordance with paragraph 10(f) below or he resigns with Good Reason in
accordance with paragraph 10(c) below.

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               (ii) Annual Bonus.

                    A. Employee also shall be eligible for a bonus under The Bon-Ton Stores, Inc. Cash Bonus Plan
(“Cash Bonus Plan”) in accordance with its terms and conditions.

                    B. For the 2006 Fiscal Year.

                         I. Employee shall be eligible for a bonus under the Cash Bonus Plan with the following
parameters: a threshold bonus of 93.8% of Employee’s Base Salary in effect on the last day of the
2006 Fiscal Year (“2006 Base Salary”); a target bonus of 125% of Employee’s 2006 Base Salary; and a
maximum bonus of 187.5% of Employee’s 2006 Base Salary. If earned, one bonus will be paid
depending upon the level of achievement as specified in subparagraphs (II) through (IV) below and
subject to subparagraph (V) below.

                         II. This bonus shall be based on attainment of specified levels of achievement with respect to
three performance measures. The achievement by the Company of a level of net income as determined
in accordance with the Company’s normal accounting practices, consistent with past practices (“Net
Income”) shall account for fifty percent (50%) of the potential bonus payout, the performance and
the achievement by the Company of a level of net sales as determined in accordance with the
Company’s normal accounting practices, consistent with past practices (“Net Sales”) shall account
for twenty-five (25%) of the potential bonus payout, and performance and achievement by the Company
of a level of GMROI Dollars in accordance with the Company’s normal accounting practices consistent
with past practice (“GMROI Dollars”) shall account for twenty-five percent (25%) of the potential
payout. Employee’s bonus for the 2006 Fiscal Year shall be calculated in a manner consistent with
the

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Company’s past practices and consistent with the bonus determinations for the 2006 Fiscal Year
for the other senior executives of the Company under the Cash Bonus Plan.

                         III. The amount payable to Employee at the various levels of achievement is set out on a table
entitled Vice Chair, President-Merchandising 2006 Bonus Metrics (“Vice Chair,
President-Merchandising 2006 Bonus Metrics Table”), approved by the HRCC of the Company’s Board and
by the Executive Committee of the Company’s Board, and delivered to Employee.

                         IV. A bonus as specified in the Vice Chair, President — Merchandising 2006 Bonus Metrics Table
between the levels of the threshold bonus and target bonus, or between the levels of the target
bonus and the maximum bonus, as applicable, shall be paid for achievement of the performance
measures specified in the Vice Chair, President — Merchandising 2006 Bonus Metrics Table, subject
to the following.

                              (1) Achievement of Net Income below the Net Income required for the threshold bonus as
specified on the Vice Chair, President — Merchandising 2006 Bonus Metrics Table shall result in no
payment of any portion of the 2006 bonus.

                              (2) Achievement of Net Sales below the Net Sales required for the threshold bonus as specified
on the Vice Chairman, President-Merchandising 2006 Bonus Metrics Table shall result in no payment
of the Net Sales portion of the 2006 bonus, but the portion of the bonus based upon Net Income
nevertheless shall be payable provided the Net Income required for that threshold bonus is
achieved, and/or the portion of the bonus based upon GMROI Dollars nevertheless shall be payable
provided the GMROI Dollars required for that threshold bonus is achieved.

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                              (3) Achievement of GMROI Dollars below the GMROI Dollars required for the threshold bonus as
specified on the Vice Chairman, President-Merchandising 2006 Bonus Metrics Table shall result in no
payment of the GMROI portion of the 2006 bonus, but the portion of the bonus based upon Net Income
nevertheless shall be payable provided the Net Income required for that threshold bonus is
achieved, and/or the portion of the bonus based upon Net Sales nevertheless shall be payable
provided the Net Sales required for that threshold bonus is achieved.

                         V. The bonus for the 2006 Fiscal Year which Employee otherwise would be paid pursuant to this
paragraph 4(b)(ii) shall be reduced by the Guaranteed Bonus referenced in paragraph 4(b)(i) above.

                    C. For the Company’s fiscal year ending on or about February 3, 2008 (“2007 Fiscal Year”),
Employee shall be eligible for a bonus under the Cash Bonus Plan with the following parameters: a
threshold bonus of 93.8% of Employee’s Base Salary in effect on the last day of the 2007 Fiscal
year (“2007 Base Salary”); a target bonus of 125% of Employee’s 2007 Base Salary; and a maximum
bonus of 187.5% of Employee’s 2007 Base Salary. The performance measures and weighting of these
performance measures shall be determined by the HRCC consistent with its determinations for other
senior executives under the Cash Bonus Plan.

                    D. For the Company’s fiscal year ending on or about January 31, 2009 (“2008 Fiscal Year”):
Employee shall be eligible for a bonus under the Cash Bonus Plan with the following parameters: a
threshold bonus of 56.25% of Employee’s Base Salary in effect on the last day of the 2008 Fiscal
Year (“2008 Base Salary”); a target bonus of 75% of Employee’s 2008 Base Salary; and a maximum
bonus of 112.5%% of Employee’s 2008 Salary.

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The performance measures and weighting of these performance measures shall be determined by
the HRCC consistent with its determinations for other senior executives under the Cash Bonus Plan.

                    E. The bonus threshold is the lowest bonus receivable for a fiscal year to the extent any
bonus is paid, and is not a guarantee that any bonus will be paid.

                    F. To the extent reasonably practicable, the annual bonus shall be computed within 90 days
following the close of the Company’s fiscal year and paid within 30 days of its computation.
Employee must be employed on the last day of the Company’s fiscal year to receive a bonus with
respect to that fiscal year, except as set forth in paragraph 11(a) of this Agreement.

          (c) Stock Options. On the Effective Date, Employee shall receive a one time 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 stock on the date of grant (“Options”). The Options will be granted
pursuant to the terms of the Company’s 2000 Stock Incentive Plan or a similar plan (“the Stock
Incentive Plan”). The Options shall vest in three annual installments as follows: 32,000 shares
on the first anniversary of the Effective Date of this Agreement; 32,000 shares on the second
anniversary of the Effective Date of this Agreement, and 32,000 shares on January 31, 2009,
provided he is still employed on such applicable date, except that in the event that Employee is
terminated without Cause by the Company prior to January 31, 2009, he shall be entitled to
pro rata vesting of the Options based on the number of days worked between the
Effective Date and date of termination, contingent upon Employee’s signing and not timely revoking
a general release of claims (including, without limitation, contractual, common law and statutory
claims against the Company and its officers, directors, employees and agents.

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          (d) Restricted Shares. On the Effective Date, Employee will be granted 65,000
restricted shares of the Company’s Common Stock pursuant to the terms of the Incentive Plan
(“Restricted Shares”). Employee’s ownership of the Restricted Shares will vest as follows: 10,000
shares on the first anniversary of the Effective Date of this Agreement, 21,666 shares on the
second anniversary of the Effective Date of this Agreement and 33,334 shares on January 31, 2009,
provided he is still employed on such applicable date.

     5. Allowances. The Company shall provide Employee with $9,500 per year, payable
monthly, as an automobile allowance. The Company will also reimburse employee on a one time basis
for reasonable attorneys fees expended in review and negotiation of this Agreement, up to a maximum
of $10,000.

     6. Medical Insurance. Employee and his eligible dependents shall be eligible to
participate in the Company’s group medical plans in accordance with the terms of such plans and,
subject to the restrictions and limitations contained in the insurance agreement or agreements.
The Company shall pay Employee up to $2,300 per year for medical expenses that are not covered by
the Company’s medical plan.

     7. Other Benefits. Employee shall be eligible to participate in the Company’s profit
sharing plan, deferred compensation plan, discount program, vacation plan, long-term disability
plan and employee benefit programs generally made available to other employees of the Company who
were previously employed in the Carson Pirie Scott division of Saks, subject to their respective
generally applicable eligibility requirements, terms, conditions and restrictions; provided,
however, that severance payments under this Agreement shall be in lieu of any severance benefits
otherwise provided by the Company. However, nothing in this Agreement shall preclude the Company
from amending or terminating any such insurance, benefit, program

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or plan so long as the amendment or termination is applicable to the Company’s executives
participating in such insurance, benefit, program or plan generally. Moreover, the Company’s
obligations under this provision shall not apply to any insurance, benefit, program or plan made
available on an individual basis to one or more select executive employees by contract if such
insurance, benefit, program or plan is not made available to all executive employees. With respect
to Employee’s participation in the Company’s vacation plan, Employee shall be eligible for four
weeks vacation per calendar year, which vacation entitlement shall be pro-rated in any calendar
year in which Employee does not work the entire calendar year.

     8. Supplemental Executive Retirement Plan. Employee shall continue his participation
in the Carson Pirie Scott & Company Supplemental Executive Retirement Plan (SERP) as such plan may
from time to time be amended pursuant to its terms. The Company agrees that there has been a
Change in Control within the meaning of the SERP. At such time as Employee’s employment with the
Company terminates, whether within two years after the Change in Control or thereafter, the
Employee shall be entitled to an immediate single sum distribution of the present value of his
accrued benefit, payable as soon as practicable after the six (6) month anniversary of Employee’s
termination of employment, and calculated pursuant to Section 8.2 of the SERP, as amended. The
provisions of the preceding sentence are intended to be an election as to the time and manner of
payment of a nonqualified deferred compensation benefit consistent with the transitional rules
contained in proposed Treasury Regulations promulgated pursuant to Internal Revenue Code (“Code”)
Section 409A.

     9. Business Expenses. The Company shall pay or reimburse Employee for reasonable
entertainment and other expenses incurred by Employee in connection with the performance of
Employee’s duties under this Agreement upon receipt of vouchers therefor and in

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accordance with the Company’s regular reimbursement procedures and practices in effect from
time to time.

     10. Termination of Employment. Notwithstanding any other provision of this Agreement,
Employee’s employment and all of the Company’s obligations or liabilities under this Agreement may
be terminated immediately, excluding any obligations the Company may have under paragraph 11 below
in any of the following circumstances:

          (a) Disability or Incapacity. In the event of Employee’s physical or mental inability
to perform his essential duties hereunder, with or without reasonable accommodation, for a period
of 13 consecutive weeks or for a cumulative period of 26 weeks during the term of this Agreement.

          (b) Death of Employee. In the event of Employee’s death.

          (c) Resignation for Good Reason. Employee may resign for “Good Reason,” defined
below, upon 30 days’ written notice by Employee to the Company except as set forth in paragraph
10(d) below. The Company may waive Employee’s obligation to work during this 30 day notice period
and terminate his employment immediately, but if the Company takes this action in the absence of
agreement by Employee, Employee shall receive the salary that otherwise would be due through the
end of the notice period. For purposes of this Agreement, “Good Reason” shall mean any of the
following violations of this Agreement by the Company: causing Employee, without Employee’s
consent, to cease to have duties and responsibilities commensurate with those of Vice Chairman,
President — Merchandising; any reduction in Employee’s base salary; except as provided in this
Agreement, any reduction in Employee’s potential bonus eligibility amount; and any substantial
breach by the Company of any material provision of this Agreement. Notwithstanding the foregoing,
the acts or omissions described

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above shall not constitute “Good Reason” unless Employee provides the Company with written
notice detailing the matters he asserts to be “Good Reason” which the Company does not cure within
thirty (30) days of receiving the written notice.

          (d) Change of Control. In the event of a Change of Control of the Company, Employee
shall be prohibited from resigning for Good Reason for a period of six (6) months following the
Change of Control. For purposes of this Agreement, a Change of Control shall be deemed to occur
if:

               (i) any “person,” as such term is defined under Sections 3(a)(9) and 13(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), who is not an affiliate of the Company on
the date hereof, becomes a “beneficial owner,” as such term is used in Rule 13d-3 under the
Exchange Act, of a majority of the outstanding voting power of the Company’s capital stock;

               (ii) the Company adopts any plan of liquidation providing for the distribution of all or
substantially all of its assets;

               (iii) the Company is party to a merger, consolidation, other form of business combination or a
sale of all or substantially all of its assets, unless the business of Company is continued
following any such transaction by a resulting entity (which may be, but need not be, Company) and
the shareholders of the Company immediately prior to such transaction hold, directly or indirectly,
immediately after such transaction a majority of the voting power of the resulting entity in
substantially the same relative percentages as prior to such transaction.

          (e) Discharge for Cause. The Company may discharge Employee at any time for “Cause,”
which shall be limited to: Employee’s material and serious breach or neglect of

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Employee’s responsibilities; willful violation or disregard of standards of conduct
established by law; willful violation or disregard of standards of conduct established by Company
policy as may from time to time be communicated to Employee; fraud, willful misconduct,
misappropriation of funds or other dishonesty; conviction of a crime of moral turpitude; any
misrepresentation made in this Agreement; or any material breach by Employee of any provision of
this Agreement (including, without limitation, acceptance of employment with another company or
performing work or providing advice to another company, as an employee, consultant or in any other
similar capacity while still an employee of the Company).

          (f) Discharge without Cause. Notwithstanding any other provision of this Agreement,
Employee’s employment and any and all of the Company’s obligations under this Agreement (excluding
any obligations the Company may have under paragraph 11 below) may be terminated by the Company at
any time without Cause.

     11. Payments Upon Termination.

          (a) Discharge Without Cause, Resignation for Good Reason, or End of Term. If Employee
is discharged without Cause, resigns for Good Reason or at the end of the Term (unless the Company
offers to renew this Agreement for at least one (1) year on substantially similar terms, including
eligibility for the bonus referenced in paragraph 4(b)(ii)(D) relating to the bonus for the 2008
Fiscal Year and severance pay terms), Employee shall receive (i) severance pay equal to two times
his base salary, payable in a lump sum as soon as practicable following the six (6) month
anniversary of Employee’s termination of employment, and (ii) if Employee has been employed for at
least six (6) months in the Company’s fiscal year in which the termination of his employment
occurs, a prorated portion (based upon number of days employed in the fiscal year) of the bonus
which would have been earned by Employee under

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paragraph 4(b)(i) above (relating to the Guaranteed Bonus for the 2006 Fiscal Year), if the
discharge or resignation should occur in the 2006 Fiscal Year), and 4(b)(ii) above (relating to the
Annual Bonus under the Cash Bonus Plan based upon the Company’s full year performance for the
fiscal year during which the discharge or resignation occurs), less the offset, if applicable,
specified in paragraph 4(b)(ii)(B)(V). (For clarity, any such bonus, whether pursuant to paragraph
4(b)(i) or 4(b)(ii) shall be prorated.) The bonus, if any, will be paid as soon as practicable
after the end of the fiscal year in which the termination occurs. These severance and bonus
payments will be made provided that Employee signs and does not timely revoke a general release of
claims (including, without limitation, contractual, common law and statutory claims) against the
Company and its officers, directors, employees and agents. This severance payment shall be in lieu
of any other severance payment to which Employee is entitled by reason of the Prior Employment
Agreement or any severance plan sponsored by Saks or the Company. Employee will also receive any
vested benefits to which Employee is entitled under the Company’s stock options and employee
benefit plans in accordance with, to the extent provided in, and subject to the restrictions and
payout schedules contained in these plans including accelerated vesting under the circumstances
provided in paragraph 4(c) of this Agreement.

          (b) Death or Disability/Incapacity.

               (i) On death, Employee’s estate’s sole entitlement will be to base salary for any days worked
prior to his death, amounts payable on account of Employee’s death under any insurance or benefit
plans or policies maintained by the Company, and any vested benefits to which Employee is entitled
under the Company’s stock option and employee benefit plans in accordance with, to the extent
provided in, and subject to the restrictions and payout schedules contained in those plans.

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               (ii) On termination for disability or incapacity, Employee’s sole entitlement will be to base
salary for any days worked prior to the date of termination, amounts payable on account of
disability or incapacity under any insurance or benefit plans or policies maintained and any vested
benefits to which Employee is entitled under the Company’s stock option and employee benefit plans
in accordance with, to the extent provided in, and subject to the restrictions and payout schedules
contained in those plans.

          (c) Discharge for Cause. If Employee is discharged for Cause or resigns without Good
Reason, Employee’s sole entitlement will be the receipt of base salary for any days worked through
the date of termination and any vested benefits to which Employee is entitled under the Company’s
stock option and employee benefit plans in accordance with, to the extent provided in, and subject
to the restrictions and payout schedules contained in those plans.

          (d) Change of Control.

               (i) Notwithstanding the foregoing, upon a Change of Control as defined in paragraph 10(d)
while Employee is employed pursuant to this Agreement, Employee’s Options and Restricted Shares
shall immediately vest.

               (ii) Notwithstanding any other provision of this Agreement, if the aggregate present value of
the “parachute payments” to the Employee, determined under Section 280G(b) of the Internal Revenue
Code of 1986, as amended (the “Code”), would be at least three times the “base amount” determined
under Code Section 280G, then the “280G Permitted Payment” shall be the maximum benefit that may be
realized upon a Change of Control under this Section 10(d) such that the aggregate present value of
such “parachute payments” to Employee is less than three times his “base amount.” In addition, in
the event the aggregate present value of the parachute payments to Employee would be at least three
times his base

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amount even after a reduction of the Change of Control benefits to $0 (all as determined for
purposes of Code Section 280G), compensation otherwise payable under this Agreement and any other
amount payable hereunder or any other severance plan, program, policy or obligation of the Company
or any other affiliate thereof that would constitute “parachute payments” shall be reduced so that
the aggregate present value of all “parachute payments” to Employee, as determined under Code
Section 280G(b) is less than three times his base amount. Any decisions regarding the requirement
or implementation of such reductions shall be made by such tax counsel as may be selected by the
Company and acceptable to Employee.

     12. Company Property. All advertising, sales, manufacturers’ and other materials or
articles or information, including, without limitation, data processing reports, customer sales
analyses, invoices, price lists or information or any other materials or data of any kind furnished
to Employee by the Company or developed by Employee on behalf of the Company or at the Company’s
direction or for the Company’s use or otherwise in connection with Employee’s employment with the
Company, are and shall remain the sole and confidential property of the Company.

     13. Non-Competition and Confidentiality. To the maximum extent permissible by law:

          (a) During his employment with the Company and for a period of one year after the termination
of his employment with the Company for any reason whatsoever, whether by Employee or by the Company
and whether during the term of this Agreement or subsequent to the expiration of this Agreement,
Employee shall not, directly or indirectly:

               (i) Induce or intentionally influence any customer, employee, consultant, independent
contractor or supplier of the Company to change his, her or its business relationship with or
terminate employment with the Company.

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               (ii) After the cessation of his employment, engage in (as a principal, partner, director,
officer, agent, employee, consultant, owner, independent contractor or otherwise) or be financially
interested in the retail department store business of any Competitor of the Company. For purposes
of this Agreement, a Competitor means each of Federated Department Stores, Dillard’s Inc., Kohl’s
Corporation, Belk, Inc., Limited Brands, Inc., Target Corporation, Boscov’s, Inc. or the affiliates
and successors of each of them.

          (b) During his employment with the Company and at all times thereafter, and except as required
by law, Employee shall not use for his personal benefit, or disclose, communicate or divulge to, or
use for the direct or indirect benefit of, any person, firm, association or company other than the
Company, any confidential information of the Company that Employee acquires in the course of his
employment, which is not otherwise lawfully known by and readily available to the general public.
This confidential information includes, but is not limited to: any material referred to in
paragraph 12 or any non-public information regarding the business, marketing, legal or accounting
methods, policies, plans, procedures, strategies or techniques; research or development projects or
results; trade secrets or other knowledge or processes of or developed by the Company; names and
addresses of employees, suppliers or customers. Employee confirms that such information is
confidential and constitutes the exclusive property of the Company, and agrees that, immediately
upon his termination, whether by Employee or by the Company and whether during the term of this
Agreement or subsequent to the expiration of this Agreement, Employee shall deliver to the Company
all correspondence, documents, books, records, lists, computer programs and other writings relating
to the Company’s business; and Employee shall retain no copies, regardless of where or by whom said
writings were kept or prepared.

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          (c) Both during his employment with the Company and following his termination for any reason,
whether by Employee or by the Company and whether during the term of this Agreement or following
the expiration of the Agreement, Employee shall, upon reasonable notice, furnish to the Company
such information pertaining to his employment with the Company as may be in his possession. The
Company shall reimburse Employee for all reasonable expenses incurred by him in fulfilling his
obligation under this subparagraph (c).

          (d) The provisions of subparagraphs (a), (b) and (c) shall survive the cessation of Employee’s
employment for any reason, as well as the expiration of this Agreement at the end of its term or at
any time prior thereto.

          (e) Employee acknowledges that the restrictions contained in this paragraph 13, in view of the
nature of the business in which the Company is engaged and the Employee’s position with the
Company, are reasonable and necessary to protect the legitimate interests of the Company, and that
any violation of those restrictions would result in irreparable injury to the Company. Employee
therefore agrees that, in the event of his violation of any of those restrictions, the Company
shall be entitled to obtain from any court of competent jurisdiction preliminary and permanent
injunctive relief against Employee, in addition to damages from Employee and an equitable
accounting of all commissions, earnings, profits and other benefits arising from such violation,
which rights shall be cumulative and in addition to any other rights or remedies to which the
Company may be entitled.

          (f) Employee agrees that if any or any portion of the foregoing covenants, or the application
thereof, is construed to be invalid or unenforceable, the remainder of such covenant or covenants
or the application thereof shall not be affected and the remaining covenant or covenants will then
be given full force and effect without regard to the invalid or

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unenforceable portions. If any covenant is held to be unenforceable because of the area
covered, the duration thereof, or the scope thereof, Employee agrees that the Court making such
determination shall have the power to reduce the area and/or the duration, and/or limit the scope
thereof, and the covenant shall then be enforceable in its reduced form. If Employee violates any
of the restrictions contained in subparagraph (a), the period of such violation (from the
commencement of any such violation until such time as such violation shall be cured by Employee to
the satisfaction of the Company) shall not count toward or be included in the one year (or such
longer period as may be prescribed by such section) restrictive period contained in subparagraph (a).

          (g) For purposes of paragraphs 12 and 13 of this Agreement, the term “Company” shall include
not only The Bon-Ton Stores, Inc., but also any of its successors, assigns, subsidiaries or
affiliates. Employee consents to the assignment of this Agreement to any purchaser of the Company
or a substantial portion of its assets.

     14. Other Tax Matters.

          (a) Employee agrees that he is responsible for paying any and all federal, state and local
income taxes assessed with respect to any money, benefits or other consideration received from the
Company and that the Company is entitled to withhold any tax payments from amounts otherwise due
Employee to the extent required by applicable statutes, rulings or regulations.

          (b) Compliance With Code Section 409A.

               (i) Notwithstanding anything to the contrary herein, no payment otherwise required to be made
hereunder that the Company determines constitutes a payment of nonqualified deferred compensation
for purposes of Section 409A of the Code shall be paid to

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Employee at a time or in a manner that will be treated as a violation of the distribution
rules of Code Section 409A(a)(2) and no alternative form of payment of such amount(s) shall be
permitted to be made hereunder if such alternative benefit form would violate any of the
requirements of Code Section 409A(a)(3) or (4) relating to acceleration of benefits and changes in
time and form of distribution (taking into account any regulations or other guidance issued by
Treasury or the Internal Revenue Service with regard to these Code provisions as may be in effect
from time to time).

               (ii) The intent of this provision is to ensure that no additional tax liabilities are imposed
on any payments or benefits provided hereunder pursuant to Code Section 409A, and may require, for
example, a delay in commencement of payments until six months after Employee’s termination of
employment with the Company. In the event any payment is delayed by reason of this paragraph 14,
such payment shall, when made, be increased by an amount representing “interest” from the date
payment would otherwise have been made, through the date payment is actually made, calculated using
the Company’s cost of borrowing as the interest rate, as determined by the Company at its
discretion.

     15. Prior Agreements.

          (a) Employee represents that there are no restrictions, agreements or understandings
whatsoever to which Employee is a party that could impact upon his employment under this Agreement
or would prevent or make unlawful his execution of this Agreement or his employment hereunder.

          (b) Employee agrees that he will not use or disclose any confidential or proprietary
information of any of his prior employers during the course of his employment under this Agreement.

- 19 -

 

     16. Entire Understanding. This Agreement contains the entire understanding between
the Company and Employee with respect to the subject matter hereof and supersedes all prior and
contemporary agreements and understandings, inducements or conditions, express or implied, written
or oral, between the Company and Employee except as herein contained. The express terms hereof
control and supersede any course of performance and/or usage of the trade inconsistent with any of
the terms hereof.

     17. Modifications. This Agreement may not be modified orally but only by written
agreement signed by Employee and the Company’s Chief Executive Officer or such other person as the
Board may designate specifically for this purpose.

     18. Provisions Separable. The provisions of this Agreement are independent of and
separable from each other, and no provision shall be affected or rendered invalid or unenforceable
by virtue of the fact that for any reason any other or others of them may be invalid or
unenforceable in whole or in part.

     19. Consolidation, Merger or Sale of Assets. Nothing in this Agreement shall preclude
the Company from consolidating or merging into or with, or transferring all or substantially all of
its assets to, another entity that assumes this Agreement and all obligations and undertakings of
the Company hereunder. Under such a consolidation, merger or transfer of assets and assumption,
the term “the Company” as used herein, shall mean such other entity and this Agreement shall
continue in full force and effect.

     20. Notices. All notices, requests, demands and other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have been duly given,
made and received when delivered (personally, by courier service such as Federal Express, or by

- 20 -

 

messenger) or when deposited in the United States mails, registered or certified mail, postage
pre-paid, return receipt requested, addressed as set forth below:

	 	(a)	 	If to the Company:
	 
	 	 	 	The Bon-Ton Stores, Inc.

2801 East Market Street

York, PA 17402

Attention: Chief Executive Officer
	 
	 	 	 	with a copy to:
	 
	 	 	 	Henry F. Miller, Esquire

Wolf, Block, Schorr and Solis-Cohen LLP

1650 Arch Street

22nd Floor

Philadelphia, PA 19103-2097
	 
	 	(b)	 	If to Employee:
	 
	 	 	 	Anthony Buccina

1963 W. Hidden Reserve Court

Mequon, WI 53092

     In addition, notice by mail shall be by air mail if posted outside of the continental United
States. Any party may alter the address to which communications or copies are to be sent by giving
notice of such change of address in conformity with the provisions of this paragraph for the giving
of notice.

     21. No Attachment. Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance,
charge, pledge, or hypothecation or to execution, attachment, levy or similar process or assignment
by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be
null, void and of no effect.

- 21 -

 

     22. Binding Agreement. This Agreement shall be binding upon, and shall inure to the
benefit of the Company and its successors, representatives, and assigns and shall be binding upon
Employee, his heirs, executors and legal representatives.

     23. No Assignment by Employee. Employee acknowledges that the services to be rendered
by him are unique and personal. Accordingly, Employee may not assign or delegate any of his rights
or obligations hereunder, except that he may assign certain rights hereunder if agreed to in
writing by the Chief Executive Officer.

     24. Indulgences. Neither the failure nor any delay on the part of either party to
exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude
any other or further exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed by the party
asserted to have granted such waiver.

     25. Paragraph Headings. The paragraph headings in this Agreement are for convenience
only; they form no part of this Agreement and shall not affect its interpretation.

     26. Controlling Law. This Agreement and all questions relating to its validity,
interpretation, performance and enforcement (including, without limitation, provisions concerning
limitations of actions), shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania, notwithstanding any conflict-of-laws doctrines of such state or any
other jurisdiction to the contrary, and without the aid of any canon, custom or rule of law
requiring construction against the draftsman.

- 22 -

 

     27. Chief Employee Officer. In the absence of the Chief Executive Officer, the
decisions of the Chief Executive Officer may be made by such other person as designated by the
Company’s Board.

     28. Execution in Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original against any party whose signature
appears thereon, and all of which shall together constitute one and the same instrument. This
Agreement shall become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties hereto.

     IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have duly
executed and delivered, in Pennsylvania, this Agreement as of the date first above written.

	 	 	 
	THE BON-TON STORES, INC.
	 	 
	 
	 	 
	By:

	 	Date: June 1, 2006
	 
	 	 
	     /s/ BYRON BERGREN
	 	 
	 	 	 
	           Byron Bergren
	 	 
	           Chief Executive Officer
	 	 
	 
	 	 
	EMPLOYEE
	 	 
	 
	 	 
	     /s/ ANTHONY BUCCINA

	 	Date: June 1, 2006
	 	 	 
	           Anthony Buccina
	 	 

- 23 -Module and Segment Reference

     

    Exhibit
      4.1

     

    

     

    THIS
      WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
      HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
      STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE
      OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
      IN
      THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR SUCH
      SHARES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION
      OF
      COUNSEL REASONABLY SATISFACTORY TO MAGNETECH, INC. THAT SUCH REGISTRATION IS
      NOT
      REQUIRED.

     

    Right
      to
      Purchase up to 375,000 Shares of Common Stock of

     

    MISCOR
      Group, Ltd.

     

    (subject
      to adjustment as provided herein)

     

    COMMON
      STOCK PURCHASE WARRANT

    
      	
               

              No.
                LMF-2

            	
               

              Issue
                Date: May 31, 2006

            

    

     

    MISCOR
      Group, Ltd., a corporation organized under the laws of the State of Indiana,
      hereby certifies that, for value received, LAURUS MASTER FUND, LTD., or assigns
      (the “Holder”), is entitled, subject to the terms set forth below, to purchase
      from the Company (as defined herein) from and after the Issue Date of this
      Warrant and at any time or from time to time before 5:00 p.m., New York time,
      through the close of business May 31, 20013 (the “Expiration Date”), up to
      375,000 fully paid and nonassessable shares of Common Stock (as hereinafter
      defined), at the applicable Exercise Price per share (as defined below). The
      number and character of such shares of Common Stock and the applicable Exercise
      Price per share are subject to adjustment as provided herein.

     

    As
      used
      herein the following terms, unless the context otherwise requires, have the
      following respective meanings: 

     

    (a)  The
      term
“Company” shall include MISCOR Group, Ltd., an Indiana corporation, and any
      person or entity which shall succeed, or assume the obligations of, MISCOR
      Group, Ltd. hereunder. 

     

    (b)  The
      term
“Common Stock” includes (i) the Company’s Common Stock, no par value; and (ii)
      any other securities into which or for which any of the securities described
      in
      the preceding clause (i) may be converted or exchanged pursuant to a plan of
      recapitalization, reorganization, merger, sale of assets or
      otherwise.

     

    (c)  The
      term
“Other Securities” refers to any stock (other than Common Stock) and other
      securities of the Company or any other person (corporate or otherwise) which
      the
      holder of the Warrant at any time shall be entitled to receive, or shall have
      received, on the exercise of the Warrant, in lieu of or in addition to Common
      Stock, or 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    which
      at
      any time shall be issuable or shall have been issued in exchange for or in
      replacement of Common Stock or Other Securities pursuant to Section 4 or
      otherwise. 

     

    (d)  The
      “Exercise Price” applicable under this Warrant shall be $0.34 per share of
      Common Stock (subject to adjustment as provided herein) for all shares acquired
      hereunder.

     

    1.  Exercise
      of Warrant.
      

     

    1.1  Number
      of Shares Issuable upon Exercise.
      Subject
      to the terms and conditions of this Warrant, from and after the date hereof
      through and including the Expiration Date, the Holder shall be entitled to
      receive, upon exercise of this Warrant in whole or in part, by delivery in
      the
      manner provided herein of an original or fax copy of an exercise notice in
      the
      form attached hereto as Exhibit
      A
      (the
“Exercise Notice”), shares of Common Stock of the Company, subject to adjustment
      pursuant to Section 4.

     

    1.2  Fair
      Market Value.
      For
      purposes hereof, the “Fair Market Value” of a share of Common Stock as of a
      particular date (the “Determination Date”) shall mean: 

     

    (a)  If
      the
      Company’s Common Stock is traded on the American Stock Exchange or another
      national exchange or is quoted on the National or SmallCap Market of The Nasdaq
      Stock Market, Inc. (“Nasdaq”), then the average of the closing or last sale
      price, respectively, reported for the five (5) trading days immediately
      preceding the Determination Date.

     

    (b)  If
      the
      Company’s Common Stock is not traded on the American Stock Exchange or another
      national exchange or on the Nasdaq but is traded on the NASD Over The Counter
      Bulletin Board, then the mean of the average of the closing bid and asked prices
      reported for the five (5) trading days immediately preceding the Determination
      Date.

     

    (c)  Except
      as
      provided in clause (d) below, if the Company’s Common Stock is not publicly
      traded, then as the Holder and the Company agree or in the absence of agreement
      by arbitration in accordance with the rules then in effect of the American
      Arbitration Association, before a single arbitrator to be chosen from a panel
      of
      persons qualified by education and training to pass on the matter to be
      decided.

     

    (d)  If
      the
      Determination Date is the date of a liquidation, dissolution or winding up,
      or
      any event deemed to be a liquidation, dissolution or winding up pursuant to
      the
      Company’s charter, then all amounts to be payable per share to holders of the
      Common Stock pursuant to the charter in the event of such liquidation,
      dissolution or winding up, plus all other amounts to be payable per share in
      respect of the Common Stock in liquidation under the charter, assuming for
      the
      purposes of this clause (d) that all of the shares of Common Stock then issuable
      upon exercise of the Warrant are outstanding at the Determination
      Date.

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    

     

    1.3  Company
      Acknowledgment.
      The
      Company will, at the time of the exercise of this Warrant, upon the request
      of
      the Holder hereof acknowledge in writing its continuing obligation to afford
      to
      such holder any rights to which such holder shall continue to be entitled after
      such exercise in accordance with the provisions of this Warrant. If the holder
      shall fail to make any such request, such failure shall not affect the
      continuing obligation of the Company to afford to such holder any such rights.
      

     

    1.4  Trustee
      for Warrant Holders.
      In the
      event that a bank or trust company shall have been appointed as trustee for
      the
      holders of this Warrant pursuant to Subsection 3.2, such bank or trust company
      shall have all the powers and duties of a warrant agent (as hereinafter
      described) and shall accept, in its own name for the account of the Company
      or
      such successor person as may be entitled thereto, all amounts otherwise payable
      to the Company or such successor, as the case may be, on exercise of this
      Warrant pursuant to this Section 1.

     

    2.  Procedure
      for Exercise.

     

    2.1  Delivery
      of Stock Certificates, Etc., on Exercise.
      The
      Company agrees that the shares of Common Stock purchased upon exercise of this
      Warrant shall be deemed to be issued to the Holder as the record owner of such
      shares as of the close of business on the date on which this Warrant shall
      have
      been surrendered and payment made for such shares in accordance herewith. As
      soon as practicable after the exercise of this Warrant in full or in part,
      and
      in any event within three (3) business days thereafter, the Company at its
      expense (including the payment by it of any applicable issue taxes) will cause
      to be issued in the name of and delivered to the Holder, or to another person
      designated by the Holder in writing (provided that the Holder has paid any
      applicable transfer taxes and that the Company has received such documentation
      and information that the Company deems reasonably necessary to ensure compliance
      with applicable securities laws), a certificate or certificates for the number
      of duly and validly issued, fully paid and nonassessable shares of Common Stock
      (or Other Securities) to which such Holder shall be entitled on such exercise,
      plus, in lieu of any fractional share to which such holder would otherwise
      be
      entitled, cash equal to such fraction multiplied by the then Fair Market Value
      of one full share, together with any other stock or other securities and
      property (including cash, where applicable) to which such Holder is entitled
      upon such exercise pursuant to Section 1.

     

    2.2  Exercise.
      

     

    (a)  To
      exercise this Warrant, the Holder must properly complete, execute and deliver
      to
      the Company the Exercise Notice. Any exercise may not be revoked unless (i)
      an
      Event of Default (as defined in the Security and Purchase Agreement dated as
      of
      the date hereof between Magnetech Industrial Services of Alabama, LLC and the
      Holder (as amended, modified, restated and/or supplemented from time to time,
      the “Security Agreement”)) has occurred and is continuing or (ii) the Company
      has consented to such a revocation. Payment may be made either (i) in cash
      or by
      certified or official bank check payable to the order of the Company equal
      to
      the applicable aggregate Exercise Price, (ii) by delivery of this Warrant,
      or
      shares of Common Stock and/or Common Stock receivable upon exercise of this
      Warrant in accordance with the formula set forth in subsection (b) below, or
      (iii) by a combination of any of the foregoing methods, for the

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    number
      of
      Common Shares specified in such Exercise Notice (as such exercise number shall
      be adjusted to reflect any adjustment in the total number of shares of Common
      Stock issuable to the Holder per the terms of this Warrant). Within three (3)
      business days after receipt of the applicable Exercise Price and, in the event
      of a complete exercise of this Warrant by the Holder, surrender of this Warrant
      to the principal office of the Company, the Holder shall thereupon be entitled
      to receive the number of duly authorized, validly issued, fully-paid and
      non-assessable shares of Common Stock (or Other Securities) determined as
      provided herein. 

     

    (b)  Notwithstanding
      any provisions herein to the contrary, if the Fair Market Value of one share
      of
      Common Stock is greater than the Exercise Price (at the date of calculation
      as
      set forth below), in lieu of exercising this Warrant for cash, the Holder may
      elect to receive shares equal to the value (as determined below) of this Warrant
      (or the portion thereof being exercised) by surrender of this Warrant at the
      principal office of the Company together with the properly endorsed Exercise
      Notice in which event the Company shall issue to the Holder within three (3)
      business days a number of shares of Common Stock computed using the following
      formula:

     

    X= Y(A-B)

              
      A

     

    Where
      X
      = the
      number of shares of Common Stock to be issued to the Holder

     

    Y
      = the
      number of shares of Common Stock purchasable under this Warrant or, if only
      a
      portion of this Warrant is being exercised, the portion of this Warrant being
      exercised (at the date of such calculation)

     

    A
      = the
      Fair
      Market Value of one share of the Company’s Common Stock (at the date of such
      calculation)

     

    B
      = the
      Exercise Price per share (as adjusted to the date of such
      calculation)

     

    3.  Effect
      of Reorganization, Etc.; Adjustment of Exercise Price.

     

    3.1  Reorganization,
      Consolidation, Merger, Etc.
      In case
      at any time or from time to time, the Company shall (a) effect a reorganization,
      (b) consolidate with or merge into any other person, or (c) transfer all or
      substantially all of its properties or assets to any other person under any
      plan
      or arrangement contemplating the dissolution of the Company, then, in each
      such
      case, as a condition to the consummation of such a transaction, proper and
      adequate provision shall be made by the Company whereby the Holder, on the
      exercise hereof as provided in Section 1 at any time after the consummation
      of
      such reorganization, consolidation or merger or the effective date of such
      dissolution, as the case may be, shall receive, in lieu of the Common Stock
      (or
      Other Securities) issuable on such exercise prior to such consummation or such
      effective date, the stock and other securities and property (including cash)
      to
      which such Holder would have been entitled upon such consummation or in
      connection with such dissolution, as the case may be, if such Holder had so
      exercised this Warrant, immediately prior thereto, all subject to further
      adjustment thereafter as provided in Section 4.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    3.2  Dissolution.
      In the
      event of any dissolution of the Company following the transfer of all or
      substantially all of its properties or assets, the Company, concurrently with
      any distributions made to holders of its Common Stock, shall at its expense
      deliver or cause to be delivered to the Holder the stock and other securities
      and property (including cash, where applicable) receivable by the Holder
      pursuant to Section 3.1, or, if the Holder shall so instruct the Company, to
      a
      bank or trust company specified by the Holder and having its principal office
      in
      New York, NY as trustee for the Holder.

     

    3.3  Continuation
      of Terms.
      Upon
      any reorganization, consolidation, merger or transfer (and any dissolution
      following any transfer) referred to in this Section 3, this Warrant shall
      continue in full force and effect and the terms hereof shall be applicable
      to
      the shares of stock and other securities and property receivable on the exercise
      of this Warrant after the consummation of such reorganization, consolidation
      or
      merger or the effective date of dissolution following any such transfer, as
      the
      case may be, and shall be binding upon the issuer of any such stock or other
      securities, including, in the case of any such transfer, the person acquiring
      all or substantially all of the properties or assets of the Company, whether
      or
      not such person shall have expressly assumed the terms of this Warrant as
      provided in Section 4. In the event this Warrant does not continue in full
      force
      and effect after the consummation of the transactions described in this Section
      3, then the Company’s securities and property (including cash, where applicable)
      receivable by the Holder will be delivered to the Holder or the Trustee as
      contemplated by Section 3.2.

     

    4.  Extraordinary
      Events Regarding Common Stock.
      In the
      event that the Company shall (a) issue additional shares of the Common Stock
      as
      a dividend or other distribution on outstanding Common Stock or any preferred
      stock issued by the Company, (b) subdivide its outstanding shares of Common
      Stock, (c) combine its outstanding shares of the Common Stock into a smaller
      number of shares of the Common Stock, then, in each such event, the Exercise
      Price shall, simultaneously with the happening of such event, be adjusted by
      multiplying the then Exercise Price by a fraction, the numerator of which shall
      be the number of shares of Common Stock outstanding immediately prior to such
      event and the denominator of which shall be the number of shares of Common
      Stock
      outstanding immediately after such event, and the product so obtained shall
      thereafter be the Exercise Price then in effect. The Exercise Price, as so
      adjusted, shall be readjusted in the same manner upon the happening of any
      successive event or events described herein in this Section 4. The number of
      shares of Common Stock that the holder shall thereafter, on the exercise hereof
      as provided in Section 1, be entitled to receive shall be adjusted to a number
      determined by multiplying the number of shares of Common Stock that would
      otherwise (but for the provisions of this Section 4) be issuable on such
      exercise by a fraction of which (a) the numerator is the Exercise Price that
      would otherwise (but for the provisions of this Section 4) be in effect, and
      (b)
      the denominator is the Exercise Price in effect on the date of such exercise
      (taking into account the provisions of this Section 4).

     

    5.  Certificate
      as to Adjustments.
      In each
      case of any adjustment or readjustment in the shares of Common Stock (or Other
      Securities) issuable on the exercise of this Warrant, the Company at its expense
      will promptly cause its Chief Financial Officer or other appropriate designee
      to
      compute such adjustment or readjustment in accordance with the terms of this
      Warrant and prepare a certificate setting forth such adjustment or readjustment
      and showing in 

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    detail
      the facts upon which such adjustment or readjustment is based, including a
      statement of (a) the consideration received or receivable by the Company for
      any
      additional shares of Common Stock (or Other Securities) issued or sold or deemed
      to have been issued or sold, (b) the number of shares of Common Stock (or Other
      Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price
      and the number of shares of Common Stock to be received upon exercise of this
      Warrant, in effect immediately prior to such adjustment or readjustment and
      as
      adjusted or readjusted as provided in this Warrant. The Company will promptly
      deliver a copy of each such certificate to the holder and any Warrant agent
      of
      the Company (appointed pursuant to Section 11 hereof).

     

    6.  Reservation
      of Stock, Etc., Issuable on Exercise of Warrant.
      The
      Company will at all times reserve and keep available, solely for issuance and
      delivery on the exercise of this Warrant, shares of Common Stock (or Other
      Securities) from time to time issuable on the exercise of this
      Warrant.

     

    7.  Assignment;
      Exchange of Warrant.
      Subject
      to compliance with applicable securities laws, this Warrant, and the rights
      evidenced hereby, may be transferred by any registered holder hereof (a
“Transferor”) in whole or in part. On the surrender for exchange of this
      Warrant, with the Transferor’s endorsement in the form of Exhibit B attached
      hereto (the “Transferor Endorsement Form”) and together with evidence reasonably
      satisfactory to the Company demonstrating compliance with applicable securities
      laws, which shall include, without limitation, a legal opinion from the
      Company’s counsel (at the Transferor’s expense) that such transfer is exempt
      from the registration requirements of applicable securities laws, the Company
      at
      its expense (but with payment by the Transferor of any applicable transfer
      taxes) will issue and deliver to or on the order of the Transferor thereof
      a new
      Warrant of like tenor, in the name of the Transferor and/or the transferee(s)
      specified in such Transferor Endorsement Form (each a “Transferee”), calling in
      the aggregate on the face or faces thereof for the number of shares of Common
      Stock called for on the face or faces of the Warrant so surrendered by the
      Transferor.

     

    8.  Replacement
      of Warrant.
      On
      receipt of evidence reasonably satisfactory to the Company of the loss, theft,
      destruction or mutilation of this Warrant and, in the case of any such loss,
      theft or destruction of this Warrant, on delivery of an indemnity agreement
      or
      security reasonably satisfactory in form and amount to the Company or, in the
      case of any such mutilation, on surrender and cancellation of this Warrant,
      the
      Company at its expense will execute and deliver, in lieu thereof, a new Warrant
      of like tenor.

     

    9.  Registration
      Rights.
      The
      Holder has been granted certain registration rights by the Company. These
      registration rights are set forth in a Registration Rights Agreement entered
      into by the Company and Holder dated as of the date hereof, as the same may
      be
      amended, modified and/or supplemented from time to time.

     

    10.  Maximum
      Exercise.
      Notwithstanding anything contained herein to the contrary, the Holder shall
      not
      be entitled to exercise this Warrant in connection with that number of shares
      of
      Common Stock which would exceed the difference between (i) 9.99% of the issued
      and outstanding shares of Common Stock and (ii) the number of shares of Common
      Stock beneficially owned by the Holder. For purposes of the immediately
      preceding sentence, 

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    beneficial
      ownership shall be determined in accordance with Section 13(d) of the Securities
      Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. The
      limitation described in the first sentence of this Section 10 shall
      automatically become null and void following notice to the Company upon the
      occurrence and during the continuance of an Event of Default (as defined in
      the
      Security Agreement), or upon 75 days prior notice to the Company.

     

    11.  Warrant
      Agent.
      The
      Company may, by written notice to the each Holder of the Warrant, appoint an
      agent for the purpose of issuing Common Stock (or Other Securities) on the
      exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant
      to Section 7, and replacing this Warrant pursuant to Section 8, or any of the
      foregoing, and thereafter any such issuance, exchange or replacement, as the
      case may be, shall be made at such office by such agent.

     

    12.  Transfer
      on the Company’s Books.
      Until
      this Warrant is transferred on the books and records of the Company (or a
      transfer agent appointed by the Company), the Company may treat the registered
      holder hereof as the absolute owner hereof for all purposes, notwithstanding
      any
      notice to the contrary.

     

    13.  Notices,
      Etc.
      Any
      notice herein required or permitted to be given shall be in writing and shall
      be
      deemed effectively given: (a) upon personal delivery to the party notified,
      (b)
      when sent by confirmed telex or facsimile if sent during normal business hours
      of the recipient, if not, then on the next business day, (c) five days after
      having been sent by registered or certified mail, return receipt requested,
      postage prepaid, or (d) one business day after deposit with a nationally
      recognized overnight courier, specifying next day delivery, with written
      verification of receipt. All communications shall be sent to the respective
      Company at the addresses provided for such Company in the Security Agreement
      executed in connection herewith, and to the Holder at the address provided
      in
      the Security Agreement for such Holder, with a copy to John E. Tucker, Esq.,
      825
      Third Avenue, 14th
      Floor,
      New York, New York 10022, facsimile number (212) 541-4434, or at such other
      address as the respective Company or the Holder may designate by ten days
      advance written notice to the other party provided as set forth in this Section
      13. 

     

    14.  Grant
      of Irrevocable Proxy.

     

    For
      good
      and valuable consideration, receipt of which is hereby acknowledged, Laurus
      Master Fund, Ltd., hereby appoints the Company (the “Proxy Holder”), with a
      mailing address at 1125 South Walnut Street, South Bend, Indiana 46619, with
      full power of substitution, as proxy, to vote all shares of Common Stock of
      the
      Company, now or in the future owned by Laurus Master Fund, Ltd., but solely
      to
      the extent issuable upon exercise of this Warrant (the “Shares”).

     

    This
      proxy is irrevocable and coupled with an interest. Upon the sale or other
      transfer of the Shares, in whole or in part, or the assignment of this Warrant,
      this proxy shall automatically terminate (x) with respect to such sold or
      transferred Shares at the time of such sale and/or transfer, and (y) with
      respect to all Shares in the case of an assignment of this Warrant, at the
      time
      of such assignment, in each case, without any further action required by any
      person.

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    Laurus
      Master Fund, Ltd. shall use its best efforts to forward to Proxy Holder within
      two (2) business days following Laurus Master Fund, Ltd.’s receipt thereof, at
      the address for Proxy Holder set forth above, copies of all materials received
      by Laurus Master Fund, Ltd. relating, in each case, to the solicitation of
      the
      vote of shareholders of the Company.

    

    This
      proxy shall remain in effect with respect to the Shares of the Company during
      the period commencing on the date hereof and continuing until the payment in
      full of all obligations and liabilities owing by the Company to Laurus Master
      Fund, Ltd. (as the same may be amended, restated, extended or modified from
      time
      to time).

     

    15.  Miscellaneous.
      This
      Warrant and any term hereof may be changed, waived, discharged or terminated
      only by an instrument in writing signed by the party against which enforcement
      of such change, waiver, discharge or termination is sought. THIS WARRANT SHALL
      BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
      YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT
      CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE BROUGHT ONLY
      IN STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF
      NEW
      YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS PROVISION
      AND
      BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The individuals executing this
      Warrant on behalf of the Company agree to submit to the jurisdiction of such
      courts and waive trial by jury. The prevailing party shall be entitled to
      recover from the other party its reasonable attorneys’ fees and costs. In the
      event that any provision of this Warrant is invalid or unenforceable under
      any
      applicable statute or rule of law, then such provision shall be deemed
      inoperative to the extent that it may conflict therewith and shall be deemed
      modified to conform with such statute or rule of law. Any such provision which
      may prove invalid or unenforceable under any law shall not affect the validity
      or enforceability of any other provision of this Warrant. The headings in this
      Warrant are for purposes of reference only, and shall not limit or otherwise
      affect any of the terms hereof. The Company acknowledges that legal counsel
      participated in the preparation of this Warrant and, therefore, stipulates
      that
      the rule of construction that ambiguities are to be resolved against the
      drafting party shall not be applied in the interpretation of this Warrant to
      favor any party against the other party.

     

    [BALANCE
      OF PAGE INTENTIONALLY LEFT BLANK;

     

    SIGNATURE
      PAGE FOLLOWS]

     

    

     

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the Company has executed this Warrant as of the date first
      written above. 

    
      	 	 	 	
               

              MISCOR
                GROUP, LTD. CORP.

            
	 WITNESS:	 	 	 
	 	 	 	 	 
	By:	/s/
              James M. Lewis	 	
              By:

            	/s/
              John A. Martell
	Name:	James
              M. Lewis	 	
              Name:

            	John
              A. Martell
	Title:	Secretary	 	
              Title:

            	President

    

     

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

     

    FORM
      OF SUBSCRIPTION

    (To
      Be
      Signed Only On Exercise Of Warrant)

    

    
      	
              TO:

            	
              MISCOR
                Group, Ltd..

            
	 	
              1125
                S. Walnut Street

            
	 	
              South
                Bend, Indiana 46619

            
	 	
               

              Attention:
                Chief Financial Officer

            

    

     

    The
      undersigned, pursuant to the provisions set forth in the attached Warrant (No.
      LMF-2), hereby irrevocably elects to purchase (check applicable
      box):

    
      	
               

              ________

            	 	
               

              ________
                shares of the Common Stock covered by such Warrant; or 

            
	
               

              ________

            	 	
               

              the
                maximum number of shares of Common Stock covered by such Warrant
                pursuant
                to the cashless exercise procedure set forth in Section
                2.

            

    

     

    The
      undersigned herewith makes payment of the full Exercise Price for such shares
      at
      the price per share provided for in such Warrant, which is $___________. Such
      payment takes the form of (check applicable box or boxes):

    
      	
               

              ________

            	 	
               

              $__________
                in lawful money of the United States; and/or

            
	
               

              ________

            	 	
               

              the
                cancellation of such number of shares of Common Stock as is necessary,
                in
                accordance with the formula set forth in Section 2.2, to exercise
                this
                Warrant with respect to the maximum number of shares of Common Stock
                purchasable pursuant to the cashless exercise procedure set forth
                in
                Section 2.

            

    

     

    The
      undersigned requests that the certificates for such shares be issued in the
      name
      of, and delivered to ______________________________________________ whose
      address is
      ___________________________________________________________________________.

     

    The
      undersigned represents and warrants that all offers and sales by the undersigned
      of the securities issuable upon exercise of the within Warrant shall be made
      pursuant to registration of such securities under the Securities Act of 1933,
      as
      amended (the “Securities Act”) or pursuant to an exemption from registration
      under the Securities Act. The undersigned agrees that it shall not offer or
      sell
      any such securities in a transaction purported to be exempt from registration
      under the Securities Act unless such transaction is consummated in accordance
      with the requirements of the Securities Act.

    
      	
               

              Dated:

            	 	 	 
	 	 	 	
              (Signature
                must conform to name of holder as specified on the face of the
                Warrant)

            
	 	 	 	
              Address:

            	 
	 	 	 	 	 

    

     

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      B

     

    FORM
      OF TRANSFEROR ENDORSEMENT

    (To
      Be
      Signed Only On Transfer Of Warrant)

     

    For
      value
      received, the undersigned hereby sells, assigns, and transfers unto the
      person(s) named below under the heading “Transferees” the right represented by
      the within Warrant to purchase the percentage and number of shares of Common
      Stock of MISCOR Group, Ltd. into which the within Warrant relates specified
      under the headings “Percentage Transferred” and “Number Transferred,”
respectively, opposite the name(s) of such person(s) and appoints each such
      person Attorney to transfer its respective right on the books of MISCOR Group,
      Ltd. with full power of substitution in the premises.

    
      	
               

              Transferees

            	
               

              Address

            	
               

              Percentage
                Transferred

            	
               

              Number
                

               

              Transferred

            
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	
               

              Dated:
                _____________________

            	 	 	 
	 	 	 	
              (Signature
                must conform to name of holder as specified on the face of the
                Warrant)

            
	 	 	 	
              Address:

            	 
	 	 	 	 	 
	 	 	 	
               

              SIGNED
                IN THE PRESENCE OF:

            
	 	 	 	 
	 	 	 	
              (Name)

            
	 	 	 	 
	 	 	 	 
	
               

              ACCEPTED
                AND AGREED:

               

              [TRANSFEREE]

            	 	 
	 	 	 
	
              (Name)

            	 	 

    

     

     

     

    11

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