Exhibit 10.1
 

 
EXECUTION COPY
 

 

 
 
 

 
SECURITIES PURCHASE AGREEMENT
 
BY AND AMONG
 
TONTINE CAPITAL PARTNERS, L.P.,
 
TONTINE CAPITAL OVERSEAS MASTER FUND, L.P.
 
AND
 
MISCOR GROUP, LTD.
 

 

 

 
JANUARY 18, 2007
 

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TABLE OF CONTENTS
 

   
Page
     
ARTICLE 1
Definitions
1
     
ARTICLE 2
Purchase and Sale of Shares
3
 
2.1
Purchase of Shares
3
 
2.2
Purchase Price and Form of Payment; Delivery
3
 
2.3
Closing Date
3
     
ARTICLE 3
Buyers’ Representations and Warranties
3
 
3.1
Organization and Qualification
3
 
3.2
Authorization; Enforcement
3
 
3.3
Securities Matters
4
 
3.4
Information
4
 
3.5
Restrictions on Transfer
5
     
ARTICLE 4
Representations and Warranties of the Company
5
 
4.1
Organization and Qualification
5
 
4.2
Authorization; Enforcement
5
 
4.3
Capitalization; Valid Issuance of Shares
6
 
4.4
No Conflicts
6
 
4.5
SEC Documents; Financial Statements.
7
 
4.6
Absence of Certain Changes
8
 
4.7
Absence of Litigation
8
 
4.8
Patents, Copyrights
8
 
4.9
Tax Status
8
 
4.10
Permits; Compliance.
9
 
4.11
Environmental Matters
9
 
4.12
Title to Property
10
 
4.13
No Investment Company or Real Property Holding Company
10
 
4.14
No Brokers
10
 
4.15
Registration Rights
10
 
4.16
Exchange Act Registration
11
 
4.17
Labor Relations
11
 
4.18
Transactions with Affiliates and Employees
11
 
4.19
Insurance
11
 
4.20
Approved Acquisitions of Shares; No Anti-Takeover Provisions
11
 
4.21
ERISA
11
 
4.22
Company Shareholders of Record
12
 
4.23
Disclosure
12
     
ARTICLE 5
Covenants
12
 
5.1
Form D; Blue Sky Laws
12
 
5.2
Use of Proceeds
12
 
5.3
Expenses
12
 
5.4
Intentionally Omitted.
12
 
5.5
No Integration
13

 

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5.6
Board Designee(s)
13
 
5.7
Observation Rights
13
 
5.8
Participation in Future Issuances
13
 
5.9
Future Acquisitions
14
     
ARTICLE 6
Conditions To The Company’s Obligation
14
 
6.1
Delivery of Transaction Documents
14
 
6.2
Payment of Purchase Price
14
 
6.3
Representations and Warranties
14
 
6.4
Litigation
15
     
ARTICLE 7
Conditions to The Buyers’ Obligation
15
 
7.1
Delivery of Transaction Documents; Issuance of Shares
15
 
7.2
Representations and Warranties
15
 
7.3
Consents
15
 
7.4
Litigation
15
 
7.5
Opinion
15
 
7.6
No Material Adverse Change
15
 
7.7
Board Approval
16
 
7.8
Irrevocable Proxy
16
     
ARTICLE 8
Indemnification
16
 
8.1
Indemnification by the Company
16
 
8.2
Notification
16
     
ARTICLE 9
Governing Law; Miscellaneous
17
 
9.1
Governing Law
17
 
9.2
Counterparts; Electronic Signatures
17
 
9.3
Headings
17
 
9.4
Severability
17
 
9.5
Entire Agreement; Amendments
17
 
9.6
Notices
17
 
9.7
Successors and Assigns
18
 
9.8
Third Party Beneficiaries
19
 
9.9
Publicity
19
 
9.10
Further Assurances
19
 
9.11
No Strict Construction
19
 
9.12
Rights Cumulative
19
 
9.13
Survival
19
 
9.14
Knowledge
20

 

 

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Securities Purchase Agreement
 
This SECURITIES PURCHASE AGREEMENT, dated as of January 18, 2007, is entered
into by and among MISCOR GROUP, LTD., an Indiana corporation (the “Company”),
and the investors identified on the signature page hereto (each a “Buyer” and
collectively, the “Buyers”).
 
RECITALS:
 
A. The Company and the Buyers are executing and delivering this Agreement in
reliance upon the exemptions from securities registration afforded by Section
4(2) of the 1933 Act and Rule 506;
 
B. The Buyers desire to purchase and the Company desires to issue and sell, upon
the terms and conditions set forth in this Agreement, 62,500,000 shares of
common stock, no par value per share of the Company; and
 
C. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as Exhibit A, pursuant to which the Company has agreed
under certain circumstances to register the resale of the Shares under the 1933
Act and the rules and regulations promulgated thereunder, and applicable state
securities laws.
 
AGREEMENT
 
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
 
 
ARTICLE 1
DEFINITIONS
 
“1933 Act” means the Securities Act of 1933, as amended.
 
“1934 Act” means the Securities Exchange Act of 1934, as amended.
 
“2006 SEC Documents” has the meaning set forth in Section 3.4.
 
“Action” means any action, suit claim, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation against
or affecting the Company, any of its Subsidiaries or any of their respective
properties before or by any court, arbitrator, governmental or administrative
agency, regulatory authority (federal, state, county, local or foreign), public
board, stock market, stock exchange or trading facility.
 
“Agreement” means this Securities Purchase Agreement.
 
“Buyer” and “Buyers” have the meaning set forth in the preamble.
 
“Closing” has the meaning set forth in Section 2.3.
 
“Closing Date” has the meaning set forth in Section 2.3.
 
“Common Stock” means the Company’s common stock, no par value per share.
 

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“Company” has the meaning set forth in the preamble.
 
“Environmental Laws” has the meaning set forth in Section 4.11.
 
“ERISA” has the meaning set forth in Section 4.21.
 
“Future Offering” has the meaning set forth in Section 5.8.
 
“Hazardous Materials” has the meaning set forth in Section 4.11.
 
“Intellectual Property” has the meaning set forth in Section 4.8.
 
“Investment Company” has the meaning set forth in Section 4.13.
 
“Laurus” means Laurus Master Fund, Ltd.
 
“Laurus Obligations” has the meaning set forth in Section 5.2.
 
“Legal Requirement” means any federal, state, local, municipal, foreign,
international, multinational or other law, rule, regulation, order, judgment,
decree, ordinance, policy or directive, including those entered, issued, made,
rendered or required by any court, administrative or other governmental body,
agency or authority, or any arbitrator.
 
“Material Adverse Effect” means any material adverse effect on the business,
operations, assets, financial condition or prospects of the Company.
 
“Observation Rights” has the meaning set forth in Section 5.7.
 
“Observer” has the meaning set forth in Section 5.7.
 
“Offering Notice” has the meaning set forth in Section 5.8.
 
“Permits” has the meaning set forth in Section 4.10.
 
“Purchase Price” means a price of $0.20 per share for the Shares to be issued
and sold to the Buyers at the Closing.
 
“Registration Rights Agreement” means the Registration Rights Agreement executed
and delivered contemporaneously with this Agreement pursuant to which the
Company has agreed under certain circumstances to register the resale of the
Shares under the 1933 Act and the rules and regulations promulgated thereunder,
and applicable state securities laws.
 
“Rule 506” means Rule 506 of Regulation D promulgated under the 1933 Act.
 
“SEC” means the United States Securities and Exchange Commission.
 
“SEC Documents” has the meaning set forth in Section 4.5.
 
“Shares” means the 62,500,000 shares of Common Stock being issued and sold under
this Agreement.
 

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“Subsidiaries” means with respect to the Company, Magnetech Industrial Services,
Inc., an Indiana corporation, Martell Electric, LLC, an Indiana limited
liability company, HK Engine Components, LLC, an Indiana limited liability
company, Magnetech Industrial Services of Alabama, LLC, an Indiana limited
liability company, and Magnetech Power Services, LLC, an Indiana limited
liability company.
 
“Transaction Documents” means this Agreement, the Registration Rights Agreement,
and any other documents contemplated by this Agreement.
 
“Transfer Instructions” has the meaning set forth in Section 2.2.
 
 
ARTICLE 2
PURCHASE AND SALE OF SHARES
 
2.1 Purchase of Shares. Subject to the terms and conditions of this Agreement,
on the Closing Date, the Company shall issue and sell the Shares and each Buyer
shall purchase from the Company the number of Shares as is set forth below such
Buyer’s name on the signature page hereto.
 
2.2 Purchase Price and Form of Payment; Delivery. On the Closing Date each Buyer
shall pay $0.20 per share for the Shares to be issued and sold to it at the
Closing, for a total price of $12,500,000. The Purchase Price shall be paid by
wire transfer of immediately available funds in accordance with the Company’s
written instructions. At the Closing, upon payment of the Purchase Price
therefore by the Buyers, the Company will deliver irrevocable written
instructions (“Transfer Instructions”) to the transfer agent for the Company’s
Common Stock to issue certificates representing the Shares registered in the
name of each Buyer and to deliver such certificates to or at the direction of
each Buyer. The Company shall not have the power to revoke or amend the Transfer
Instructions without the written consent of the Buyers.
 
2.3 Closing Date. Subject to the satisfaction (or written waiver) of the
conditions set forth in Article 6 and Article 7 below, the closing of the
transactions contemplated by this Agreement shall be held on January 18, 2007,
or such other time as may be mutually agreed upon by the parties to this
Agreement (the “Closing Date”), at the offices of Barack Ferrazzano Kirschbaum
Perlman & Nagelberg LLP, 333 West Wacker Drive, Suite 2700, Chicago, Illinois
60606 or at such other location or by such other method (including exchange of
signed documents) as may be mutually agreed upon by the parties to this
Agreement (“Closing”).
 
 
ARTICLE 3
BUYERS’ REPRESENTATIONS AND WARRANTIES
 
Each Buyer represents and warrants to the Company that:
 
3.1 Organization and Qualification. Each of the Buyers is an entity of the type
identified on the signature page hereto, duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, with full
power and authority to purchase the Shares and otherwise perform its obligations
under this Agreement and the other Transaction Documents.
 
3.2 Authorization; Enforcement. This Agreement and each of the other Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by, and duly executed and
delivered on behalf of, such Buyer. This Agreement and each of the other
Transaction Documents constitutes the valid and binding agreement of such Buyer
enforceable in accordance with its terms, except as such enforceability may be
limited by: (i) applicable
 

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bankruptcy, insolvency, reorganization, moratorium or other similar laws in
effect that limit creditors’ rights generally; (ii) equitable limitations on the
availability of specific remedies; and (iii) principles of equity.
 
3.3 Securities Matters. In connection with the Company’s compliance with
applicable securities laws:
 
a. Such Buyer understands that the Shares are being offered and sold to it in
reliance upon specific exemptions from the registration requirements of United
States and state securities laws and that the Company is relying upon the truth
and accuracy of, and such Buyer’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such exemption and the
eligibility of such Buyer to acquire the Shares.
 
b. Such Buyer is purchasing the Shares for its own account, not as a nominee or
agent, for investment purposes and not with a present view towards resale,
except pursuant to sales exempted from registration under the 1933 Act, or
registered under the 1933 Act as contemplated by the Registration Rights
Agreement.
 
c. Such Buyer is an “accredited investor” as that term is defined in Rule 501(a)
of Regulation D under the 1933 Act, and has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Shares. Such Buyer understands that its investment
in the Shares involves a significant degree of risk. Such Buyer understands that
no United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the Shares.
 
d. Such Buyer is not acting as an underwriter for the sale of the Shares to the
public or to others. Such Buyer is not a member of the National Association of
Securities Dealers, Inc. (“NASD”) and for a period of 12 months prior to the
date of this Agreement, has not been affiliated or associated with any company,
firm, or other entity that is a member of the NASD.
 
e. Such Buyer is not executing this Agreement and purchasing the Shares as a
result of (i) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, or (ii) any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.
 
3.4 Information. Such Buyer has conducted its own due diligence examination of
the Company’s business, financial condition, results of operations, and
prospects. In connection with such investigation, such Buyer and its
representatives (i) have reviewed the Company’s quarterly reports on Form 10-Q
for the three most recently concluded interim periods, the Company’s
Registration Statements on Form S-1 and Form S-1/A filed on November 1, 2005,
May 4, 2006, October 11, 2006 and November 2, 2006 and the Company’s Current
Reports on Form 8-K or Form 8-K/A filed in 2006 (and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits to such documents) incorporated by reference therein, being hereinafter
referred to herein as the the “2006 SEC Documents”), and (ii) have been given an
opportunity to ask questions, to the extent such Buyer considered necessary, and
have received answers from, officers of the Company concerning the business,
finances and operations of the Company and information relating to the offer and
sale of the Shares, and (iii) have received or had an opportunity to obtain such
additional information as they deem necessary to make an informed investment
decision with respect to the purchase of the Shares.
 

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3.5 Restrictions on Transfer. Such Buyer understands that except as provided in
the Registration Rights Agreement, the issuance of the Shares has not been and
is not being registered under the 1933 Act or any applicable state securities
laws. Such Buyer may be required to hold the Shares indefinitely and the Shares
may not be transferred unless (i) the Shares are sold pursuant to an effective
registration statement under the 1933 Act, or (ii) such Buyer shall have
delivered to the Company an opinion of counsel to the effect that the Shares to
be sold or transferred may be sold or transferred pursuant to an exemption from
such registration, which opinion shall be reasonably acceptable to the Company.
Such Buyer understands that until such time as the resale of the Shares has been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement or otherwise may be sold pursuant to an exemption from registration,
certificates evidencing the Shares may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates evidencing such Shares): 
 
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
FEDERAL SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE.
THE SHARES MAY NOT BE SOLD OR OFFERED FOR SALE UNLESS THEY HAVE FIRST BEEN SO
REGISTERED OR UNLESS THE COMPANY RECEIVES A WRITTEN OPINION FROM LEGAL COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.”
 
 
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
Except as set forth in the Company’s Disclosure Schedule attached hereto, and
subject to any information contained in the 2006 SEC Documents, the Company
represents and warrants to the Buyers that:
 
4.1 Organization and Qualification. The Company has no subsidiaries other than
the Subsidiaries. The Company and each of its Subsidiaries is a corporation or
limited liability company, as applicable, duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is incorporated
or organized, with corporate or limited liability company power and authority to
own, lease, use and operate its properties and to carry on its business as now
operated and conducted. The Company and each of its Subsidiaries is duly
qualified as a foreign corporation or limited liability company to do business
and is in good standing in each jurisdiction in which its ownership or use of
property or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect. Neither the Company nor any Subsidiary is in
violation of any provision of its respective certificate or articles of
incorporation, partnership agreement, bylaws or other organizational or charter
documents, as the same may have been amended. 
 
4.2 Authorization; Enforcement. The Company has all requisite corporate power
and authority to enter into and perform this Agreement and each of the other
Transaction Documents and to consummate the transactions contemplated hereby and
thereby and to issue the Shares, in accordance with the terms hereof and
thereof. The execution and delivery of this Agreement and each of the other
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation, the
issuance of the Shares) have been duly authorized by the Company’s Board of
Directors and no further consent or authorization of the Company, its Board of
Directors, or its shareholders is required. This Agreement and each of the other
Transaction Documents have been duly executed and delivered by the Company. This
Agreement and each of the
 

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other Transaction Documents will constitute upon execution and delivery by the
Company, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by: (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws in effect that limit creditors’ rights
generally; (ii) equitable limitations on the availability of specific remedies;
(iii) principles of equity (regardless of whether such enforcement is considered
in a proceeding in law or in equity); and (iv) to the extent rights to
indemnification and contribution may be limited by federal securities laws or
the public policy underlying such laws.
 
4.3 Capitalization; Valid Issuance of Shares. As of the date hereof, the
authorized capital stock of the Company consists of 300,000,000 shares of Common
Stock, of which 117,285,272 shares are issued and outstanding, and no shares are
held by the Company as treasury shares, and 20,000,000 shares of preferred
stock, of which no shares are issued and outstanding. All of such outstanding
shares of Common Stock are duly authorized, validly issued, fully paid and
nonassessable. The Shares have been duly authorized and when issued pursuant to
the terms hereof will be validly issued, fully paid and nonassessable and will
not be subject to any encumbrances, preemptive rights or any other similar
contractual rights of the shareholders of the Company or any other person. No
shares of capital stock of the Company are subject to preemptive rights or any
other similar rights of the shareholders of the Company or any liens or
encumbrances imposed through the actions or failure to act of the Company. As of
the date hereof, the Company had outstanding warrants to purchase 13,761,269
shares of Common Stock, options to purchase 1,185,000 shares of Common Stock
issued under its 2005 Stock Option Plan, as well as 300,000 shares of restricted
Common Stock issued under its 2005 Restricted Stock Plan. As of the date of this
Agreement, except to the extent described in the preceding sentence and Schedule
4.3 attached hereto, (i) there are no outstanding options, warrants, scrip,
rights to subscribe for, puts, calls, rights of first refusal, agreements,
understandings, claims or other commitments or rights of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for any shares of capital stock of the Company or any of its Subsidiaries, or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock, (ii) there are no agreements
or arrangements under which the Company or any of its Subsidiaries is obligated
to register the sale of any of its or their securities under the 1933 Act
(except the Registration Rights Agreement) and (iii) there are no anti-dilution
or price adjustment provisions contained in any security issued by the Company
(or in any agreement providing rights to security holders) that will be
triggered by the issuance of the Shares. Except as may be described in any
documents which have been publicly filed by any of the Company's shareholders,
to the Company’s knowledge, there are no agreements between the Company’s
shareholders with respect to the voting or transfer of the Company’s capital
stock or with respect to any other aspect of the Company’s affairs. 
 
4.4 No Conflicts. The execution, delivery and performance of this Agreement and
each of the other Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of Shares) will not (i) conflict with or result
in a violation of any provision of the Amended and Restated Articles of
Incorporation, as amended, of the Company or the Amended and Restated Code of
By-Laws, as amended, of the Company, (ii) violate or conflict with, or result in
a breach of any provision of, or constitute a default (or an event which with
notice or lapse of time or both could become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture, patent, patent license or instrument to which the
Company or any of its Subsidiaries is a party, or (iii) result in a violation of
any Legal Requirement (including federal and state securities laws and
regulations and regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect). Neither
the Company nor any of its Subsidiaries is in violation of its
 

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Certificate or Articles of Incorporation, bylaws or other organizational
documents and neither the Company nor any of its Subsidiaries is in default (and
no event has occurred which with notice or lapse of time would result in a
default) under, and neither the Company nor any of its Subsidiaries has taken
any action or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which any property or assets of the Company or any of its Subsidiaries is bound
or affected, except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. Except with respect to any filings or
notices related to the issuance of the Shares to be filed with the OTC Bulletin
Board, if any, and as required under the 1933 Act and any applicable state
securities laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency, regulatory agency, self regulatory organization or stock
market or any third party in order for it to execute, deliver or perform any of
its obligations under the Transaction Documents. All consents, authorizations,
orders, filings and registrations that the Company is required to effect or
obtain pursuant to the preceding sentence have been obtained or effected on or
prior to the date hereof. 
 
4.5 SEC Documents; Financial Statements. 
 
a. Since December 31, 2004, the Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the 1933 Act and the 1934 Act (all of
the foregoing filed prior to the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents (other than
exhibits to such documents) incorporated by reference therein, being hereinafter
referred to herein as the “SEC Documents”), or has timely filed for a valid
extension of such time of filing and has filed any such SEC Documents prior to
the expiration of any such extension. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
 
b. As of their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes, year end adjustments or may be condensed or summary statements) and
fairly present in all material respects the consolidated financial position of
the Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the financial statements of the Company
included in the SEC Documents, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to September 30, 2006, and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in such financial
statements, which, individually or taken in the aggregate would not reasonably
be expected to have a Material Adverse Effect.
 
c. The Company has established and maintains disclosure controls and procedures
(as such term is defined in Rule 13a-15(e) under the 1934 Act). Such disclosure
controls and procedures:
 

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(A) are designed to ensure that material information relating to the Company and
its Subsidiaries is made known to the Company’s chief executive officer and its
chief financial officer by others within those entities, particularly during the
periods in which the Company’s reports and filings under the 1934 Act are being
prepared, (B) have been evaluated for effectiveness as of the end of the most
recent annual period reported to the SEC, and (C) are effective to perform the
functions for which they were established. Neither the auditors of the Company
nor the Board of Directors of the Company has been advised of: (x) any
significant deficiencies or material weaknesses in the design or operation of
the internal controls over financial reporting (as such term is defined in Rule
13a-15(f) under the 1934 Act) of the Company that have materially affected the
Company’s internal control over financial reporting; or (y) any fraud, whether
or not material, that involves management or other employees who have a role in
the internal controls over financial reporting of the Company
 
4.6 Absence of Certain Changes. Except that on May 31, 2006, Magnetech
Industrial Services of Alabama, LLC, acquired substantially all of the assets of
E. T. Smith Services of Alabama, Inc., and except with respect to the
transactions contemplated hereby and by each of the other Transaction Documents,
since December 31, 2005, (i) the Company and each of its Subsidiaries has
conducted its business only in the ordinary course, consistent with past
practice, and since that date, no changes have occurred which would reasonably
be expected to have a Material Adverse Effect; and (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade
payables, accrued expenses and other liabilities incurred in the ordinary course
of business consistent with past practice and (B) liabilities not required to be
reflected on the Company’s financial statements pursuant to GAAP or required to
be disclosed in filings made with the SEC.
 
4.7 Absence of Litigation. Except as set forth in Schedule 4.7, there is no
Action pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company or any of its Subsidiaries that (i)
adversely affects or challenges the legality, validity or enforceability of this
Agreement, or (ii) would, if there were an unfavorable decision, have or
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor any of its Subsidiaries, nor any director or officer thereof (in his or her
capacity as such), is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty. There has not been, and to the knowledge of the
Company, there is not pending any investigation by the SEC involving the Company
or any current or former director or officer of the Company (in his or her
capacity as such). The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
under the 1934 Act or the 1933 Act.
 
4.8 Patents, Copyrights. The Company and each of its Subsidiaries owns or
possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, copyrights,
trademarks, trademark applications, service marks, service names, trade names
and copyrights (“Intellectual Property”) necessary to enable it to conduct its
business as now operated (and, to the Company’s knowledge, as presently
contemplated to be operated in the future); there is no claim or Action by any
person pertaining to, or proceeding pending, or to the Company’s knowledge
threatened, which challenges the right of the Company or of a Subsidiary with
respect to any Intellectual Property necessary to enable it to conduct its
business as now operated and to the Company’s knowledge, the Company’s or its
Subsidiaries’ current products and processes do not infringe on any Intellectual
Property or other rights held by any person, except where any such infringement
would not reasonably be expected to have a Material Adverse Effect.
 
4.9 Tax Status. The Company and each of its Subsidiaries has made or filed all
federal, state and foreign income and all other material tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and
 

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has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim. The Company has not executed a waiver with respect to
the statute of limitations relating to the assessment or collection of any
foreign, federal, state or local tax. 
 
4.10 Permits; Compliance. 
 
a. The Company and each of its Subsidiaries is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted
(collectively, “Permits”), and there is no Action pending or, to the knowledge
of the Company, threatened regarding suspension or cancellation of any of the
Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or
in default or violation of, any of the Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
 
b. Since December 31, 2005, no event has occurred or, to the knowledge of the
Company, circumstance exists that (with or without notice or lapse of time): (a)
would reasonably be expected to constitute or result in a violation by the
Company or any of its Subsidiaries, or a failure on the part of the Company or
its Subsidiaries to comply with, any Legal Requirement; or (b) would reasonably
be expected to give rise to any obligation on the part of the Company or any of
its Subsidiaries to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature in connection with a failure to comply with any
Legal Requirement, except in either case that would not reasonably be expected
to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has received any notice or other communication from any regulatory
authority or any other person, nor does the Company have any knowledge
regarding: (x) any actual, alleged, possible or potential violation of, or
failure to comply with, any Legal Requirement, or (y) any actual, alleged,
possible or potential obligation on the part of the Company or any of its
Subsidiaries to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature in connection with a failure to comply with any
Legal Requirement, except in either case that would not reasonably be expected
to have a Material Adverse Effect.
 
c. The Company is in compliance in all material respects with the provisions of
the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated
thereunder that are applicable to it and has taken reasonable steps such that
the Company expects to be in a position to comply with the requirements of
Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated thereunder at such time as Section 404 becomes applicable to the
Company.
 
d. The Company is, and has reason to believe that for the foreseeable future it
will continue to be, in compliance with all applicable rules of the OTC Bulletin
Board. The Company has not received notice from the OTC Bulletin Board that the
Company is not in compliance with the rules or requirements thereof. The
issuance and sale of the Shares under this Agreement does not contravene the
rules and regulations of the OTC Bulletin Board, and no approval of the
shareholders of the Company is required for the Company to issue the Shares as
contemplated by this Agreement.
 
4.11 Environmental Matters. “Environmental Laws” shall mean, collectively, all
Legal Requirements, including any federal, state, local or foreign statute,
laws, rule, regulation, ordinance, code, policy or rule of common law or any
judicial or administrative interpretation thereof, including any
 

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judicial or administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or wildlife, including, without limitation, laws and regulations
relating to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or
petroleum products (collectively, “Hazardous Materials”) or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials. Except for such matters as could not, singly or
in the aggregate, reasonably be expected to result in a Material Adverse Effect
or as set forth on Schedule 4.11: (i) the Company and its Subsidiaries have
complied and are in compliance with all applicable Environmental Laws; (ii)
without limiting the generality of the foregoing, the Company and its
Subsidiaries have obtained, have complied, and are in compliance with all
Permits that are required pursuant to Environmental Laws for the occupation of
their respective facilities and the operation of their respective businesses;
(iii) none of the Company or its Subsidiaries has received any written notice,
report or other information regarding any actual or alleged violation of
Environmental Laws, or any liabilities or potential liabilities (including
fines, penalties, costs and expenses), including any investigatory, remedial or
corrective obligations, relating to any of them or their respective facilities
arising under Environmental Laws, nor, to the knowledge of the Company is there
any factual basis therefore; (iv) there are no underground storage tanks,
polychlorinated biphenyls, urea formaldehyde or other hazardous substances
(other than small quantities of hazardous substances for use in the ordinary
course of the operation of the Company’s and its Subsidiaries’ respective
businesses, which are stored and maintained in accordance and in compliance with
all applicable Environmental Laws), in, on, over, under or at any real property
owned or operated by the Company and/or its Subsidiaries; (v) there are no
conditions existing at any real property or with respect to the Company or any
of its Subsidiaries that require remedial or corrective action, removal,
monitoring or closure pursuant to the Environmental Laws and (vi) to the
knowledge of the Company, neither the Company nor any of its Subsidiaries has
contractually, by operation of law, or otherwise amended or succeeded to any
liabilities arising under any Environmental Laws of any predecessors or any
other Person.
 
4.12 Title to Property. Except for any lien for current taxes not yet delinquent
or which are being contested in good faith and by appropriate proceedings, the
Company and its Subsidiaries have good and marketable title to all real property
and all personal property owned by them which is material to the business of the
Company and its Subsidiaries. Any leases of real property and facilities of the
Company and its Subsidiaries are valid and effective in accordance with their
respective terms, except as would not have a Material Adverse Effect.
 
4.13 No Investment Company or Real Property Holding Company. The Company is not,
and upon the issuance and sale of the Shares as contemplated by this Agreement
will not be, an “investment company” as defined under the Investment Company Act
of 1940 (“Investment Company”). The Company is not controlled by an Investment
Company. The Company is not a United States real property holding company, as
defined under the Internal Revenue Code of 1986, as amended.
 
4.14 No Brokers. The Company has taken no action which would give rise to any
claim by any person for brokerage commissions, transaction fees or similar
payments relating to this Agreement or the transactions contemplated hereby.
 
4.15 Registration Rights. Except pursuant to the Registration Rights Agreement,
and as otherwise set forth in Schedule 4.15 effective upon the Closing, neither
the Company nor any Subsidiary is currently subject to any agreement providing
any person or entity any rights (including piggyback registration rights) to
have any securities of the Company or any Subsidiary registered with the SEC or
registered or qualified with any other governmental authority.
 

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4.16 Exchange Act Registration. The Common Stock is registered pursuant the 1934
Act, and the Company has taken no action designed to, or which, to the knowledge
of the Company, is likely to have the effect of, terminating the registration of
the Common Stock.
 
4.17 Labor Relations. No labor or employment dispute exists or, to the knowledge
of the Company, is imminent or threatened, with respect to any of the employees
of the Company that has, or could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.
 
4.18 Transactions with Affiliates and Employees. Except as set forth in the SEC
Documents, and Schedule 4.18, none of the officers or directors of the Company,
and to the knowledge of the Company, none of the employees of the Company, is
presently a party to any transaction or agreement with the Company (other than
for services as employees, officers and directors) exceeding $60,000, including
any contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
 
4.19 Insurance. The Company and its Subsidiaries have insurance policies in full
force and effect of a type, covering such risks and in such amounts, and having
such deductibles and exclusions as are customary for conducting businesses and
owning assets similar in nature and scope to those of the Company and its
Subsidiaries. The amounts of all such insurance policies and the risks covered
thereby are in accordance in all material respects with all material contracts
and agreements to which the Company and/or its Subsidiaries is a party and with
all applicable Legal Requirements. With respect to each such insurance policy:
(i) the policy is valid, outstanding and enforceable in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws in effect that
limit creditors’ rights generally, equitable limitations on the availability of
specific remedies and principles of equity (regardless of whether such
enforcement is considered in a proceeding in law or in equity); (ii) neither the
Company nor any of its Subsidiaries is in breach or default with respect to its
obligations thereunder in any material respect; and (iii) no party to the policy
has repudiated, or given notice of an intent to repudiate, any provision
thereof.
 
4.20 Approved Acquisitions of Shares; No Anti-Takeover Provisions. The Board of
Directors of the Company has unanimously approved this Agreement and taken all
other requisite action such that the provisions of any anti-takeover laws and
regulations of any governmental authority, including without limitation, the
applicable provisions of the IBCL, and that any provisions of an anti-takeover
nature adopted by the Company or any of its Subsidiaries or contained in the
Company’s Amended and Restated Articles of Incorporation, Amended and Restated
Code of Bylaws or the organizational documents of any of its Subsidiaries, will
not apply to the Buyers, this Agreement or any of the other Transaction
Documents.
 
4.21 ERISA. Based upon the Employee Retirement Income Security Act of 1974
(“ERISA”), and the regulations and published interpretations thereunder: (i)
neither the Company nor any of its Subsidiaries has engaged in any Prohibited
Transactions (as defined in Section 406 of ERISA and Section 4975 of the Code);
(ii) the Company and each of its Subsidiaries has met all applicable minimum
funding requirements under Section 302 of ERISA in respect to its plans; (iii)
neither the Company nor any of its Subsidiaries has any knowledge of any event
or occurrence which would cause the Pension Benefit Guaranty Corporation to
institute proceedings under Title IV of ERISA to terminate any employee benefit
plan(s); neither the Company nor any of its Subsidiaries has any fiduciary
responsibility for investments with respect to any plan existing for the benefit
of persons other than its or such Subsidiary’s employees; and (v) neither the
Company nor any of its Subsidiaries has withdrawn, completely or partially, from
any
 

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multi-employer pension plan so as to incur liability under the Multiemployer
Pension Plan Amendments Act of 1980.
 
4.22 Company Shareholders of Record. As of December 31, 2006, the Company had 62
“shareholders” as defined in Section 4 of Chapter 42 of the IBCL, and is not
considered an “Issuing Public Corporation” for purposes of Chapter 42 of the
IBCL. 
 
4.23 Disclosure. The Company understands and confirms that the Buyers will rely
on the representations and covenants contained herein in effecting the
transactions contemplated by this Agreement and the other Transaction Documents.
All representations and warranties provided to the Buyers including the
disclosures in the Company’s disclosure schedules attached hereto furnished by
or on behalf of the Company, taken as a whole are true and correct and do not
contain any untrue statement of material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or
its Subsidiaries or its or their businesses, properties, prospects, operations
or financial conditions, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed. 
 
 
ARTICLE 5
COVENANTS
 
5.1 Form D; Blue Sky Laws. Upon completion of the Closing, the Company shall
file with the SEC a Form D with respect to the Shares as required under
Regulation D and each applicable state securities commission and will provide a
copy thereof to the Buyers promptly after such filing. 
 
5.2 Use of Proceeds. The Company shall use the proceeds from the sale of the
Shares (i) first to repay in full, all the obligations of the Company and its
Subsidiaries to Laurus, including all obligations pursuant to the Secured
Revolving Note for the benefit of Laurus, dated August 24, 2005; the Secured
Convertible Minimum Borrowing Note for the benefit of Laurus, dated August 24,
2005; the Secured Convertible Term Note for the benefit of Laurus, dated August
24, 2005; the Secured Non-Convertible Revolving Note for the benefit of Laurus,
dated May 31, 2006; and the Secured Term Note for the benefit of Laurus, dated
May 31, 2006 (the “Laurus Obligations”), and then use any remaining proceeds
(ii) to pay $1,500,000 of outstanding accounts payable within sixty (60) days
after the date of this Agreement, provided that if Laurus shall exercise its
option to convert a portion of the Laurus Obligations to shares of Common Stock,
the Company shall pay an additional $400,000 of outstanding accounts payable,
for payment in total of $1,900,000 of accounts payable; and (iv) for general
corporate purposes. Notwithstanding the foregoing, if necessary during the
renegotiation of the Company’s general credit facility, the Company may use the
portion of the proceeds designated for the payment of outstanding accounts
payable for general corporate purposes prior to paying any outstanding accounts
payable, provided that the accounts payable are paid within sixty (60) days
after the date of this Agreement as provided in this Section 5.2. 
 
5.3 Expenses. At the Closing, the Company shall reimburse the Buyers for all
reasonable expenses incurred by them in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the other
Transaction Documents and its due diligence review of the Company, including,
without limitation, reasonable attorneys’ fees and expenses, and out-of-pocket
travel costs and expenses.
 
5.4 Intentionally Omitted.
 
 

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5.5 No Integration. The Company shall not make any offers or sales of any
security (other than the Shares) under circumstances that would require
registration of the Shares being offered or sold hereunder under the 1933 Act or
cause the offering of the Shares to be integrated with any other offering of
securities by the Company in such a manner as would require the Company to seek
the approval of its stockholders for the issuance of the Shares under any
stockholder approval provision applicable to the Company or its securities.
 
5.6 Board Designee(s). For as long as the Buyers or their affiliates hold (i) at
least 10% of the then issued and outstanding Common Stock, the Buyers shall have
the right to appoint one member of the Company’s Board of Directors; and (ii) at
least 20% of the then issued and outstanding Common Stock, the Buyers shall have
the right to appoint (a) one member of the Company’s Board of Directors if the
Company’s Board of Directors consists of five or fewer directors; and (b) two
members of the Company’s Board of Directors if the Company’s Board of Directors
consists of six or more directors. Notwithstanding anything to the contrary
contained in this Agreement, the Amended and Restated Articles of Incorporation,
as amended, of the Company, or the Amended and Restated Code of By-Laws of the
Company, as amended, for as long as the Buyers have the right to appoint
directors pursuant to this Section 5.6, the Company’s Board of Directors shall
be comprised of no more than seven directors.
 
5.7 Observation Rights. In addition to the rights to nominate one or more
directors provided in Section 5.6, for such time as the Buyers or their
affiliates continue to hold at least 10% of the total issued and outstanding
Common Stock, the Company and its Subsidiaries shall extend Observation Rights
(as defined below) to Buyers or their affiliates. For purposes of this Section,
the term “Observation Rights” shall mean the right of Buyers or their affiliates
to have a representative (an “Observer”) attend as an observer all meetings
(including telephonic meetings) of the Boards of Directors of the Company and
its Subsidiaries and their respective committees. The Observer shall receive
prior written notice of all meetings of the Boards of Directors of the Company
and its Subsidiaries and their respective committees at the same time that
notice of such meetings is given to the directors and shall receive all
materials and information provided from time to time to the members of the
Boards of Directors of the Company and its Subsidiaries and their respective
committees. Subject to ordinary and reasonable procedural rules, the Observer
may participate in a meaningful manner in discussions of matters brought to the
Board of Directors, and shall be permitted to pose questions and the Board of
Directors shall provide complete responses to the questions posed. For the
avoidance of doubt, the Observer shall not be deemed to be a member of the Board
of Directors or any committee of the Company and its Subsidiaries. The Company
shall reimburse the Observer for the out-of-pocket expenses of the Observer in
attending such meetings on the same basis that the directors are reimbursed for
their out-of-pocket expenses. Notwithstanding anything to the contrary contained
herein, the Observation Rights shall be conditioned on the Observer maintaining
the confidentiality of all material non-public material and information provided
to the Observer and the Boards of Directors and committees of the Company and
its Subsidiaries in accordance with procedures and policies established from
time to time in writing by the Company and its Subsidiaries and provided to the
Observer; however, notwithstanding any such procedures, the Observer shall be
permitted to (A) provide, on a confidential basis, such material and information
to the Buyers and their affiliates and their respective managers, partners,
directors, officers, representatives, advisers, auditors, examiners and counsel
who have agreed in writing to observe the confidentiality provisions of this
Section 5.7, and (B) provided the Observer gives prior written notice to the
Company, disclose such material and information in accordance with applicable
laws or legal process, in any litigation or other proceedings under this
Agreement or in accordance with regulatory requirements. 
 
5.8 Participation in Future Issuances. The Buyers shall have the right to
participate in any future offerings, sales or exchanges by the Company of Common
Stock or securities convertible into or exercisable for Common Stock (each, a
“Future Offering”) so as to maintain each Buyer’s percentage
 

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ownership, on a fully diluted basis, of the Common Stock immediately prior to
such offerings. For purposes of this Section 5.8, however, a Future Offering
shall not include the issuance of options, restricted stock or similar
securities by the Company in accordance with the terms of any employee benefit
or compensation plan adopted by the Company’s Board of Directors. Each Buyer
shall be entitled to receive written notice of any Future Offering (an “Offering
Notice”) at least 15 days prior to the proposed closing date of such Future
Offering, which Offering Notice must include a description of the securities to
be offered, sold or exchanged, including the price and other terms upon which
they are to be issued, sold or exchanged, the parties to whom such securities
are being offered, sold or exchanged and the number or amount of the offered
securities to be issued, sold or exchanged. If either or both of the Buyers
elect to participate in a Future Offering, such Buyer or Buyers must give
written notice of such election to the Company within 7 days following the
receipt by such Buyer or Buyers of the Offering Notice. Such participation by
such Buyer or Buyers in any Future Offering shall be at the same price and
otherwise on the same terms as those described in the Offering Notice. 
 
5.9 Future Acquisitions. The Company shall not revoke its approval of the
acquisition of up to 30% of the Common Stock on a fully diluted basis by the
Buyers. The Company shall use its best efforts to ensure that any future
acquisitions of the Common Stock by the Buyers (up to 30% of the of the
outstanding Common Stock on a fully diluted basis) shall not be made subject to
the provisions of any anti-takeover laws and regulations of any governmental
authority, including without limitation, the applicable provisions of the IBCL,
and any provisions of an anti-takeover nature adopted by the Company or any of
its Subsidiaries or contained in the Company’s Amended and Restated Articles of
Incorporation, Amended and Restated Code of Bylaws or the organizational
documents of any of its Subsidiaries. The Buyers acknowledge and agree that they
will obtain written approval from the Company’s Board of Directors before the
Buyer and their affiliates acquire in excess of thirty percent (30%) of the
Common Stock computed on a fully-diluted basis, provided, however that this
covenant shall not apply to (a) any increase in the percentage ownership of
Common Stock of the Buyers and their affiliates due to a redemption or
repurchase by the Company of any of its Common Stock, or (b) any instances where
the Buyers and their affiliates inadvertently acquires in excess of 30% of the
Common Stock on a fully-diluted basis, provided that in such case the Buyers
shall notify the Company in writing promptly upon discovery of such inadvertent
acquisition, and the Buyers and their affiliates shall promptly take all such
actions as are necessary to cure such circumstance within thirty (30) days of
providing such notice unless the Company’s Board of Directors approves such
inadvertent acquisition. 
 

 
 
ARTICLE 6
CONDITIONS TO THE COMPANY’S OBLIGATION
 
The obligation of the Company hereunder to issue and sell the Shares to the
Buyers at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions thereto, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion:
 
6.1 Delivery of Transaction Documents. The Buyers shall have executed and
delivered the Transaction Documents to the Company.
 
6.2 Payment of Purchase Price. The Buyers shall have delivered the Purchase
Price in accordance with Section 2.2 above.
 
6.3 Representations and Warranties. The representations and warranties of the
Buyers shall be true and correct in all material respects (provided, however,
that such qualification shall only apply to
 

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representations or warranties not otherwise qualified by materiality) as of the
date when made and as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date), and the
applicable Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the applicable Buyer at
or prior to the Closing Date. 
 
6.4 Litigation. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
 
 
ARTICLE 7
CONDITIONS TO THE BUYERS’ OBLIGATION
 
The obligation of the Buyers hereunder to purchase the Shares at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Buyers’ sole
benefit and may be waived by the Buyers at any time in its sole discretion:
 
7.1 Delivery of Transaction Documents; Issuance of Shares. The Company shall
have executed and delivered the Transaction Documents to the Buyers, and shall
deliver the Transfer Instructions to the transfer agent for the Company’s Common
Stock to issue certificates in the name of each Buyer representing the Shares
being purchased by such Buyer. The Company shall deliver a copy of the Transfer
Instructions to the Buyers at the Closing.
 
7.2 Representations and Warranties. The representations and warranties of the
Company shall be true and correct in all material respects (provided, however,
that such qualification shall only apply to representations or warranties not
otherwise qualified by materiality) as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date.
 
7.3 Consents. Any consents or approvals required to be secured by the Company
for the consummation of the transactions contemplated by the Transaction
Documents shall have been obtained and shall be reasonably satisfactory to the
Buyers. 
 
7.4 Litigation. No Action shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
 
7.5 Opinion. The Buyers shall have received an opinion of the Company’s counsel,
dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyers with respect to the matters set forth in Exhibit B
attached hereto.
 
7.6 No Material Adverse Change. There shall have been no material adverse change
in the assets, liabilities (contingent or otherwise), affairs, business,
operations, prospects or condition (financial or otherwise) of the Company prior
to the Closing Date.
 
 

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7.7 Board Approval. The Board of Directors of the Company shall have adopted
irrevocable resolutions approving on or prior to the Closing Date the
acquisition by the Buyers and their affiliates of up to 30% of the Common Stock,
on a fully diluted basis, including the acquisition of the Shares so that the
Buyers and their affiliates are not subject to the restrictions to Section 18 or
Section 19 of Chapter 43 of the Indiana Business Corporation Law, as the same
may be amended.
 
7.8 Irrevocable Proxy. The Buyers shall receive an irrevocable proxy from John
A. Martell in the form attached hereto as Exhibit C.
 
 
ARTICLE 8
INDEMNIFICATION
 
8.1 Indemnification by the Company. The Company agrees to indemnify each Buyer
and its affiliates and hold each Buyer and its affiliates harmless from and
against any and all liabilities, losses, damages, costs and expenses of any kind
(including, without limitation, the reasonable fees and disbursements of such
Buyer’s counsel in connection with any investigative, administrative or judicial
proceeding), which may be incurred by such Buyer or such affiliates as a result
of any claims made against such Buyer or such affiliates by any person that
relate to or arise out of (i) any breach by the Company of any of its
representations, warranties or covenants contained in this Agreement or in the
Transaction Documents (other than the Registration Rights Agreement, which
contains separate indemnification provisions), or (ii) any litigation,
investigation or proceeding instituted by any person with respect to this
Agreement or the Shares (excluding, however, any such litigation, investigation
or proceeding which arises solely from the acts or omissions of such Buyer or
its affiliates).
 
8.2 Notification. Any person entitled to indemnification hereunder (“Indemnified
Party”) will (i) give prompt notice to the Company, of any third party claim,
action or suit with respect to which it seeks indemnification (the “Claim”) (but
omission of such notice shall not relieve the Company from liability hereunder
except to the extent it is actually prejudiced by such failure to give notice),
specifying in reasonable detail the factual basis for the Claim, the amount
thereof, estimated in good faith, and the method of computation of the Claim,
all with reasonable particularity and containing a reference to the provisions
of this Agreement in respect of which such indemnification is sought with
respect to the Claim, and (ii) unless in such Indemnified Party’s reasonable
judgment a conflict of interest may exist between such Indemnified Party and the
Company with respect to such claim, permit the Company to assume the defense of
the Claim with counsel reasonably satisfactory to the Indemnified Party. The
Indemnified Party shall cooperate fully with the Company with respect to the
defense of the Claim and, if the Company elects to assume control of the defense
of the Claim, the Indemnified Party shall have the right to participate in the
defense of the Claim at its own expense. If the Company does not elect to assume
control or otherwise participate in the defense of the Claim, then the
Indemnified Party may defend through counsel of its own choosing. If such
defense is not assumed by the Company, the Company will not be subject to any
liability under this Agreement or otherwise for any settlement made without its
consent (but such consent will not be unreasonably withheld or delayed). If the
Company elects not to or is not entitled to assume the defense of a Claim, it
will not be obligated to pay the fees and expenses of more than one counsel for
all Indemnified Parties with respect to the Claim, unless an actual conflict of
interest exists between such Indemnified Party and any other of such Indemnified
Parties with respect to the Claim, in which event the Company will be obligated
to pay the fees and expenses of such additional counsel or counsels. 
 

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ARTICLE 9
GOVERNING LAW; MISCELLANEOUS
 
9.1 Governing Law. This Agreement shall be enforced, governed by and construed
in accordance with the laws of the State of Indiana applicable to agreements
made and to be performed entirely within such state, without regard to the
principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States Federal Courts located in the
Northern District of Indiana with respect to any dispute arising under this
Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby. All parties irrevocably waive the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
All parties further agree that service of process upon a party mailed by first
class mail shall be deemed in every respect effective service of process upon
the party in any such suit or proceeding. Nothing herein shall affect any
party’s right to serve process in any other manner permitted by law. All parties
agree that a final non-appealable judgment in any such suit or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner. The party which does not prevail in any
dispute arising under this Agreement shall be responsible for all reasonable
fees and expenses, including reasonable attorneys’ fees, incurred by the
prevailing party in connection with such dispute.
 
9.2 Counterparts; Electronic Signatures. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party.
This Agreement, once executed by a party, may be delivered to the other party
hereto by electronic transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
 
9.3 Headings. The headings of this Agreement are for convenience of reference
only and shall not form part of, or affect the interpretation of, this
Agreement. 
 
9.4 Severability. In the event that any provision of this Agreement 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 to such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
 
9.5 Entire Agreement; Amendments. This Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and supersede all previous understandings or
agreements between the parties with respect to such matters. No provision of
this Agreement may be waived other than by an instrument in writing signed by
the party to be charged with enforcement. The provisions of this Agreement may
be amended only by a written instrument signed by the Company and the Buyers.
 
9.6 Notices. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a party. The
addresses for such communications shall be:
 

17

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If to the Company:
 
   
MISCOR Group, Ltd.
 
1125 South Walnut Street
 
South Bend, Indiana 46619
 
Attention:
John A. Martell and
   
James M. Lewis, Esq.
 
Telephone:
(574) 234-8131
 
Facsimile:
(574) 232-7648
     
With copy to:
 
   
Barnes & Thornburg LLP
 
100 N. Michigan, Suite 600
 
South Bend, Indiana 46601
 
Attention: Richard L. Mintz, Esq.
 
Telephone: (574) 234-1171
 
Facsimile: (574) 237-1125
     
If to the Buyers:
 
   
Tontine Capital Partners, L.P.
 
55 Railroad Avenue, 1st Floor
 
Greenwich, Connecticut 06830
 
Attention: Mr. Jeffrey L. Gendell
 
Telephone: (203) 769-2000
 
Facsimile: (203) 769-2010
     
With copy to:
 
   
Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP
       
Until June 30, 2007:
 
333 W. Wacker Drive, Suite 2700
 
Chicago, Illinois 60606
       
After June 30, 2007:
 
200 W. Madison Street, Suite 3900
 
Chicago, Illinois 60606
       
Attention: John E. Freechack, Esq.
 
Telephone:
(312) 984-3100
 
Facsimile:
(312) 984-3150

 
Each party shall provide notice to the other party of any change in address.
 
9.7 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and assigns. Neither the Company
nor any Buyer shall assign this
 

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Agreement or any rights or obligations hereunder without the prior written
consent of the other parties hereto. 
 
9.8 Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
person.
 
9.9 Publicity. The Company and the Buyers shall have the right to review a
reasonable period of time before issuing any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of the
Buyers, to make any press release with respect to such transactions as is
required by applicable law and regulations (although the Buyers shall be
consulted by the Company in connection with any such press release prior to its
release and shall be provided with a copy thereof and be given an opportunity to
comment thereon). Notwithstanding the foregoing, the Company shall file with the
SEC a Form 8-K disclosing the transactions herein within four (4) business days
of the Closing Date and attach the relevant agreements and instruments to either
such Form 8-K or the Company’s Annual Report on Form 10-K for the year ended
December 31, 2006, and the Buyers may make such filings as may be required under
Section 13 and Section 16 of the 1934 Act.
 
9.10 Further Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
 
9.11 No Strict Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
 
9.12 Rights Cumulative. Each and all of the various rights, powers and remedies
of the parties shall be considered cumulative with and in addition to any other
rights, powers and remedies which such parties may have at law or in equity in
the event of the breach of any of the terms of this Agreement. The exercise or
partial exercise of any right, power or remedy shall neither constitute the
exclusive election thereof nor the waiver of any other right, power or remedy
available to such party.
 
9.13 Survival. Any covenant or agreement in this Agreement required to be
performed following the Closing Date, shall survive the Closing Date. Without
limitation of the foregoing, the respective representations and warranties given
by the parties hereto shall survive the Closing Date and the consummation of the
transactions contemplated herein, but only for a period of the earlier of (i)
eighteen (18) months following the Closing Date and (ii) the applicable statute
of limitations with respect to each representation and warranty, and thereafter
shall expire and have no further force and effect; provided, however, that (a)
the representations and warranties of the Company made in Sections 4.1, 4.2, 4.3
and 4.9 shall survive the Closing Date and the consummation of the transactions
contemplated herein for a period of the earlier of (x) five (5) years following
the Closing Date and (y) the applicable statute of limitations with respect to
each such representation and warranty and (b) the representations and warranties
of the Company made in Sections 4.5, 4.6 and 4.23 shall survive the Closing Date
and the consummation of the transactions contemplated herein for a period of the
earlier of (x) four (4) years following the Closing Date and (y) the applicable
statute of limitations with respect to each such representation and warranty.
 
 

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9.14 Knowledge. The term "knowledge of the Company" or any similar formulation
of knowledge shall mean, the actual knowledge of any of John A. Martell, Richard
J. Mullin and James M. Lewis after reasonable inquiry made by them of the
appropriate personnel or representatives of the Company or any of its
Subsidiaries. 
 
[Signature Page Follows]
 

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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed as of the date first above written.
 

 
COMPANY:
       
MISCOR GROUP, LTD.
       
By:
   
Name:
   
Title:
               
BUYERS:
       
TONTINE CAPITAL PARTNERS, L.P.
       
By:
Tontine Capital Management, LLC, its general partner
             
By:
     
Jeffrey L. Gendell, as managing member
 
       
Total Number of Shares: 50,000,000
 
 
Total Purchase Price: $10,000,000
 
 
Form of Entity and Jurisdiction of Organization:
 
 
Delaware Limited Partnership
 
       
TONTINE CAPITAL OVERSEAS MASTER FUND, L.P.
       
By:
Tontine Capital Overseas GP, L.L.C., its general partner
             
By:
     
Jeffrey L. Gendell, as managing member
 
       
Total Number of Shares: 12,500,000
 
 
Total Purchase Price: 2,500,000
 
 
Form of Entity and Jurisdiction of Organization:
 
 
Cayman Islands Limited Partnership
 

 

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Exhibit A
 
Form of Registration Rights Agreement
 
 
 
 
 
 
 
 
 

A-1

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

Exhibit B
 
Form of Legal Opinion
 
1. The Company and each of its Subsidiaries is a corporation, validly existing
and in good standing under the laws of the state of the jurisdiction in which it
is incorporated. The Company and each of its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
in which its ownership or use of property or the nature of the business
conducted by it makes such qualification necessary.
 
2. The Company has all necessary corporate power and authority to execute,
deliver and perform its obligations under each of the Transaction Documents. The
execution, delivery and performance of each of the Transaction Documents has
been duly authorized by all necessary corporate action on the part of the
Company.
 
3. The Company has all requisite corporate power and authority to own and
operate its property and to conduct the business in which it is currently
engaged.
 
4. Each of the Transaction Documents has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
 
5. The issuance, sale and delivery of the Shares and the execution, delivery and
performance by the Company of the Transaction Documents and the consummation by
the Company of the transactions contemplated thereby do not (i) violate or
result in a breach of or default under the Amended and Restated Articles of
Incorporation, as amended, Amended and Restated Code of By-laws or other
governing documents of the Company or any applicable requirement of law; or (ii)
to our knowledge, result in the creation or imposition of any lien upon any of
the assets of the Company pursuant to the terms of any contractual obligation.
 
6. To our knowledge, there are no actions, suits, proceedings, claims or
disputes pending or threatened against, or affecting, the Company, at law, in
equity, in arbitration or before any governmental authority that contest or
affect the execution, validity or performance of the Transaction Documents or
are likely to have a Material Adverse Effect.
 
7. Except for filings, authorizations or approvals contemplated by the
Agreement, to our knowledge no authorizations or approvals of, and no filings
with, any governmental authority are necessary or required for the execution,
delivery or performance by, or enforcement against, the Company of any of the
Transaction Documents.
 
8. The Shares are duly authorized and, when issued and sold to the Purchasers
after payment therefor in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and non-assessable.
 
9. There are no statutory, or to our knowledge, contractual preemptive, rights
of first refusal or similar rights with respect to the issuance and sale of the
Common Stock.
 
10. Assuming that the representations made by the Purchasers in the Agreement
are true and correct and that any required filings are made pursuant to Rule 503
of Regulation D as promulgated under the Securities Act of 1933, the offering,
sale and issuance of the shares pursuant to the Agreement do not require
registration under the Securities Act of 1933 and the rules promulgated
thereunder as they currently exist or registration or qualification under any
state securities laws.
 

B-1

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Exhibit C
 
Form of Irrevocable Proxy
 
 
 
 
 
 
 
 
C-1