|MFRI, INC., MIDWESCO FILTER RESOURCES, INC.,PERMA-PIPE, INC., THERMAL CARE, INC. ANDTDC FILTER MANUFACTURING, INC., AS BORROWERS
LOAN AND SECURITY AGREEMENT
Dated:  July 11, 2002
$28,000,000
FLEET CAPITAL CORPORATIONIndividually and as Agent for any Lender which isor becomes a Party hereto
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|TABLE OF CONTENTS                             
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|SECTION1.           CREDIT FACILITY           
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|SECTION2.           INTEREST, FEES AND CHARGES
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|SECTION3.           LOAN ADMINISTRATION       
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|SECTION4.           TERM AND TERMINATION      
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|SECTION 5.           SECURITY INTERESTS       
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|SECTION 6.           COLLATERAL ADMINISTRATION
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|TABLE OF CONTENTS(continued)                                          
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|SECTION 7.REPRESENTATIONS AND WARRANTIES                              
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|SECTION8.           COVENANTS AND CONTINUING AGREEMENTS               
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|SECTION 9.CONDITIONS PRECEDENT                                        
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|SECTION10.           EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
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|SECTION11.           AGENT                                            
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|TABLE OF CONTENTS(continued)      
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|SECTION12.           MISCELLANEOUS
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|LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT  is made as of this 11th day of July, 2002, by and among FLEET CAPITAL CORPORATION (Fleet), a Rhode Island corporation with an office at One South Wacker Drive, Suite 1400,
Chicago, Illinois 60606, individually as a Lender and as Agent (Agent) for itself and
any other financial institution which is or becomes a party hereto (each such financial institution,
including Fleet, is referred to hereinafter individually as a Lender and collectively
as the Lenders), the LENDERS and MFRI, INC., a Delaware corporation (MFRI), MIDWESCO FILTER RESOURCES, INC., a Delaware corporation (Midwesco), PERMA-PIPE, INC., a Delaware corporation (Perma-Pipe), THERMAL CARE, INC., a Delaware corporation (Thermal Care) and TDC FILTER MANUFACTURING, INC., a Delaware corporation (TDC). Capitalized terms used in this Agreement have the meanings
assigned to them in Appendix A, General Definitions. Accounting terms not otherwise specifically
defined herein shall be construed in accordance with GAAP consistently applied. MFRI, Midwesco, Perma-Pipe,
Thermal Care, and TDC are sometimes hereinafter referred to individually as a Borrower
and collectively as Borrowers.
SECTION 1.  CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the representations and warranties made
in, this Agreement and the other Loan Documents, Lenders agree to make a Total Credit Facility of
up to Twenty-Eight Million Dollars ($28,000,000) available upon Borrowers request therefor,
as follows:
1.1 Loans.
1.1.1 Revolving Credit Loans. Each Lender agrees, severally and not jointly, for so long as no Default or Event of Default exists,
  to make Revolving Credit Loans to Borrowers from time to time during the period from the date hereof
  to, but not including, the last day of the Term, as requested by MFRI, on its own behalf and on behalf
  of all Borrowers, in the manner set forth in subsection 3.1.1 hereof, up to a maximum principal
  amount at any time outstanding equal to the lesser of (i) such Lenders Revolving Loan
  Commitment minus the product of such Lenders Revolving Loan Percentage and the LC Amount minus the product of such Lenders Revolving Loan Percentage and reserves, if any and (ii) the
  product of such Lenders Revolving Loan Percentage and an amount equal to the Borrowing Base
  at such time minus the LC Amount minus reserves, if any. Agent shall have the right to establish reserves in such amounts, and with respect
  to such matters, as Agent shall deem necessary or appropriate in its sole judgment, exercised in
  a commercially reasonable manner, against the amount of Revolving Credit Loans which Borrowers may
  otherwise request under this subsection 1.1.1, including without limitation, with respect to
  (i) price adjustments, damages, unearned discounts, returned products or other matters for which
  credit memoranda are issued in the ordinary course of any Borrowers business; (ii) potential
  dilution related to Accounts; (iii) shrinkage, spoilage and obsolescence of any Borrowers
  Inventory; (iv) slow-moving Inventory; (v) other sums chargeable against Borrowers
  Loan Account as Revolving Credit Loans under any section of this Agreement; (vi) amounts owing
  by any Borrower to any Person to the extent secured by a Lien on, or trust over, any Property of
  any Borrower; (vii) amounts owing by any Borrower in connection with Product Obligations; and
  (viii) such other specific events, conditions or
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|contingencies as to which Agent, in its sole judgment, exercised in a commercially reasonable manner,
determines reserves should be established from time to time hereunder. The Revolving Credit Loans
shall be repayable in accordance with the terms of the Revolving Notes and shall be secured by all
of the Collateral.
1.1.2 Overadvances. Insofar as Borrowers may request and Agent or Majority Lenders (as provided below) may be willing
  in their sole and absolute discretion to make Revolving Credit Loans to Borrowers at a time when
  the unpaid balance of Revolving Credit Loans plus the sum of the LC Amount plus the amount of LC
  Obligations that have not been reimbursed by Borrowers or funded with a Revolving Credit Loan, plus
  reserves, exceeds, or would exceed with the making of any such Revolving Credit Loan, the Borrowing
  Base (and such Loan or Loans being herein referred to individually as an Overadvance
  and collectively, as Overadvances), Agent shall enter such Overadvances as debits in
  the Loan Account. All Overadvances shall be repaid on demand, shall be secured by the Collateral
  and shall bear interest as provided in this Agreement for Revolving Credit Loans generally. Any Overadvance
  made pursuant to the terms hereof shall be made by all Lenders ratably in accordance with their respective
  Revolving Loan Percentages. Overadvances in the aggregate amount of $500,000 or less may, unless
  a Default or Event of Default has occurred and is continuing, be made in the sole and absolute discretion
  of Agent. Overadvances in an aggregate amount of more than $500,000 but less than $1,000,000 may,
  unless a Default or an Event of Default has occurred and is continuing, be made in the sole and absolute
  discretion of the Majority Lenders. Overadvances in an aggregate amount of $1,000,000 or more and
  Overadvances to be made after the occurrence and during the continuation of a Default or an Event
  of Default shall require the consent of all Lenders. The foregoing notwithstanding, in no event,
  unless otherwise consented to by all Lenders, (w) shall any Overadvances be outstanding for
  more than sixty (60) consecutive days, (x) after all outstanding Overadvances have been repaid,
  shall Agent or Lenders make any additional Overadvances unless sixty (60) days or more have expired
  since the last date on which any Overadvances were outstanding, (y) shall Overadvances be outstanding
  on more than ninety (90) days within any one hundred eighty day (180) period or (z) shall Agent
  make Revolving Credit Loans on behalf of Lenders under this subsection 1.1.2 to the extent such
  Revolving Credit Loans would cause a Lenders share of the Revolving Credit Loans to exceed
  such Lenders Revolving Loan Commitment minus such Lenders Revolving Loan Percentage of the LC Amount.
1.1.3 Use of Proceeds. The Revolving Credit Loans shall be used solely for (i) the satisfaction of existing Indebtedness
of Borrowers to Harris Trust and Savings Bank; (ii) the satisfaction of existing Indebtedness
of Borrowers outstanding under the Term Loan Documents in an amount not to exceed Ten Million
Seventy Thousand Dollars ($10,070,000.00); (iii) Borrowers general operating capital needs
in a manner consistent with the provisions of this Agreement and all applicable laws, and (iv) other
purposes permitted under this Agreement, including without limitation, repayments of the Term Loan
in excess of the amount referred to in clause (ii) as provided in Section 8.2.6 hereof.
1.1.4 Agent Loans. Upon the occurrence and during the continuance of an Event of Default, Agent, in its sole discretion,
may make Revolving Credit Loans on behalf of Lenders, in an aggregate amount not to exceed One Million
Dollars ($1,000,000), if Agent, in its reasonable business judgment, deems that such Revolving Credit
Loans are necessary or
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|desirable (i) to protect all or any portion of the Collateral, (ii) to enhance the likelihood,
or maximize the amount of, repayment of the Loans and the other Obligations, or (iii) to pay
any other amount chargeable to any Borrower pursuant to this Agreement, including without limitation
costs, fees and expenses as described in Sections 2.8 and 2.9 (hereinafter, Agent Loans);
provided, that in no event shall (a) the maximum principal amount of the Revolving Credit Loans exceed
the aggregate Revolving Loan Commitments and (b) Majority Lenders may at any time revoke Agents
authorization to make Agent Loans. Any such revocation must be in writing and shall become effective
prospectively upon Agents receipt thereof. Each Lender shall be obligated to advance its Revolving
Loan Percentage of each Agent Loan. If Agent Loans are made pursuant to the preceding sentence, then
(a) the Borrowing Base shall be deemed increased by the amount of such permitted Agent Loans,
but only for so long as Agent allows such Agent Loans to be outstanding, and (b) all Lenders
that have committed to make Revolving Credit Loans shall be bound to make, or permit to remain outstanding,
such Agent Loans based upon their Revolving Loan Percentages in accordance with the terms of this Agreement.
1.2 Letters of Credit; LC Guaranties. Agent agrees, for so long as no Default or Event of Default exists and if requested by MFRI, on its
own behalf and on behalf of all other Borrowers, to (i) issue its, or cause to be issued by
Bank or another Affiliate of Agent, on the date requested by MFRI, on its own behalf and on behalf
of all other Borrowers, Letters of Credit for the account of Borrowers or (ii) execute LC Guaranties
by which Agent, Bank, or another Affiliate of Agent, on the date so requested by MFRI, shall guaranty
the payment or performance by Borrowers of their reimbursement obligations with respect to letters
of credit; provided that the LC Amount shall not exceed Seven Million Dollars ($7,000,000) at any time. No Letter of Credit
or LC Guaranty may have an expiration date after the last day of the Term. Notwithstanding anything
to the contrary contained herein, Borrowers, Agent and Lenders hereby agree that all LC Obligations
and all obligations of Borrowers relating thereto shall be satisfied by the prompt issuance of one
or more Revolving Credit Loans that are Base Rate Portions, which Borrowers hereby acknowledge are
requested and Lenders hereby agree to fund. In the event that Revolving Credit Loans are not, for
any reason, promptly made to satisfy all then existing LC Obligations, each Lender hereby agrees
to pay to Agent, on demand, an amount equal to such LC Obligations multiplied by such Lenders Revolving Loan Percentage, and until so paid, such amount shall be secured by the
Collateral and shall bear interest and be payable at the same rate and in the same manner as Base
Rate Portions. Immediately upon the issuance of a Letter of Credit or an LC Guaranty under this Agreement,
each Lender shall be deemed to have irrevocably and unconditionally purchased and received from Agent,
without recourse or warranty, an undivided interest and participation therein equal to such LC Obligations
multiplied by such Lenders Revolving Loan Percentage.
SECTION 2.  INTEREST, FEES AND CHARGES
2.1 Interest.
2.1.1 Rates of Interest. Interest shall accrue on the principal amount of the Base Rate Current Asset Revolving Portion outstanding
at the end of each day at a fluctuating rate per annum equal to the Applicable Margin (Current Asset)
then in effect plus the Base Rate. Interest shall accrue on the principal amount of the Base Rate Real Estate Revolving
Portion outstanding at the end of each day at a fluctuating rate per annum equal to the Applicable
Margin
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|(Real Estate) then in effect plus the Base Rate. Said rate of interest shall increase or decrease by an amount equal to any increase
or decrease in the Base Rate, effective as of the opening of business on the day that any such change
in the Base Rate occurs. If MFRI, on its own behalf and on behalf of all other Borrowers, exercises
its LIBOR Option as provided in Section 3.1, (i) interest shall accrue on the principal amount
of the LIBOR Current Asset Revolving Portions outstanding at the end of each day at a rate per annum
equal to the Applicable Margin (Current Asset) then in effect plus the LIBOR applicable to each LIBOR Portion for the corresponding Interest Period and (ii) interest
shall accrue on the principal amount of the LIBOR Real Estate Revolving Portions outstanding at the
end of each day at a per annum rate equal to the Applicable Margin (Real Estate) then in effect plus the LIBOR applicable to each LIBOR Portion for the corresponding Interest Period. For purposes of
computing interest hereunder, the Base Rate Real Estate Portion and the LIBOR Real Estate Portion
shall be deemed first borrowed and last repaid. As of the Closing Date, the LIBOR Real Estate Portion
shall be deemed to be included within the LIBOR Portion with the shortest Interest Period and thereafter
shall be deemed to be automatically continued pursuant to Section 3.1.9 until such time as the Real
Estate Component is reduced to Zero Dollars ($0).
2.1.2 Default Rate of Interest. At the option of Agent, upon and after the occurrence of an Event of Default, and during the continuation
thereof, the principal amount of all Loans shall bear interest at a rate per annum equal to 2.0% plus the interest rate otherwise applicable thereto (the Default Rate).
2.1.3 Maximum Interest. In no event whatsoever shall the aggregate of all amounts deemed interest hereunder or under the
Notes and charged or collected pursuant to the terms of this Agreement or pursuant to the Notes exceed
the highest rate permissible under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. If any provisions of this Agreement or the Notes are in contravention
of any such law, such provisions shall be deemed amended to conform thereto (the Maximum Rate).
If at any time, the amount of interest paid hereunder is limited by the Maximum Rate, and the amount
at which interest accrues hereunder is subsequently below the Maximum Rate, the rate at which interest
accrues hereunder shall remain at the Maximum Rate, until such time as the aggregate interest paid
hereunder equals the amount of interest that would have been paid had the Maximum Rate not applied.
2.2 Computation of Interest and Fees. Interest, Letter of Credit and LC Guaranty fees and Unused Line Fees hereunder shall be calculated
daily and shall be computed on the actual number of days elapsed over a year of 360 days. For the
purpose of computing interest hereunder, all items of payment received by Agent shall be deemed applied
by Agent on account of the Obligations (subject to final payment of such items) on the first Business
Day after receipt by Agent of such items in Agents account located in Hartford, Connecticut.
2.3 Fee Letter. Borrowers shall pay to Agent certain fees and other amounts in accordance with the terms of the fee
letter between Borrowers and Agent (the Fee Letter).
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|2.4 Letter of Credit and LC Guaranty Fees. Borrowers shall pay to Agent:
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| | (i) for standby Letters of Credit and LC Guaranties of standby letters of credit, for the ratable benefit
  of Lenders a per annum fee equal to one and three-quarters percent (1-3/4%) of the aggregate face
  amount of such Letters of Credit and LC Guaranties outstanding from time to time during the term
  of this Agreement, plus all normal and customary charges associated with the issuance thereof, which fees and charges shall
  be deemed fully earned upon issuance of each such Letter of Credit or LC Guaranty, shall be due and
  payable on the first Business Day of each month and shall not be subject to rebate or proration upon
  the termination of this Agreement for any reason;                                                                                                                                                                                                                                                                                                                                       
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| | (ii) for documentary Letters of Credit and LC Guaranties of documentary letters of credit, for the ratable
  benefit of Lenders, a per annum fee equal to one and three-quarters percent (1-3/4%) of the face
  amount of each such Letter of Credit or LC Guaranty, payable upon the issuance of such Letter of
  Credit or execution of such LC Guaranty and an additional fee equal to one and three-quarters percent
  (1-3/4%) per annum of the face amount of such Letters of Credit or LC Guaranty payable upon each
  renewal thereof and each extension thereof plus all normal and customary charges associated with the issuance and administration of each such Letter
  of Credit or LC Guaranty (which fees and charges shall be fully earned upon issuance, renewal or
  extension (as the case may be) of each such Letter of Credit or LC Guaranty, shall be due and payable
  on the first Business Day of each month, and shall not be subject to rebate or proration upon the
  termination of this Agreement for any reason); and
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| | (iii) with respect to all Letters of Credit and LC Guaranties, for the account of Agent only, a per annum
  fronting fee equal to one-quarter of one percent (1⁄4%) of the aggregate face amount of such Letters
  of Credit and LC Guaranties outstanding from time to time during the term of this Agreement, which
  fronting fees shall be payable monthly in arrears on the first Business Day of each month and shall
  not be subject to rebate or proration upon the termination of this Agreement for any reason.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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|2.5 Unused Line Fee. Borrowers shall pay to Agent, for the ratable benefit of Lenders, a fee (the Unused Line Fee)
equal to the Applicable Margin per annum multiplied by the average daily amount by which Revolving
Credit Maximum Amount exceeds the sum of (i) the outstanding principal balance of the Revolving
Credit Loans plus (ii) the LC Amount. The Unused Line Fee shall be payable monthly in arrears on the first day
of each month hereafter.
2.6 Prepayment Fee. At the effective date of termination of this Agreement for any reason, Borrowers shall pay to Agent,
for the ratable benefit of Lenders (in addition to the then outstanding principal, accrued interest
and other charges owing under the terms of this Agreement and any of the other Loan Documents) and
any amounts owing pursuant to subsection 3.2.5, as liquidated damages for the loss of the bargain
and not as a penalty, an amount equal to one percent (1%) of the Total Credit Facility if termination
occurs during the first twelve-month period of the Term (July 11, 2002 through July 10, 2003); one-half
of one percent (1⁄2%) of the Total Credit Facility if termination occurs during the second 12-month
period of the Term (July 11, 2003 through July 10, 2004); and one-quarter of one percent (1⁄4%)

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|of the Total Credit Facility if termination occurs during the third 12-month period of the Term (July
11, 2004 through July 9, 2005). If termination occurs on the last day of the Term, no termination
charge shall be payable.
2.7 Audit Fees. Borrowers shall pay to Agent audit fees in accordance with Agents current schedule of fees
payable by borrowers of Agent generally in effect from time to time in connection with audits of
the books and records and Properties of Borrowers and their Subsidiaries and such other matters as
Agent shall deem appropriate in its sole judgment, plus all reasonable out-of-pocket expenses incurred
by Agent in connection with such audits, whether such audits are conducted by employees of Agent
or by third parties hired by Agent. Such audit fees and out-of-pocket expenses shall be payable on
the first day of the month following the date of issuance by Agent of a request for payment thereof
to Borrowers immediately upon demand therefor by Agent from time to time. Agent may, in its discretion,
provide for the payment of such amounts by making appropriate Revolving Credit Loans to Borrowers
and charging Borrowers Loan Account therefor.
2.8 Reimbursement of Expenses. If, at any time or times regardless of whether or not an Event of Default then exists, (i) Agent
  incurs legal or accounting expenses or any other costs or out-of-pocket expenses in connection with
  (1) the negotiation and preparation of this Agreement or any of the other Loan Documents, any
  amendment of or modification of this Agreement or any of the other Loan Documents, or any syndication
  or attempted syndication of the Obligations (including, without limitation, printing and distribution
  of materials to prospective Lenders and all costs associated with bank meetings, but excluding any
  closing fees paid to Lenders in connection therewith) or (2) the administration of this Agreement
  or any of the other Loan Documents and the transactions contemplated hereby and thereby; or (ii) Agent
  or any Lender incurs legal or accounting expenses or any other costs or out-of-pocket expenses in
  connection with (1) any litigation, contest, dispute, suit, proceeding or action (whether instituted
  by Agent, any Lender, any Borrower or any other Person) relating to the Collateral, this Agreement
  or any of the other Loan Documents or any Borrowers, any of its Subsidiaries or any Guarantors
  affairs; (2) any attempt to enforce any rights of Agent or any Lender against any Borrower or
  any other Person which may be obligated to Agent or any Lender by virtue of this Agreement or any
  of the other Loan Documents, including, without limitation, the Account Debtors; or (3) any
  attempt to inspect, verify, protect, preserve, restore, collect, sell, liquidate or otherwise dispose
  of or realize upon the Collateral; then all such legal and accounting expenses, other costs and out
  of pocket expenses of Agent or any Lender, as applicable, shall be charged to Borrowers; provided, that Borrowers shall not be responsible for such costs and out-of-pocket expenses to the extent incurred
  because of the gross negligence or willful misconduct of Agent or any Lender. All amounts chargeable
  to Borrowers under this Section 2.8 shall be Obligations secured by all of the Collateral, shall
  be payable on demand to Agent or such Lender, as the case may be, and shall bear interest from the
  date such demand is made until paid in full at the rate applicable to Base Rate Revolving Portions
  from time to time. Borrowers shall also reimburse Agent for expenses incurred by Agent in its administration
  of the Collateral to the extent and in the manner provided in Sections 2.9 and 2.10 hereof.
2.9 Bank Charges. Borrowers shall pay to Agent, on demand, any and all fees, costs or expenses which Agent or any Lender
pays to a bank or other similar institution arising out of or in connection with (i) the forwarding
to any Borrower or any other Person on behalf of any
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|Borrower, by Agent or any Lender, of proceeds of Loans made to Borrowers pursuant to this Agreement
and (ii) the depositing for collection by Agent or any Lender of any check or item of payment
received or delivered to Agent or any Lender on account of the Obligations.
2.10 Collateral Protection Expenses; Appraisals. All out-of-pocket expenses incurred in protecting, storing, warehousing, insuring, handling, maintaining
and shipping the Collateral, and any and all excise, property, sales, and use taxes imposed by any
state, federal, or local authority on any of the Collateral or in respect of the sale thereof shall
be borne and paid by Borrowers. If Borrowers fail to promptly pay any portion thereof when due, Agent
may, at its option, but shall not be required to, pay the same and charge Borrowers therefor. Additionally,
from time to time, if Agent or any Lender determines that obtaining appraisals is necessary in order
for it to comply with applicable laws or regulations, and at any time if a Default or an Event of
Default shall have occurred and be continuing, Agent may, at Borrowers expense, obtain appraisals
from appraisers (who may be personnel of Agent), stating the then current fair market value of all
or any portion of the real estate or personal property of any Borrower or any of its Subsidiaries,
including without limitation the Inventory of Borrowers and their Subsidiaries.
2.11 Payment of Charges. All amounts chargeable to Borrowers under this Agreement shall be Obligations secured by all of the
Collateral, shall be, unless specifically otherwise provided, payable on demand and shall bear interest
from the date demand was made or such amount is due, as applicable, until paid in full at the rate
applicable to the Base Rate Portion from time to time.
2.12 No Deductions. Any and all payments or reimbursements made hereunder shall be made free and clear of and without
deduction for any and all taxes, levies, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto; excluding, however, the following: taxes imposed on the income of Agent
or any Lender or franchise taxes by the jurisdiction under the laws of which Agent or any Lender
is organized or doing business or any political subdivision thereof and taxes imposed on its income
by the jurisdiction of Agents or such Lenders applicable lending office or any political
subdivision thereof or franchise taxes (all such taxes, levies, imposts, deductions, charges or withholdings
and all liabilities with respect thereto excluding such taxes imposed on net income, herein Tax
Liabilities). If any Borrower shall be required by law to deduct any such Tax Liabilities from
or in respect of any sum payable hereunder to Agent or any Lender, then the sum payable hereunder
shall be increased as may be necessary so that, after all required deductions are made, Agent or
such Lender receives an amount equal to the sum it would have received had no such deductions been made.
SECTION 3.  LOAN ADMINISTRATION
3.1 Manner of Borrowing Revolving Credit Loans/LIBOR Option. Borrowings under the credit facility established pursuant to Section 1 hereof shall be as follows:
3.1.1 Loan Requests; Revolving Credit Loans. A request for a Revolving Credit Loan shall be made, or shall be deemed to be made, in the following
manner: (a) MFRI, on its own behalf and on behalf of all other Borrowers, may give Agent
notice of its intention to borrow, in which notice MFRI shall specify the amount of the proposed
borrowing of a
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|Revolving Credit Loan and the proposed borrowing date, which shall be a Business Day, no later than
11:00 a.m. (Chicago, Illinois time) on the proposed borrowing date (or in accordance with subsection 3.1.7,
3.1.8 or 3.1.9, as applicable, in the case of a request for a LIBOR Portion), provided, however, that no such request may be made at a time when there exists a Default or an Event of Default; and
(b) the becoming due of any amount required to be paid under this Agreement, or the Notes, whether
as interest or for any other Obligation, shall be deemed irrevocably to be a request for a Revolving
Credit Loan on the due date in the amount required to pay such interest or other Obligation.
3.1.2 Disbursement. Borrowers hereby irrevocably authorize Agent to disburse the proceeds of each Loan requested, or
deemed to be requested, pursuant to subsection 3.1.1 as follows: (i) the proceeds
of each Revolving Credit Loan requested under subsection 3.1.1(a) shall be disbursed by Agent
in lawful money of the United States of America in immediately available funds, in the case of the
initial borrowing, in accordance with the terms of the written disbursement letter from MFRI, on
its own behalf and on behalf of all other Borrowers, and in the case of each subsequent borrowing,
by wire transfer to Borrowers main disbursement account or such other bank account as Agent
in its discretion may agree to from time to time; and (ii) the proceeds of each Revolving Credit
Loan deemed requested under subsection 3.1.1(b) shall be disbursed by Agent by way of direct
payment of the relevant interest or other Obligation. If at any time any Loan is funded by Agent
or Lenders in excess of the amount requested or deemed requested by MFRI, on its own behalf and on
behalf of all other Borrowers, Borrowers agree to repay the excess to Agent immediately upon the
earlier to occur of (a) any Borrowers discovery of the error and (b) notice thereof
to Borrowers from Agent or any Lender.
3.1.3 Payment by Lenders. Agent shall give to each Lender prompt written notice by facsimile, telex or cable of the receipt
by Agent from MFRI of any request for a Revolving Credit Loan. Each such notice shall specify the
requested date and amount of such Revolving Credit Loan, whether such Revolving Credit Loan shall
be subject to the LIBOR Option, and the amount of each Lenders advance thereunder (in accordance
with its applicable Revolving Loan Percentage. Each Lender shall, not later than 12:00 p.m.
(Chicago time) on such requested date, wire to a bank designated by Agent the amount of that Lenders
Revolving Loan Percentage of the requested Revolving Credit Loan. The failure of any Lender to make
the Revolving Credit Loans to be made by it shall not release any other Lender of its obligations
hereunder to make its Revolving Credit Loan. Neither Agent nor any other Lender shall be responsible
for the failure of any other Lender to make the Revolving Credit Loan to be made by such other Lender.
The foregoing notwithstanding, Agent, in its sole discretion, may from its own funds make a Revolving
Credit Loan on behalf of any Lender. In such event, the Lender on behalf of whom Agent made the Revolving
Credit Loan shall reimburse Agent for the amount of such Revolving Credit Loan made on its behalf,
on a weekly (or more frequent, as determined by Agent in its sole discretion) basis. On each such
settlement date, Agent will pay to each Lender the net amount owing to such Lender in connection
with such settlement, including without limitation amounts relating to Loans, fees, interest and
other amounts payable hereunder. The entire amount of interest attributable to such Revolving Credit
Loan for the period from the date on which such Revolving Credit Loan was made by Agent on such Lenders
behalf until Agent is reimbursed by such Lender, shall be paid to Agent for its own account.
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|3.1.4 Authorization. Borrowers hereby irrevocably authorize Agent, in Agents sole discretion, to advance to Borrowers,
and to charge to Borrowers Loan Account hereunder as a Revolving Credit Loan (which shall be
a Base Rate Revolving Portion), a sum sufficient to pay all interest accrued on the Obligations during
the immediately preceding month and to pay all fees, costs and expenses and other Obligations at
any time owed by any Borrower to Agent or any Lender hereunder.
3.1.5 Letter of Credit and LC Guaranty Requests. A request for a Letter of Credit or LC Guaranty shall be made in the following manner: MFRI,
on its own behalf and on behalf of all other Borrowers, may give Agent and Bank a written notice
of its request for the issuance of a Letter of Credit or LC Guaranty, not later than 11:00 a.m.
(Chicago, Illinois time), one Business Day before the proposed issuance date thereof, in which notice
MFRI shall specify the proposed issuer, issuance date and format and wording for the Letter of Credit
or LC Guaranty being requested (which shall be satisfactory to Agent and the Person being asked to
issue such Letter of Credit or LC Guaranty); provided, that no such request may be made at a time when there exists a Default or Event of Default. Such
request shall be accompanied by an executed application and reimbursement agreement in form and substance
satisfactory to Agent and the Person being asked to issue the Letter of Credit or LC Guaranty, as
well as any required resolutions.
3.1.6 Method of Making Requests. As an accommodation to Borrowers, unless a Default or an Event of Default is then in existence, (i) Agent
shall permit telephonic or electronic requests for Revolving Credit Loans to Agents, (ii) Agent
and Bank may, in their discretion, permit electronic transmittal of requests for Letters of Credit
and LC Guaranties to them, and (iii) Agent may, in Agents discretion, permit electronic
transmittal of instructions, authorizations, agreements or reports to Agent. Unless MFRI, on its
own behalf and on behalf of all other Borrowers, specifically directs Agent or Bank in writing not
to accept or act upon telephonic or electronic communications from any Borrower, neither Agent nor
Bank shall have any liability to Borrowers for any loss or damage suffered by any Borrower as a result
of Agents or Banks honoring of any requests, execution of any instructions, authorizations
or agreements or reliance on any reports communicated to it telephonically or electronically and
purporting to have been sent to Agent or Bank by any Borrower, and neither Agent nor Bank shall have
any duty to verify the origin of any such communication or the authority of the Person sending it.
Each telephonic request for a Revolving Credit Loan, Letter of Credit or LC Guaranty accepted by
Agent and Bank, if applicable, hereunder shall be promptly followed by a written confirmation of
such request from MFRI, on its own behalf and on behalf of all other Borrowers, to Agent and Bank, if applicable.
3.1.7 LIBOR Portions. Provided that as of both the date of the LIBOR Request and the first day of the Interest Period,
no Default or Event of Default exists, in the event Borrowers desire to obtain a LIBOR Portion, MFRI,
on its own behalf and on behalf of all other Borrowers, shall give Agent a LIBOR Request no later
than 11:00 a.m. (Chicago, Illinois time) on the third Business Day prior to the requested borrowing
date. Each LIBOR Request shall be irrevocable and binding on all Borrowers. In no event shall Borrowers
be permitted to have outstanding at any one time LIBOR Portions with more than five (5) different
Interest Periods. LIBOR Portions shall be included within the definition of LIBOR Current Asset Portions
or LIBOR Real Estate Portions as determined by the definitions of such terms.
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|3.1.8 Conversion of Base Rate Portions. Provided that as of both the date of the LIBOR Request and the first day of the Interest Period,
no Default or Event of Default exists, Borrowers may, on any Business Day, convert any Base Rate
Portion into a LIBOR Portion. If Borrowers desire to convert a Base Rate Portion, MFRI, on its own
behalf and on behalf of all other Borrowers, shall give Agent a LIBOR Request no later then 11:00 a.m.
(Chicago, Illinois time) on the third Business Day prior to the requested conversion date. After
giving effect to any conversion of Base Rate Portions to LIBOR Portions, Borrowers shall not be permitted
to have outstanding at any one time LIBOR Portions with more than five (5) different Interest Periods.
3.1.9 Continuation of LIBOR Portions. Provided that as of both the date of the LIBOR Request and the first day of the Interest Period,
no Default or Event of Default exists, Borrowers may, on any Business Day, continue any LIBOR Portions
into a subsequent Interest Period of the same or a different permitted duration. If Borrowers desire
to continue a LIBOR Portion, MFRI, on its own behalf and on behalf of all other Borrowers, shall
give Agent a LIBOR Request no later than 11:00 a.m. (Chicago, Illinois time) on the third Business
Day prior to the requested continuation date. After giving effect to any continuation of LIBOR Portions,
Borrowers shall not be permitted to have outstanding at any one time LIBOR Portions with more than
five (5) different Interest Periods. If MFRI shall fail to give timely notice of its election to
continue any LIBOR Portion or portion thereof as provided above, or if such continuation shall not
be permitted, such LIBOR Portion or portion thereof, unless such LIBOR Portion shall be repaid, shall
automatically be converted into a Base Rate Portion at the end of the Interest Period then in effect
with respect to such LIBOR Portion.
3.1.10 Inability to Make LIBOR Portions. Notwithstanding any other provision hereof, if any applicable law, treaty, regulation or directive,
or any change therein or in the interpretation or application thereof, shall make it unlawful for
any Lender (for purposes of this subsection 3.1.10, the term Lender shall include
the office or branch where such Lender or any corporation or bank then controlling such Lender makes
or maintains any LIBOR Portions) to make or maintain its LIBOR Portions, or if with respect to any
Interest Period, Agent is unable to determine the LIBOR relating thereto, or adverse or unusual conditions
in, or changes in applicable law relating to, the London interbank market make it, in the reasonable
judgment of Agent, impracticable to fund therein any of the LIBOR Portions, or make the projected
LIBOR unreflective of the actual costs of funds therefor to any Lender, the obligation of Agent and
Lenders to make or continue LIBOR Portions or convert Base Rate Portions to LIBOR Portions hereunder
shall forthwith be suspended during the pendency of such circumstances and Borrowers shall, if any
affected LIBOR Portions are then outstanding, promptly upon request from Agent, convert such affected
LIBOR Portions into Base Rate Portions.
3.2 Payments. Except where evidenced by notes or other instruments issued or made by Borrowers to any Lender and
accepted by such Lender specifically containing payment instructions that are in conflict with this
Section 3.2 (in which case the conflicting provisions of said notes or other instruments shall
govern and control), the Obligations shall be payable as follows:
3.2.1 Principal; Revolving Credit Loans. Principal on account of Revolving Credit Loans shall be payable by Borrowers to Agent for the ratable
benefit of Lenders immediately upon the earliest of (i) the receipt by Agent or any Borrower
of any proceeds of any
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|of the Collateral (except as otherwise provided herein), including without limitation pursuant to subsections 3.3.1
and 6.2.4, to the extent of said proceeds, subject to Borrowers rights to reborrow such amounts
in compliance with subsection 1.1.1 hereof; (ii) the occurrence of an Event of Default in consequence
of which Agent or Majority Lenders elect to accelerate the maturity and payment of the Obligations,
or (iii) termination of this Agreement pursuant to Section 4 hereof; provided, however, that, if an Overadvance shall exist at any time, Borrowers shall, on demand, repay the Overadvance.
Each payment (including principal prepayment) by Borrowers on account of principal of the Revolving
Credit Loans shall be applied first to the Base Rate Portion, and second to LIBOR Portions.
3.2.2 Interest.
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| | (i) Base Rate Portion. Interest accrued on the Base Rate Portion shall be due and payable on the earliest of (1) the
  first calendar day of each month (for the immediately preceding month), computed through the last
  calendar day of the preceding month, (2) the occurrence of an Event of Default in consequence
  of which Agent or Majority Lenders elect to accelerate the maturity and payment of the Obligations
  or (3) termination of this Agreement pursuant to Section 4 hereof.
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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (ii) LIBOR Portion. Interest accrued on each LIBOR Portion shall be due and payable on each LIBOR Interest Payment Date
  and on the earlier of (1) the occurrence of an Event of Default in consequence of which Agent
  or Majority Lenders elect to accelerate the maturity and payment of the Obligations or (2) termination
  of this Agreement pursuant to Section 4 hereof.                                                                                                                

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|3.2.3 Costs, Fees and Charges. Costs, fees and charges payable pursuant to this Agreement shall be payable by Borrowers to Agent,
as and when provided in Section 2 or Section 3 hereof, as applicable to Agent or a Lender,
as applicable, or to any other Person designated by Agent or such Lender in writing.
3.2.4 Other Obligations. The balance of the Obligations requiring the payment of money, if any, shall be payable by Borrowers
to Agent for distribution to Lenders, as appropriate, as and when provided in this Agreement, the
Other Agreements or the Security Documents, or on demand, whichever is later.
3.2.5 Prepayment of/Failure to Borrow LIBOR Portions. Borrowers may prepay a LIBOR Portion only upon at least three (3) Business Days prior written
notice to Agent (which notice shall be irrevocable). Borrowers shall pay to each Lender, upon request
of such Lender, such amount or amounts as shall be sufficient (in the reasonable opinion of such
Lender) to compensate such Lender for any loss, cost, or expense incurred as a result of: (i) any
payment of a LIBOR Portion on a date other than the last day of the Interest Period for such LIBOR
Portion; (ii) any failure by Borrowers to borrow a LIBOR Portion on the date specified by Borrowers
LIBOR Request; or (iii) any failure by Borrowers to pay a LIBOR Portion on the date for payment
specified in Borrowers written notice. Without limiting the foregoing, Borrowers shall pay
to each Lender a yield maintenance fee in an amount computed as follows: the current
rate for United States Treasury securities (bills on a discounted basis shall be converted to a bond
equivalent) with a maturity date closest to the Interest Period chosen

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|pursuant to the LIBOR Portion as to which the prepayment is made, shall be subtracted from the LIBOR
in effect at the time of prepayment. If the result is zero or a negative number, there shall be no
yield maintenance fee. If the result is a positive number, then the resulting percentage shall be
multiplied by the amount of the principal balance being prepaid. The resulting amount shall be divided
by 360 and multiplied by the number of days remaining in the Interest Period chosen pursuant to the
LIBOR Portion as to which the prepayment is made. Said amount shall be reduced to present value calculated
by using the above referenced United States Treasury securities rate and the number of days remaining
in the term chosen pursuant to the LIBOR Portion as to which prepayment is made. The resulting amount
shall be the yield maintenance fee due to the applicable Lender upon the prepayment of a LIBOR Portion.
If by reason of an Event of Default, Agent or Majority Lenders elect to declare the Obligations to
be immediately due and payable, then any yield maintenance fee with respect to a LIBOR Portion shall
become due and payable in the same manner as though Borrowers had exercised such right of prepayment.
3.3 Mandatory and Optional Prepayments.
3.3.1 Proceeds of Sale, Loss, Destruction or Condemnation of Collateral. Except as provided in subsections 6.4.2 and 8.2.9, if any Borrower or any of its Subsidiaries
sells any of the Collateral or if any of the Collateral is lost or destroyed or taken by condemnation,
the applicable Borrower shall, unless otherwise agreed by Majority Lenders, pay to Agent for the
ratable benefit of Lenders as and when received by such Borrower or such Subsidiary and as a mandatory
prepayment of the Loans, as herein provided, a sum equal to the proceeds (including insurance payments
but net of costs and taxes incurred in connection with such sale or event) received by such Borrower
or such Subsidiary from such sale, loss, destruction or condemnation. Any Revolving Credit Loans
repaid pursuant to this Section 3.3.1 shall be subject to Borrowers right to reborrow such
amounts as provided in Section 1.1.1.
3.3.2 Proceeds from Issuance of Additional Indebtedness or Equity. If, after the Closing Date, any Borrower issues any additional Indebtedness or obtains any additional
equity in a manner permitted under this Agreement, then, except as otherwise provided in Section 8.2.6,
such Borrower shall pay to Agent for the ratable benefit of Lenders, when and as received by such
Borrower and as a mandatory prepayment of the Obligations, a sum equal to one hundred percent (100%)
of the net proceeds to such Borrower of the issuance of such Indebtedness or equity. Any such prepayment
shall be applied to the Loans in the manner specified in the second sentence of subsection 3.3.1
until payment thereof in full. Any Revolving Credit repaid pursuant to this Section 3.3.2 shall be
subject to Borrowers right to reborrow such funds pursuant to Section 1.1.1.
3.3.3 LIBOR Portions. If the application of any payment made in accordance with the provisions of this Section 3.3
at a time when no Event of Default has occurred and is continuing would result in termination of
a LIBOR Portion prior to the last day of the Interest Period for such LIBOR Portion, the amount of
such prepayment shall not be applied to such LIBOR Portion, but will, at Borrowers option,
be held by Agent in a non-interest bearing account at a Lender or another bank satisfactory to Agent
in its discretion, which account is in the name of Agent and from which account only Agent can make
any withdrawal, in each case to be applied as such amount would otherwise have been applied under
this Section 3.3 at the
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|earlier to occur of (i) the last day of the relevant Interest Period or (ii) the occurrence
of a Default or an Event of Default.
3.4 Application of Payments and Collections.
3.4.1 Collections. All items of payment received by Agent by 12:00 noon, Chicago, Illinois, time, on any Business Day
shall be deemed received on that Business Day. All items of payment received after 12:00 noon, Chicago,
Illinois, time, on any Business Day shall be deemed received on the following Business Day. If as
the result of collections of Accounts as authorized by subsection 6.2.4 hereof or otherwise,
a credit balance exists in the Loan Account, such credit balance shall not accrue interest in favor
of Borrowers, but shall be disbursed to Borrowers or otherwise at MFRIs direction in the manner
set forth in subsection 3.1.2, upon Borrowers request at any time, so long as no Default
or Event of Default then exists. Agent may at its option, offset such credit balance against any
of the Obligations upon and during the continuance of an Event of Default.
3.4.2 Apportionment, Application and Reversal of Payments. Principal and interest payments shall be apportioned ratably among Lenders (according to the unpaid
principal balance of the Loans to which such payments relate held by each Lender). All payments shall
be remitted to Agent and all such payments not relating to principal or interest of specific Loans,
or not constituting payment of specific fees, and all proceeds of Accounts, or, except as provided
in subsection 3.3.1, other Collateral received by Agent, shall be applied, ratably, subject
to the provisions of this Agreement, first, to pay any fees, indemnities, or expense reimbursements (other than amounts related to Product Obligations)
then due to Agent or Lenders from Borrowers; second, to pay interest due from Borrowers in respect of all Loans, including Agent Loans; third, to pay or prepay principal of Agent Loans; fourth, to pay or prepay principal of the Revolving Credit Loans (other than Agent Loans) and unpaid reimbursement
obligations in respect of Letters of Credit; fifth, to pay an amount to Agent equal to all outstanding Letter of Credit Obligations to be held as cash
Collateral for such Obligations; sixth, to the payment of any other Obligation (other than amounts related to Product Obligations) due to
Agent or any Lender by Borrowers; and seventh, to pay any fees, indemnities or expense reimbursements related to Product Obligations. After the
occurrence and during the continuance of an Event of Default, Agent shall have the continuing exclusive
right to apply and reapply any and all such payments and collections received at any time or times
hereafter by Agent or its agent against the Obligations, in such manner as Agent may deem advisable,
notwithstanding any entry by Agent or any Lender upon any of its books and records.
3.5 All Loans to Constitute One Obligation. The Loans and LC Guarantees shall constitute one general Obligation of Borrowers, and shall be secured
by Agents Lien upon all of the Collateral.
3.6 Loan Account. Agent shall enter all Loans as debits to a loan account (the Loan Account) and shall
also record in the Loan Account all payments made by any Borrower on any Obligations and all proceeds
of Collateral which are finally paid to Agent, and may record therein, in accordance with customary
accounting practice, other debits and credits, including interest and all charges and expenses properly
chargeable to Borrowers.
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|3.7 Statements of Account. Agent will account to Borrowers monthly with a statement of Loans, charges and payments made pursuant
to this Agreement during the immediately preceding month, and such account rendered by Agent shall
be deemed final, binding and conclusive upon Borrowers absent demonstrable error unless Agent is
notified by MFRI, on its own behalf and on behalf of all other Borrowers, in writing to the contrary
within 30 days of the date each accounting is received by Borrowers. Such notice shall only be deemed
an objection to those items specifically objected to therein.
3.8 Increased Costs. If any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law) adopted or implemented after the date of this Agreement
and having general applicability to all banks or finance companies within the jurisdiction in which
any Lender operates (excluding, for the avoidance of doubt, the effect of and phasing in of capital
requirements or other regulations or guidelines passed prior to the date of this Agreement), or any
interpretation or application thereof by any governmental authority charged with the interpretation
or application thereof, or the compliance of such Lender therewith, shall:
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| | (i)(1) subject such Lender to any tax with respect to this Agreement (other than (a) any tax
  based on or measured by net income or otherwise in the nature of a net income tax, including, without
  limitation, any franchise tax or any similar tax based on capital, net worth or comparable basis
  for measurement and (b) any tax collected by a withholding on payments and which neither is
  computed by reference to the net income of the payee nor is in the nature of an advance collection
  of a tax based on or measured by the net income of the payee) or (2) change the basis of taxation
  of payments to such Lender of principal, fees, interest or any other amount payable hereunder or
  under any Loan Documents (other than in respect of (a) any tax based on or measured by net income
  or otherwise in the nature of a net income tax, including, without limitation, any franchise tax
  or any similar tax based on capital, net worth or comparable basis for measurement and (b) any
  tax collected by a withholding on payments and which neither is computed by reference to the net
  income of the payee nor is in the nature of an advance collection of a tax based on or measured by
  the net income of the payee);
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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (ii) impose, modify or hold applicable any reserve (except any reserve taken into account in the determination
  of the applicable LIBOR), special deposit, assessment or similar requirement against assets held
  by, or deposits in or for the account of, advances or loans by, or other credit extended by, any
  office of such Lender, including (without limitation) pursuant to Regulation D of the Board of Governors
  of the Federal Reserve System; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (iii) impose on such Lender or the London interbank market any other condition with respect to any Loan
  Document;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|and the result of any of the foregoing is to increase the cost to such Lender of making, renewing or
maintaining Loans hereunder or the result of any of the foregoing is to reduce the rate of return
on such Lenders capital as a consequence of its obligations hereunder, or the result of any
of the foregoing is to reduce the amount of any payment (whether of principal, interest or otherwise)
in respect of any of the Loans, then, in any such case, Borrowers shall pay such

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|Lender, upon demand and certification not later than sixty (60) days following its receipt of notice
of the imposition of such increased costs, such additional amount as will compensate such Lender
for such additional cost or such reduction, as the case may be, to the extent such Lender has not
otherwise been compensated, with respect to a particular Loan, for such increased cost as a result
of an increase in the Base Rate or the LIBOR. An officer of the applicable Lender shall determine
the amount of such additional cost or reduced amount using reasonable averaging and attribution methods
and shall certify the amount of such additional cost or reduced amount to Borrowers, which certification
shall include a written explanation of such additional cost or reduction to Borrowers. Such certification
shall be conclusive absent manifest error. If a Lender claims any additional cost or reduced amount
pursuant to this Section 3.8, then such Lender shall use reasonable efforts (consistent with
legal and regulatory restrictions) to designate a different lending office or to file any certificate
or document reasonably requested by Borrowers if the making of such designation or filing would avoid
the need for, or reduce the amount of, any such additional cost or reduced amount and would not,
in the sole discretion of such Lender, be otherwise disadvantageous to such Lender.
3.9 Basis for Determining Interest Rate Inadequate. In the event that Agent or any Lender shall have determined that:
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| | (i) reasonable means do not exist for ascertaining the LIBOR for any Interest Period; or                                                                                                                                                       
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                
| | (ii) Dollar deposits in the relevant amount and for the relevant maturity are not available in the London
interbank market with respect to a proposed LIBOR Portion, or a proposed conversion of a Base Rate
Portion into a LIBOR Portion; then

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|Agent or such Lender shall give Borrowers prompt written, telephonic or electronic notice of the determination
of such effect. If such notice is given, (i) any such requested LIBOR Portion shall be made
as a Base Rate Portion, unless MFRI, on its own behalf and on behalf of all other Borrowers, shall
notify Agent no later than 10:00 a.m. (Chicago, Illinois time) three (3) Business Days
prior to the date of such proposed borrowing that the request for such borrowing shall be canceled
or made as an unaffected type of LIBOR Portion, and (ii) any Base Rate Portion which was to
have been converted to an affected type of LIBOR Portion shall be continued as or converted into
a Base Rate Portion, or, if MFRI, on its own behalf and on behalf of all other Borrowers, shall notify
Agent, no later than 10:00 a.m. (Chicago, Illinois time) three (3) Business Days prior to the
proposed conversion, shall be maintained as an unaffected type of LIBOR Portion.
3.10 Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of any Loan made by it in excess of its ratable share
of payments on account of Loans made by all Lenders, such Lender shall forthwith purchase from each
other Lender such participation in such Loan as shall be necessary to cause such purchasing Lender
to share the excess payment ratably with each other Lender; provided, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender,
such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lenders
the purchase price to the extent of such

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|recovery, together with an amount equal to such Lenders ratable share (according to the proportion
of (i) the amount of such Lenders required repayment to (ii) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing
Lender in respect of the total amount so recovered. Borrowers agree that any Lender so purchasing
a participation from another Lender pursuant to this Section 3.10 may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of Borrowers in the amount
of such participation. Notwithstanding anything to the contrary contained herein, all purchases and
repayments to be made under this Section 3.10 shall be made through Agent.
SECTION 4.  TERM AND TERMINATION
4.1 Term of Agreement. Subject to the right of Lenders to cease making Loans to Borrowers during the continuance of any
Default or Event of Default, this Agreement shall be in effect for a period of three (3) years from
the date hereof, through and including July 10, 2005 (the Term), unless terminated as
provided in Section 4.2 hereof.
4.2 Termination.
4.2.1 Termination by Lenders. Agent may, and at the direction of Majority Lenders shall, terminate this Agreement without notice
upon or after the occurrence and during the continuance of an Event of Default.
4.2.2 Termination by Borrowers. Upon at least thirty (30) days prior written notice to Agent and Lenders, Borrowers may, at their
option, terminate this Agreement; provided, however, no such termination shall be effective until Borrowers have paid or collateralized to Agents
satisfaction all of the Obligations in immediately available funds, all Letters of Credit and LC
Guaranties have expired, terminated or have been cash collateralized to Agents satisfaction
and Borrowers have complied with Section 2.6 and subsection 3.2.5. Any notice of termination
given by Borrowers shall be irrevocable unless all Lenders otherwise agree in writing and no Lender
shall have any obligation to make any Loans or issue or procure any Letters of Credit or LC Guaranties
on or after the termination date stated in such notice. Borrowers may elect to terminate this Agreement
in its entirety only. No section of this Agreement or type of Loan available hereunder may be terminated
singly.
4.2.3 Effect of Termination. All of the Obligations shall be immediately due and payable upon the termination date stated in any
notice of termination of this Agreement. All undertakings, agreements, covenants, warranties and
representations of Borrowers contained in the Loan Documents shall survive any such termination and
Agent shall retain its Liens in the Collateral and Agent and each Lender shall retain all of its
rights and remedies under the Loan Documents notwithstanding such termination until all Obligations
have been discharged or paid, in full, in immediately available funds, including, without limitation,
all Obligations under Section 2.6 and subsection 3.2.5 resulting from such termination.
Notwithstanding the foregoing or the payment in full of the Obligations, Agent shall not be required
to terminate its Liens in the Collateral unless, with respect to any loss or damage Agent may incur
as a result of dishonored checks or other items of payment received by Agent from any Borrower or
any Account Debtor and applied to the Obligations, Agent shall, at its option, (i) have received
a written agreement
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|16
|--



|satisfactory to Agent, executed by Borrowers and by any Person whose loans or other advances to Borrowers
are used in whole or in part to satisfy the Obligations, indemnifying Agent and each Lender from
any such loss or damage or (ii) have retained cash Collateral or other Collateral for such period
of time as Agent, in its discretion, may deem necessary to protect Agent and each Lender from any
such loss or damage.
SECTION 5.  SECURITY INTERESTS
5.1 Security Interest in Collateral. To secure the prompt payment and performance to Agent and each Lender of the Obligations, each Borrower
hereby grants to Agent for the benefit of itself and each Lender a continuing Lien upon all of each
such Borrowers assets, including all of the following Property and interests in Property of
each such Borrower, whether now owned or existing or hereafter created, acquired or arising and wheresoever
located:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| | (i) Accounts;                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                 
| | (ii) Certificated Securities;                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                 
| | (iii) Chattel Paper;                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                 
| | (iv) Computer Hardware and Software and all rights with respect thereto, including, any and all licenses,
  options, warranties, service contracts, program services, test rights, maintenance rights, support
  rights, improvement rights, renewal rights and indemnifications, and any substitutions, replacements,
  additions or model conversions of any of the foregoing;
| |                                                                                                                                                                                                                                                                                                                                                                                 
| | (v) Contract Rights;                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                 
| | (vi) Deposit Accounts;                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                 
| | (vii) Documents;                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                 
| | (viii) Equipment;                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                 
| | (ix) Financial Assets;                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                 
| | (x) Fixtures, other than Fixtures which secure Existing Mortgage Indebtedness;                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                 
| | (xi) General Intangibles, including Payment Intangibles and Software;                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                 
| | (xii) Goods (including all of its Equipment, Fixtures and Inventory), and all accessions, additions, attachments,
improvements, substitutions and replacements thereto and therefor;                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                 
| | (xiii) Instruments;                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                 
| | (xiv) Intellectual Property;                                                                                                                                                                                                                                                                                                                                                    

|17
|--



| | (xv) Inventory;                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| |                                                                                                            
| | (xvi) Investment Property;                                                                                 
| |                                                                                                            
| | (xvii) money (of every jurisdiction whatsoever);                                                           
| |                                                                                                            
| | (xviii) Letter-of-Credit Rights;                                                                           
| |                                                                                                            
| | (xix) Payment Intangibles;                                                                                 
| |                                                                                                            
| | (xx) Security Entitlements;                                                                                
| |                                                                                                            
| | (xxi) Software;                                                                                            
| |                                                                                                            
| | (xxii) Supporting Obligations;                                                                             
| |                                                                                                            
| | (xxiii) Uncertificated Securities; and                                                                     
| |                                                                                                            
| | (xxiv) to the extent not included in the foregoing, all other personal property of any kind or description;

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|together with all books, records, writings, data bases, information and other property relating to,
used or useful in connection with, or evidencing, embodying, incorporating or referring to any of
the foregoing, and all Proceeds, products, offspring, rents, issues, profits and returns of and from
any of the foregoing; provided that to the extent that the provisions of any lease or license of Computer Hardware and Software or
Intellectual Property expressly prohibit (which prohibition is enforceable under applicable law)
any assignment thereof, and the grant of a security interest therein, Agent will not enforce its
security interest in any Borrowers rights under such lease or license (other than in respect
of the Proceeds thereof) for so long as such prohibition continues, it being understood that upon
request of Agent, the applicable Borrower will in good faith use reasonable efforts to obtain consent
for the creation of a security interest in favor of Agent (and to Agents enforcement of such
security interest) in Agents rights under such lease or license.
5.2 Other Collateral.
5.2.1 Commercial Tort Claims. Borrowers shall promptly notify Agent in writing upon any Borrower incurring or otherwise obtaining
a Commercial Tort Claim after the Closing Date against any third party and, upon request of Agent,
promptly enter into an amendment to this Agreement and do such other acts or things deemed appropriate
by Agent to give Agent a security interest in any such Commercial Tort Claim. Borrowers represent
and warrant that as of the date of this Agreement, to their knowledge, no Borrower possesses any
Commercial Tort Claims.
5.2.2 Other Collateral. Borrowers shall promptly notify Agent in writing upon any Borrower acquiring or otherwise obtaining
any Collateral after the date hereof consisting of Deposit Accounts, Investment Property, Letter-of-Credit
Rights or Electronic Chattel Paper and, upon the request of Agent, promptly execute such other documents,
and do such other acts or things deemed appropriate by Agent to deliver to Agent control with respect
to such Collateral;

|18
|--



|promptly notify Agent in writing upon acquiring or otherwise obtaining any Collateral after the date
hereof consisting of Documents or Instruments and, upon the request of Agent, will promptly execute
such other documents, and do such other acts or things deemed appropriate by Agent to deliver to
Agent possession of such Documents which are negotiable and Instruments, and, with respect to nonnegotiable
Documents, to have such nonnegotiable Documents issued in the name of Agent; and with respect to
Collateral in the possession of a third party, other than Certificated Securities and Goods covered
by a Document, obtain an acknowledgement from the third party that it is holding the Collateral for
the benefit of Agent.
5.3 Lien Perfection; Further Assurances. Each Borrower shall execute such UCC-1 financing statements as are required by the UCC and such other
instruments, assignments or documents as are necessary to perfect Agents Lien upon any of the
Collateral and shall take such other action as may be required to perfect or to continue the perfection
of Agents Lien upon the Collateral. Unless prohibited by applicable law, each Borrower hereby
authorizes Agent to execute and file any such financing statement, including, without limitation,
financing statements that indicate the Collateral (i) as all assets of such Borrower or words
of similar effect, or (ii) as being of an equal or lesser scope, or with greater or lesser detail,
than as set forth in Section 5.1, on such Borrowers behalf. Each Borrower also hereby
ratifies its authorization for Agent to have filed in any jurisdiction any like financing statements
or amendments thereto if filed prior to the date hereof. The parties agree that a carbon, photographic
or other reproduction of this Agreement shall be sufficient as a financing statement and may be filed
in any appropriate office in lieu thereof. At Agents request, each Borrower shall also promptly
execute or cause to be executed and shall deliver to Agent any and all documents, instruments and
agreements deemed necessary by Agent, to give effect to or carry out the terms or intent of the Loan Documents.
5.4 Lien on Realty. The due and punctual payment and performance of the Obligations shall also be secured by the Lien
created by the Mortgage upon all real Property of Perma-Pipe described therein. If any Borrower shall
acquire at any time or times hereafter any fee simple interest in other real Property (other than
leasehold interests in sales offices or warehouses), such Borrower agrees promptly to execute and
deliver to Agent, for its benefit and the ratable benefit of Lenders, as additional security and
Collateral for the Obligations, deeds of trust, security deeds, mortgages or other collateral assignments
reasonably satisfactory in form and substance to Agent and its counsel (herein collectively referred
to as New Mortgages) covering such real Property. The Mortgages and each New Mortgage
shall be duly recorded (at Borrowers expense) in each office where such recording is required
to constitute a valid Lien on the real Property covered thereby. In respect to any Mortgage or any
New Mortgage, the applicable Borrower shall deliver to Agent, at Borrowers expense, mortgagee
title insurance policies issued by a title insurance company reasonably satisfactory to Agent, which
policies shall be in form and substance reasonably satisfactory to Agent and shall insure a valid
Lien in favor of Agent for the benefit of itself and each Lender on the Property covered thereby,
subject only to Permitted Liens and those other exceptions reasonably acceptable to Agent and its
counsel. Borrowers shall also deliver to Agent such other usual and customary documents, including,
without limitation, ALTA Surveys of the real Property described in the Mortgage or any New Mortgage,
as Agent and its counsel may reasonably request relating to the real Property subject to the Mortgage or the New Mortgages.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|19
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|SECTION 6.  COLLATERAL ADMINISTRATION
6.1 General.
6.1.1 Location of Collateral. All Collateral, other than Inventory in transit, motor vehicles and Collateral having an aggregate
value of not more than Five Hundred Thousand Dollars ($500,000), will at all times be kept by Borrowers
and their Subsidiaries at one or more of the business locations set forth in Exhibit 6.1.1 hereto, as updated by Borrowers providing prior written notice to Agent of any new location.
6.1.2 Insurance of Collateral. Borrowers shall maintain and pay for insurance upon all Collateral wherever located and with respect
to the business of Borrowers and each of their Subsidiaries, covering casualty, hazard, public liability,
workers compensation and such other risks in such amounts and with such insurance companies
as are reasonably satisfactory to Agent. Borrowers shall deliver certified copies of such policies
to Agent as promptly as practicable, with satisfactory lenders loss payable endorsements, naming
Agent as a loss payee, assignee or additional insured, as appropriate, as its interest may appear,
and showing only such other loss payees, assignees and additional insureds as are satisfactory to
Agent. Each policy of insurance or endorsement shall contain a clause requiring the insurer to give
not less than 10 days prior written notice to Agent in the event of cancellation of the policy
for nonpayment of premium and not less than 30 days prior written notice to Agent in the event
of cancellation of the policy for any other reason whatsoever and a clause specifying that the interest
of Agent shall not be impaired or invalidated by any act or neglect of any Borrower, any of its Subsidiaries
or the owner of the Property or by the occupation of the premises for purposes more hazardous than
are permitted by said policy. Borrowers agree to deliver to Agent, promptly as rendered, true copies
of all reports made in any reporting forms to insurance companies. All proceeds of business interruption
insurance (if any) of any Borrower and its Subsidiaries shall be remitted to Agent for application
to the outstanding balance of the Revolving Credit Loans.
Unless Borrowers provide Agent with evidence of the insurance coverage required by this Agreement,
Agent may purchase insurance at Borrowers expense to protect Agents interests in the
Properties of Borrowers and their Subsidiaries. This insurance may, but need not, protect the interests
of Borrowers and their Subsidiaries. The coverage that Agent purchases may not pay any claim that
any Borrower or any Subsidiary makes or any claim that is made against any Borrower or any such Subsidiary
in connection with said Property. Borrowers may later cancel any insurance purchased by Agent, but
only after providing Agent with evidence that Borrowers and their Subsidiaries have obtained insurance
as required by this Agreement. If Agent purchases insurance, Borrowers will be responsible for the
costs of that insurance, including interest and any other charges Agent may impose in connection
with the placement of insurance, until the effective date of the cancellation or expiration of the
insurance. The costs of the insurance may be added to the Obligations. The costs of the insurance
may be more than the cost of insurance that Borrowers and their Subsidiaries may be able to obtain on their own.
6.1.3 Protection of Collateral. Neither Agent nor any Lender shall be liable or responsible in any way for the safekeeping of any
of the Collateral or for any loss or damage thereto (except for reasonable care in the custody thereof
while any Collateral is in Agents or
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|20
|--



|any Lenders actual possession) or for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency, or other person whomsoever, but the same
shall be at Borrowers sole risk.
6.2 Administration of Accounts.
6.2.1 Records, Schedules and Assignments of Accounts. Borrowers shall keep accurate and complete records of their Accounts and all payments and collections
thereon and shall submit to Agent on such periodic basis as Agent shall request a sales and collections
report for the preceding period, in form acceptable to Agent. Concurrently with the delivery of each
Borrowing Case Certificate described in subsection 8.1.4, or more frequently as requested by
Agent, from and after the date hereof, Borrowers shall deliver to Agent a detailed aged trial balance
of all of their Accounts, specifying the names, addresses, face values, dates of invoices and due
dates for each Account Debtor obligated on an Account so listed (Schedule of Accounts),
and upon Agents request therefor, copies of proof of delivery and the original copy of all
documents, including, without limitation, repayment histories and present status reports relating
to the Accounts so scheduled and such other matters and information relating to the status of then
existing Accounts as Agent shall request. If requested by Agent, Borrowers shall execute and deliver
to Agent formal written assignments of all of their Accounts weekly or daily, which shall include
all Accounts that have been created since the date of the last assignment, together with copies of
invoices or invoice registers related thereto.
6.2.2 Discounts, Allowances, Disputes. If any Borrower grants any discounts, allowances or credits that are not shown on the face of the
invoice for the Account involved, Borrowers shall report such discounts, allowances or credits, as
the case may be, to Agent as part of the next required Schedule of Accounts.
6.2.3 Account Verification. Any of Agents officers, employees or agents shall have the right, at any time or times hereafter,
in the name of Agent, any designee of Agent or any Borrower, to verify the validity, amount or any
other matter relating to any Accounts by mail, telephone, electronic communication or otherwise.
Each Borrower shall cooperate fully with Agent in an effort to facilitate and promptly conclude any
such verification process.
6.2.4 Maintenance of Dominion Account. Borrowers shall maintain a Dominion Account or Accounts pursuant to lockbox and blocked account arrangements
acceptable to Agent with Bank. Borrowers shall issue to Bank an irrevocable letter of instruction
directing Bank to deposit all payments or other remittances received in the lockbox and blocked accounts
to the Dominion Account for application on account of the Obligations as provided in subsection 3.2.1.
All funds deposited in any Dominion Account shall immediately become the property of Agent, for the
ratable benefit of Lenders, and Borrowers shall obtain the agreement by Bank in favor of Agent to
waive any recoupment, setoff rights, and any security interest in, or against, the funds so deposited.
Agent assumes no responsibility for such lockbox and blocked account arrangements, including, without
limitation, any claim of accord and satisfaction or release with respect to deposits accepted by
any bank thereunder.
6.2.5 Collection of Accounts, Proceeds of Collateral. Each Borrower agrees that all invoices rendered and other requests made by any Borrower for payment
in respect of
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|21
|--



|Accounts shall contain a written statement directing payment in respect of such Accounts to be paid
to a lockbox established pursuant to subsection 6.2.4. To expedite collection, each Borrower
shall endeavor in the first instance to make collection of its Accounts for Agent. All remittances
received by any Borrower on account of Accounts, together with the proceeds of any other Collateral,
shall be held as Agents property, for its benefit and the benefit of Lenders, by such Borrower
as trustee of an express trust for Agents benefit and each Borrower shall immediately deposit
same in kind in the Dominion Account. Agent retains the right at all times after the occurrence and
during the continuance of a Default or an Event of Default to notify Account Debtors that any Borrowers
Accounts have been assigned to Agent and to collect Borrowers Accounts directly in its own
name, or in the name of Agents agent, and to charge the collection costs and expenses, including
attorneys fees, to Borrowers.
6.2.6 Taxes. If an Account includes a charge for any tax payable to any governmental taxing authority, Agent is
authorized, in its sole discretion, to pay the amount thereof to the proper taxing authority for
the account of Borrowers and to charge Borrowers therefor, except for taxes that (i) are being
actively contested in good faith and by appropriate proceedings and with respect to which Borrowers
maintain reasonable reserves on their books therefor and (ii) would not reasonably be expected
to result in any Lien other than a Permitted Lien. In no event shall Agent or any Lender be liable
for any taxes to any governmental taxing authority that may be due by any Borrower.
6.3 Administration of Inventory. Each Borrower shall keep records of its Inventory which records shall be complete and accurate in
all material respects. Borrowers shall furnish to Agent Inventory reports concurrently with the delivery
of each Borrowing Base Certificate described in subsection 8.1.4 or more frequently as requested
by Agent, which reports will be in such other format and detail as Agent shall request and shall
include a current list of all locations of each Borrowers Inventory. Borrowers shall conduct
a physical inventory no less frequently than annually and shall provide to Agent a report based on
each such physical inventory promptly thereafter, together with such supporting information as Agent
shall reasonably request.
6.4 Administration of Equipment.
6.4.1 Records and Schedules of Equipment. Each Borrower shall keep records of its Equipment which shall be complete and accurate in all material
respects itemizing and describing the kind, type, quality, quantity and book value of its Equipment
and all dispositions made in accordance with subsection 6.4.2 hereof, and Borrowers shall, and
shall cause each of their Subsidiaries to, furnish Agent with a current schedule containing the foregoing
information on at least an annual basis and more often if requested by Agent. Promptly after the
request therefor by Agent, Borrowers shall deliver to Agent any and all evidence of ownership, if
any, of any of their Equipment.
6.4.2 Dispositions of Equipment. Borrowers shall not, and shall not permit any of their Subsidiaries to, sell, lease or otherwise
dispose of or transfer any of their respective Equipment or other fixed assets or any part thereof
without the prior written consent of Agent; provided, however, that the foregoing restriction shall not apply, for so long as no Default or Event of Default
exists and is continuing, to (i) dispositions of Equipment and other fixed assets
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|22
|--



|which, in the aggregate during any consecutive twelve-month period, have a fair market value or a book
value, whichever is less, of One Million ($1,000,000) or less, provided that all proceeds thereof are remitted to Agent for application to the Loans as provided in subsection 3.3.1
or the holders of the Indebtedness outstanding under the Term Loan Documents in accordance with the
terms of such Term Loan Documents, or (ii) replacements of Equipment or other fixed assets that
are substantially worn, damaged or obsolete with Equipment or other fixed assets of like kind, function
and value which are useful in the business of any Borrower or one of its Subsidiaries, provided that the replacement Equipment or other fixed assets shall be acquired within ninety (90) days after
any disposition of the Equipment or other fixed assets that are to be replaced and the replacement
Equipment or other fixed assets shall be free and clear of Liens other than Permitted Liens that
are not Purchase Money Liens.
6.5 Payment of Charges. All amounts chargeable to Borrowers under Section 6 hereof shall be Obligations secured by all
of the Collateral, shall be payable on demand and shall bear interest from the date such advance
was made until paid in full at the rate applicable to Base Rate Revolving Portions from time to time.
SECTION 7.  REPRESENTATIONS AND WARRANTIES
7.1 General Representations and Warranties. To induce Agent and each Lender to enter into this Agreement and to make advances hereunder, Borrowers
warrant, represent and covenant to Agent and each Lender, on a joint and several basis, that:
7.1.1 Qualification. Each Borrower and each of its Subsidiaries is a corporation, limited partnership or limited liability
company duly organized, validly existing and in good standing under the laws of the jurisdiction
of its incorporation or organization. Each Borrower and each of its Subsidiaries is duly qualified
and is authorized to do business and is in good standing as a foreign limited liability company,
limited partnership or corporation, as applicable, in each state or jurisdiction listed on Exhibit 7.1.1 hereto and in all other states and jurisdictions in which the failure of any Borrower or any of its
Subsidiaries to be so qualified could reasonably be expected to have a Material Adverse Effect.
7.1.2 Power and Authority. Each Borrower and each of its Subsidiaries executing this Agreement is duly authorized and empowered
to enter into, execute, deliver and perform this Agreement and each of the other Loan Documents to
which it is a party. The execution, delivery and performance of this Agreement and each of the other
Loan Documents have been duly authorized by all necessary corporate or other relevant action and
do not and will not: (i) require any consent or approval of the shareholders or members
of any Borrower or any of the shareholders, partners or members, as the case may be, of any Subsidiary
of any Borrower; (ii) contravene any Borrowers or any of its Subsidiaries charter,
articles or certificate of incorporation, partnership agreement, certificate of formation, by-laws,
limited liability agreement, operating agreement or other organizational documents (as the case may
be); (iii) violate, or cause any Borrower or any of its Subsidiaries to be in default under,
any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award in effect having applicability to any Borrower or any of its Subsidiaries, the violation
of which could reasonably be expected to have a Material Adverse Effect; (iv) result in a breach
of or constitute a default under any indenture or loan or credit agreement or any other agreement,
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|23
|--



|lease or instrument to which any Borrower or any of its Subsidiaries is a party or by which it or its
Properties may be bound or affected, the breach of or default under which could reasonably be expected
to have a Material Adverse Effect; or (v) result in, or require, the creation or imposition
of any Lien (other than Permitted Liens) upon or with respect to any of the Properties now owned
or hereafter acquired by any Borrower or any of its Subsidiaries.
7.1.3 Legally Enforceable Agreement. This Agreement is, and each of the other Loan Documents when delivered under this Agreement will
be, a legal, valid and binding obligation of each Borrower and each of its Subsidiaries party thereto,
enforceable against it in accordance with its respective terms.
7.1.4 Capital Structure. Exhibit 7.1.4 hereto states, as of the date hereof, (i) the correct name of each of the Subsidiaries of each
Borrower, its jurisdiction of incorporation or organization and the percentage of its Voting Stock
owned by each Borrower, (ii) the name of each Borrowers and each of its Subsidiaries
corporate or joint venture relationships and the nature of the relationship, (iii) the number,
nature and holder of all outstanding Securities of each Borrower and the holder of Securities of
each Subsidiary of each Borrower (other than MFRI) and (iv) the number of authorized, issued
and treasury Securities of each Borrower. Each Borrower has good title to all of the Securities it
purports to own of each of such Subsidiaries, free and clear in each case of any Lien other than
Permitted Liens. All such Securities have been duly issued and are fully paid and non-assessable.
As of the date hereof, there are no outstanding options to purchase, or any rights or warrants to
subscribe for, or any commitments or agreements to issue or sell, any Securities or obligations convertible
into, or any powers of attorney relating to, any Securities of any Borrower or any of its Subsidiaries.
Except as set forth on Exhibit 7.1.4, as of the date hereof, there are no outstanding agreements or instruments binding upon any of any
Borrowers or any of its Subsidiaries partners, members or shareholders, as the case may
be, relating to the ownership of its Securities.
7.1.5 Names; Organization. Since June 1, 1997, neither any Borrower nor any of its Subsidiaries has been known as or has
used any legal, fictitious or trade names except those listed on Exhibit 7.1.5 hereto. Except as set forth on Exhibit 7.1.5, neither any Borrower nor any of its Subsidiaries has been the surviving entity of a merger or consolidation
or has acquired all or substantially all of the assets of any Person since June 1, 1997. Each
of each Borrowers and each of its Subsidiaries state(s) of incorporation or organization,
Type of Organization and Organizational I.D. Number is set forth on Exhibit 7.1.5. The exact legal name of each Borrower and each of its Subsidiaries is set forth on Exhibit 7.1.5.
7.1.6 Business Locations; Agent for Process. Each of each Borrowers and each of its Subsidiarys chief executive office, location of
books and records and other places of business are as listed on Exhibit 6.1.1 hereto, as updated from time to time by Borrowers in accordance with the provisions of subsection 6.1.1.
During the preceding one-year period, neither any Borrower nor any of its Subsidiaries has had an
office, place of business or agent for service of process, other than as listed on Exhibit 6.1.1. All tangible Collateral is and will at all times be kept by Borrowers and their Subsidiaries in accordance
with subsection 6.1.1. Except as shown on Exhibit 6.1.1, as of the date hereof, no Inventory is stored with a bailee, distributor, warehouseman or similar
party, nor is any Inventory consigned to any Person.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|24
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|7.1.7 Title to Properties; Priority of Liens. Each Borrower and each of its Subsidiaries has good, indefeasible and marketable title to and fee
simple ownership of, or valid and subsisting leasehold interests in, all of its real Property, and
good title to all of the Collateral and all of its other Property, in each case, free and clear of
all Liens except Permitted Liens. Each Borrower and each of its Subsidiaries has paid or discharged
all lawful claims which, if unpaid, might become a Lien against any of any Borrowers or such
Subsidiarys Properties that is not a Permitted Lien. The Liens granted to Agent under Section 5
hereof are first priority Liens, subject only to Permitted Liens.
7.1.8 Accounts. Agent may rely, in determining which Accounts are Eligible Accounts, on all statements and representations
made by any Borrower with respect to any Account or Accounts. With respect to each of each Borrowers
Accounts, whether or not such Account is an Eligible Account, unless otherwise disclosed to Agent
in writing:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| | (i) It is genuine and in all respects what it purports to be, and it is not evidenced by a judgment;                                                                                                                                                                                                                                                             
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                  
| | (ii) It arises out of a completed, bona fide sale and delivery of goods or rendition of services by a Borrower, in the ordinary course of its business
  and in accordance with the terms and conditions of all purchase orders, contracts or other documents
  relating thereto and forming a part of the contract between such Borrower and the Account Debtor;
| |                                                                                                                                                                                                                                                                                                                                                                  
| | (iii) It is for a liquidated amount maturing as stated in the duplicate invoice covering such sale or rendition
  of services, a copy of which has been furnished or is available to Agent;                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                  
| | (iv) There are no facts, events or occurrences which in any way impair the validity or enforceability of
  any Accounts or tend to materially reduce the amount payable thereunder from the face amount of the
  invoice and statements delivered or made available to Agent with respect thereto;                                                               
| |                                                                                                                                                                                                                                                                                                                                                                  
| | (v) To the best of each Borrowers knowledge, the Account Debtor thereunder (1) had the capacity
  to contract at the time any contract or other document giving rise to the Account was executed and
  (2) such Account Debtor is Solvent; and                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                  
| | (vi) To the best of each Borrowers knowledge, there are no proceedings or actions which are threatened
  or pending against the Account Debtor thereunder which might result in any material adverse change
  in such Account Debtors financial condition or the collectibility of such Account.                                                               

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|7.1.9 Equipment. The Equipment of Borrowers and their Subsidiaries is in good operating condition and repair, and
all necessary replacements of and repairs thereto shall be made so that the operating efficiency
thereof shall be maintained and preserved, reasonable wear and tear excepted. Neither any Borrower
nor any of its Subsidiaries will permit any Equipment to become affixed to any real Property leased
to any Borrower or any of its Subsidiaries so that an interest arises therein under the real estate
laws of the applicable jurisdiction unless the landlord of such real Property has executed a landlord
waiver or leasehold

|25
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|mortgage in favor of and in form reasonably acceptable to Agent, and no Borrower will permit any of
the Equipment of any Borrower or any of its Subsidiaries to become an accession to any personal Property
other than Equipment that is subject to first priority (except for Permitted Liens) Liens in favor
of Agent.
7.1.10 Financial Statements; Fiscal Year. The Consolidated and consolidating balance sheets of MFRI and its Subsidiaries (including the accounts
of all Subsidiaries of MFRI and their respective Subsidiaries for the respective periods during which
a Subsidiary relationship existed) as of April 30, 2002, and the related statements of income,
changes in shareholders equity, and changes in financial position for the periods ended on
such dates, have been prepared in accordance with GAAP, and present fairly in all material respects
the financial positions of MFRI and such Persons, taken as a whole, at such dates and the results
of MFRIs and such Persons operations, taken as a whole, for such periods. As of the date
hereof, since February 28, 2002, there has been no material adverse change in the financial position
of MFRI and such other Persons, taken as a whole, as reflected in the Consolidated balance sheet
as of such date. Agent has received a copy of MFRIs quarterly report on Form 10-Q for
the fiscal quarter ended April 30, 2002, which discloses certain changes with respect to the operating
results and certain write-offs to be taken by MFRI. As of the date hereof, the fiscal year of MFRI
and each of its Subsidiaries ends on January 31 of each year.
7.1.11 Full Disclosure. The financial statements referred to in subsection 7.1.10 hereof do not, nor does this Agreement
or any other written statement of any Borrower to Agent or any Lender contain any untrue statement
of a material fact or omit a material fact necessary to make the statements contained therein or
herein not misleading. There is no fact which any Borrower has failed to disclose to Agent or any
Lender in writing which could reasonably be expected to have a Material Adverse Effect.
7.1.12 Solvent Financial Condition. Each Borrower and each of its Subsidiaries, is now and, after giving effect to the initial Loans
to be made and the initial Letters of Credit and LC Guaranties to be issued hereunder and all related
transactions, will be, Solvent.
7.1.13 Surety Obligations. Except as set forth on Exhibit 7.1.13, as of the date hereof, neither any Borrower nor any of its Subsidiaries is obligated as surety or
indemnitor under any surety or similar bond or other contract or has issued or entered into any agreement
to assure payment, performance or completion of performance of any undertaking or obligation of any
Person.
7.1.14 Taxes. MFRIs federal tax identification number is 36-3922969. The federal tax identification number
of each Subsidiary of MFRI is shown on Exhibit 7.1.14 hereto. Each Borrower and each of its Subsidiaries has filed all federal, state and local tax returns
and other reports relating to taxes it is required by law to file, and has paid, or made provision
for the payment of, all taxes, assessments, fees, levies and other governmental charges upon it,
its income and Properties as and when such taxes, assessments, fees, levies and charges are due and
payable, unless and to the extent any thereof are being actively contested in good faith and by appropriate
proceedings and each Borrower and each of its Subsidiaries maintains reasonable reserves on its books
therefor. The provision for taxes on the books of each Borrower and its
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|26
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|Subsidiaries is adequate for all years not closed by applicable statutes, and for the current fiscal
year.
7.1.15 Brokers. Except as shown on Exhibit 7.1.15 hereto, there are no claims for brokerage commissions, finders fees or investment banking fees
in connection with the transactions contemplated by this Agreement.
7.1.16 Patents, Trademarks, Copyrights and Licenses. Each Borrower and each of its Subsidiaries owns, possesses or licenses or has the right to use all
the patents, trademarks, service marks, trade names, copyrights, licenses and other Intellectual
Property necessary for the present and planned future conduct of its business without any known conflict
with the rights of others, except for such conflicts as could not reasonably be expected to have
a Material Adverse Effect. All such patents, trademarks, service marks, trade names, copyrights,
licenses, and other similar rights are listed on Exhibit 7.1.16 hereto. No claim has been asserted to any Borrower or any of its Subsidiaries which is currently pending
that their use of their Intellectual Property or the conduct of their business does or may infringe
upon the Intellectual Property rights of any third party. To the knowledge of Borrowers and except
as set forth on Exhibit 7.1.16 hereto, as of the date hereof, no Person is engaging in any activity that infringes in any material
respect upon any Borrowers or any of its Subsidiaries material Intellectual Property.
Except as set forth on Exhibit 7.1.16, each Borrowers and each of its Subsidiaries (i) material trademarks, service marks,
and copyrights are registered with the U.S. Patent and Trademark Office or in the U.S. Copyright
Office, as applicable and (ii) material license agreements and similar arrangements relating
to its Inventory (1) permits, and does not restrict, the assignment by any Borrower or any of
its Subsidiaries to Agent, or any other Person designated by Agent, of all of any Borrowers
or such Subsidiarys, as applicable, rights, title and interest pertaining to such license agreement
or such similar arrangement and (2) would permit the continued use by any Borrower or such Subsidiary,
or Agent or its assignee, of such license agreement or such similar arrangement and the right to
sell Inventory subject to such license agreement for a period of no less than 6 months after a default
or breach of such agreement or arrangement. The consummation and performance of the transactions
and actions contemplated by this Agreement and the other Loan Document, including without limitation,
the exercise by Agent of any of its rights or remedies under Section 10, will not result in
the termination or impairment of any of any Borrowers or any of its Subsidiaries ownership
or rights relating to its Intellectual Property, except for such Intellectual Property rights the
loss or impairment of which could not reasonably be expected to have a Material Adverse Effect. Except as listed on Exhibit 7.1.16 and except as could not reasonably be expected to have a Material Adverse Effect, (i) neither
any Borrower nor any of its Subsidiaries is in breach of, or default under, any term of any license
or sublicense with respect to any of its Intellectual Property and (ii) to the knowledge of
any Borrower, no other party to such license or sublicense is in breach thereof or default thereunder,
and such license is valid and enforceable.
7.1.17 Governmental Consents. Each Borrower and each of its Subsidiaries has, and is in good standing with respect to, all governmental
consents, approvals, licenses, authorizations, permits, certificates, inspections and franchises
necessary to continue to conduct its business as heretofore or proposed to be conducted by it and
to own or lease and operate its Properties as now owned or leased by it, except where the failure
to possess or so maintain such rights could not reasonably be expected to have a Material Adverse
Effect.
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|27
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|7.1.18 Compliance with Laws. Each Borrower and each of its Subsidiaries has duly complied, and its Properties, business operations
and leaseholds are in compliance with, the provisions of all federal, state and local laws, rules
and regulations applicable to such Borrower or such Subsidiary, as applicable, its Properties or
the conduct of its business, except for such non-compliance as could not reasonably be expected to
have a Material Adverse Effect, and there have been no citations, notices or orders of noncompliance
issued to any Borrower or any of its Subsidiaries under any such law, rule or regulation, except
where such noncompliance could not reasonably be expected to have a Material Adverse Effect. Each
Borrower and each of its Subsidiaries has established and maintains an adequate monitoring system
to insure that it remains in compliance in all material respects with all federal, state and local
rules, laws and regulations applicable to it. No Inventory has been produced in violation of the
Fair Labor Standards Act (29 U.S.C. §201 et seq.), as amended.
7.1.19 Restrictions. Neither any Borrower nor any of its Subsidiaries is a party or subject to any contract or agreement
which restricts its right or ability to incur Indebtedness, other than as set forth on Exhibit 7.1.19 hereto, none of which prohibit the execution of or compliance with this Agreement or the other Loan
Documents by any Borrower or any of its Subsidiaries, as applicable.
7.1.20 Litigation. Except as set forth on Exhibit 7.1.20 hereto, there are no actions, suits, proceedings or investigations pending, or to the knowledge of
any Borrower, threatened, against or affecting any Borrower or any of its Subsidiaries, or the business,
operations, Properties, prospects, profits or condition of any Borrower or any of its Subsidiaries
which, singly or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
Neither any Borrower nor any of its Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration board or tribunal, which,
singly or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
7.1.21 No Defaults. Except as set forth on Exhibit 7.1.21 attached hereto, no event has occurred and no condition exists which would, upon or after the execution
and delivery of this Agreement or any Borrowers performance hereunder, constitute a Default
or an Event of Default. Neither any Borrower nor any of its Subsidiaries is in default in (and no
event has occurred and no condition exists which constitutes, or which the passage of time or the
giving of notice or both would constitute, a default in) the payment of any Indebtedness to any Person
for Money Borrowed in excess of One Million Dollars ($1,000,000).
7.1.22 Leases. Exhibit 7.1.22 hereto is a complete listing of all capitalized and operating personal property leases of each Borrower
and its Subsidiaries and all real property leases of each Borrower and its Subsidiaries. Each Borrower
and each of its Subsidiaries is in full compliance with all of the terms of each of its respective
capitalized and operating leases, except where the failure to so comply could not reasonably be expected
to have a Material Adverse Effect.
7.1.23 Pension Plans. Except as disclosed on Exhibit 7.1.23 hereto, neither any Borrower nor any of its Subsidiaries has any Plan. Each Borrower and each of its
Subsidiaries is in compliance with the requirements of ERISA and the regulations promulgated thereunder
with
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|28
|--



|respect to each Plan, except where the failure to so comply could not reasonably be expected to have
a Material Adverse Effect. No fact or situation that could reasonably be expected to result in a
material adverse change in the financial condition of any Borrower and its Subsidiaries exists in
connection with any Plan. Neither any Borrower nor any of its Subsidiaries has any withdrawal liability
in connection with a Multiemployer Plan.
7.1.24 Trade Relations. There exists no actual or, to any Borrowers knowledge, threatened termination, cancellation
or limitation of, or any modification or change in, the business relationship between any Borrower
or any of its Subsidiaries and any customer or any group of customers whose purchases individually
or in the aggregate are material to the business of any Borrower and its Subsidiaries, or with any
material supplier, except in each case, where the same could not reasonably be expected to have a
Material Adverse Effect, and there exists no present condition or state of facts or circumstances
which would prevent any Borrower or any of its Subsidiaries from conducting such business after the
consummation of the transactions contemplated by this Agreement in substantially the same manner
in which it has heretofore been conducted.
7.1.25 Labor Relations. Except as described on Exhibit 7.1.25 hereto, as of the date hereof, neither any Borrower nor any of its Subsidiaries is a party to any
collective bargaining agreement. There are no material grievances, disputes or controversies with
any union or any other organization of any Borrowers or any of its Subsidiaries employees,
or threats of strikes, work stoppages or any asserted pending demands for collective bargaining by
any union or organization, except those that could not reasonably be expected to have a Material
Adverse Effect.
7.2 Continuous Nature of Representations and Warranties. Each representation and warranty contained in this Agreement and the other Loan Documents shall be
continuous in nature and shall remain accurate, complete and not misleading at all times during the
term of this Agreement, except for changes in the nature of any Borrowers or one of Borrowers
Subsidiarys business or operations that would render the information in any exhibit attached
hereto or to any other Loan Document either inaccurate, incomplete or misleading, so long as Majority
Lenders have consented to such changes or such changes are expressly permitted by this Agreement.
Without limiting the generality of the foregoing, each Loan request made or deemed made pursuant
to subsection 3.1.1 hereof shall constitute Borrowers reaffirmation, as of the date of
each such loan request, of each representation, warranty or other statement made or furnished to
Agent or any Lender by or on behalf of any Borrower, any Subsidiary of any Borrower, or any Guarantor
in this Agreement, any of the other Loan Documents, or any instrument, certificate or financial statement
furnished in compliance with or in reference thereto.
7.3 Survival of Representations and Warranties. All representations and warranties of Borrowers contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Agent and each Lender and
the parties thereto and the closing of the transactions described therein or related thereto.
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|SECTION 8.  COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the Term, and thereafter for so long as there are any Obligations outstanding, Borrowers covenant
that, unless otherwise consented to by Majority Lenders, in writing, they shall:
8.1.1 Visits and Inspections; Lender Meeting. Permit (i) representatives of Agent, and during the continuation of any Default or Event of
Default any Lender, from time to time, as often as may be reasonably requested, but only during normal
business hours, to visit and inspect the Properties of each Borrower and each of its Subsidiaries,
inspect, audit and make extracts from its books and records, and discuss with its officers, its employees
and its independent accountants, each Borrowers and each of its Subsidiaries business,
assets, liabilities, financial condition, business prospects and results of operations and (ii) appraisers
engaged pursuant to Section 2.10 (whether or not personnel of Agent), from time to time, as
often as may be reasonably requested, but only during normal business hours, to visit and inspect
the Properties of each Borrower and each of its Subsidiaries, for the purpose of completing appraisals
pursuant to Section 2.10. Agent, if no Default or Event of Default then exists, shall give Borrowers
reasonable prior notice of any such inspection or audit. Without limiting the foregoing, Borrowers
will participate and will cause their key management personnel to participate in a meeting with Agent
and Lenders periodically during each year (except that during the continuation of an Event of Default
such meetings may be held more frequently as requested by Agent or Majority Lenders), which meeting(s)
shall be held at such times and such places as may be reasonably requested by Agent.
8.1.2 Notices. Promptly notify Agent in writing of the occurrence of any event or the existence of any fact which
renders any representation or warranty in this Agreement or any of the other Loan Documents inaccurate,
incomplete or misleading in any material respect as of the date made or remade. In addition, each
Borrower agrees to provide Agent with prompt written notice of any change in the information disclosed
in any Exhibit hereto, in each case after giving effect to the materiality limits and Material Adverse
Effect qualifications contained therein.
8.1.3 Financial Statements. Keep, and cause each of its Subsidiaries to keep, adequate records and books of account with respect
to its business activities in which proper entries are made in accordance with customary accounting
practices reflecting all its financial transactions; and cause to be prepared and furnished to Agent
and each Lender, the following, all to be prepared in accordance with GAAP applied on a consistent
basis, unless MFRIs certified public accountants concur in any change therein and such change
is disclosed to Agent and is consistent with GAAP:
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| | (i) not later than 90 days after the close of each fiscal year of MFRI, unqualified (except for a qualification
  for a change in accounting principles with which the accountant concurs) audited financial statements
  of MFRI and its Subsidiaries as of the end of such year, on a Consolidated and consolidating basis,
  certified by a firm of independent certified public accountants of recognized standing selected by
  MFRI but acceptable to Agent and, within a reasonable time thereafter permit Agent to review a copy
  of any management letter issued in connection therewith;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | (ii) not later than 30 days (40 days with respect to each January and February within the Term and the
  months of May through December, 2002) after the end of each month hereafter, including the last month
  of MFRIs fiscal year, unaudited interim financial statements of MFRI and its Subsidiaries as
  of the end of such month and of the portion of the fiscal year then elapsed, on a Consolidated and
  consolidating basis, certified by the principal financial officer of MFRI as prepared in accordance
  with GAAP and fairly presenting in all material respects the financial position and results of operations
  of MFRI and its Subsidiaries for such month and period subject only to changes from audit and year-end
  adjustments and except that such statements need not contain notes; not later than 30 days after
  the end of the months of May through December, 2002, unaudited unconsolidated interim financial statements
  of MFRI and its Subsidiaries as of the end of such month and of the portion of the fiscal year then
  elapsed, certified by the principal financial officer of MFRI as prepared in accordance with GAAP
  and fairly presenting in all material respects the financial position and results of operation of
  MFRI and its Subsidiaries for such month and period subject only to changes in audit and year-end
  adjustments and Consolidations and other non-material adjustments and except that such statements need not contain notes;
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (iii) together with each delivery of financial statements pursuant to clauses (i) and (ii) of this
  subsection 8.1.3, a management report (1) setting forth in comparative form the corresponding
  figures for the corresponding periods of the previous fiscal year and the corresponding figures from
  the most recent Projections for the current fiscal year delivered pursuant to subsection 8.1.7
  and (2) identifying the reasons for any significant variations. The information above shall
  be presented in reasonable detail and shall be certified by the chief financial officer of MFRI to
  the effect that such information fairly presents in all material respects the results of operation
  and financial condition of MFRI and its Subsidiaries as at the dates and for the periods indicated;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (iv) promptly after the sending or filing thereof, as the case may be, copies of any proxy statements,
  financial statements or reports which MFRI has made available to its Securities holders and copies
  of any regular, periodic and special reports or registration statements which MFRI or any of its
  Subsidiaries files with the Securities and Exchange Commission or any governmental authority which
  may be substituted therefor, or any national securities exchange;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (v) upon request of Agent, copies of any annual report to be filed with ERISA in connection with each
  Plan;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (vi) within forty-five (45) days after the end of each fiscal quarter hereafter, a certificate in form
  and substance reasonably acceptable to Agent, evidencing that Borrowers are in compliance with the
  financial covenants contained in the Term Loan Documents; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (vii) such other data and information (financial and otherwise) as Agent or any Lender, from time to time,
  may reasonably request, bearing upon or related to the Collateral or any Borrowers or any of
  its Subsidiaries financial condition or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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|Promptly after the receipt of the financial statements by MFRI described in clause (i) of
this subsection 8.1.3, MFRI shall permit Agent to review the accountants letter to MFRIs
management that is prepared in connection with such financial statements and also shall cause to
be prepared and shall furnish to Agent a certificate of the aforesaid certified public accountants
certifying to Agent that, based upon their examination of the financial statements of MFRI and its
Subsidiaries performed in connection with their examination of said financial statements, they are
not aware of any Default or Event of Default, or, if they are aware of such Default or Event of Default,
specifying the nature thereof. Concurrently with the delivery of the financial statements described
in paragraph (i) and (ii) of this subsection 8.1.3, or more frequently if reasonably requested
by Agent, MFRI shall cause to be prepared and furnished to Agent a Compliance Certificate in the form of Exhibit 8.1.3 hereto executed by the Chief Financial Officer of MFRI (a Compliance Certificate).
8.1.4 Borrowing Base Certificates. On or before the third Business Day of each week from and after the date hereof, Borrowers shall
deliver to Agent, in form acceptable to Agent, a Borrowing Base Certificate (on a Consolidated and
consolidating basis) as of the last day of the immediately preceding week, with such supporting materials
as Agent shall reasonably request. If Borrowers deem it advisable, or Agent shall request, Borrowers
shall execute and deliver to Agent Borrowing Base Certificates more frequently than weekly.
8.1.5 Landlord, Processor and Storage Agreements. Provide Agent with copies of all agreements between any Borrower or any of its Subsidiaries and any
landlord, warehouseman, processor, distributor or consignee which owns or is the lessee of any premises
at which any Collateral may, from time to time, be kept. With respect to any lease (other than leases
for sales offices), warehousing agreement or any processing agreement in any case entered into after
the Closing Date, Borrowers shall provide Agent with landlord waivers, bailee letters or processor
letters with respect to such premises. Such landlord waivers, bailee letters or processor letters
shall be in a form supplied by Agent to Borrowers with such reasonable revisions as are customarily
accepted by Agent or by similar financial institutions in similar financial transactions.
8.1.6 Projections. No later than the first day of each fiscal year of MFRI, deliver to Agent projections of sales and
gross margins of MFRI and each of its Subsidiaries for such fiscal year, month by month. No later
than February 28 of each fiscal year of MFRI, deliver to Agent Projections of MFRI and each of its
Subsidiaries for the then current fiscal year month by month with respect to income statements and
quarter by quarter with respect to balance sheets and statements of cash flows.
8.1.7 Subsidiaries. Cause each Subsidiary of each Borrower that is not a Borrower, whether now or hereafter in existence,
promptly upon Agents request therefor, to execute and deliver to Agent a Guaranty Agreement
and a security agreement pursuant to which such Subsidiary guaranties the payment of all Obligations
and grants to Agent a first priority Lien (subject only to Permitted Liens) on all of its Properties
of the types described in Section 5.1; provided, however, that with respect to existing Subsidiaries, no such Guaranty Agreement and/or security agreement
shall be required to be executed or delivered by any such Subsidiary if such Subsidiary is prohibited
from executing any such document or agreement by the terms of any statute, law, contract, agreement,
instrument or document existing as of the
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|Closing Date evidencing such Subsidiarys Money Borrowed. Additionally, the applicable Borrower
shall execute and deliver to Agent a pledge agreement pursuant to which such Borrower grants to Agent
a first priority Lien (subject only to Permitted Liens) with respect to all of the issued and outstanding
Securities of each such Subsidiary.
8.1.8 Deposit and Brokerage Accounts. For each deposit account or brokerage account that any Borrower at any time opens or maintains, such
Borrower shall, at Agents request and option, pursuant to an agreement in form and substance
reasonably satisfactory to Agent, cause the depository bank or securities intermediary, as applicable,
to agree to comply at any time with instructions from Agent to such depository bank or securities
intermediary, as applicable, directing the disposition of funds from time to time credited to such
deposit or brokerage account, without further consent of the applicable Borrower.
8.1.9 Cash Management Services. Prior to the date which is sixty (60) days after the Closing Date, Borrower shall enter into mutually
agreeable cash management agreements with Bank, to the extent Bank offers such services at competitive
rates.
8.2 Negative Covenants. During the Term, and thereafter for so long as there are any Obligations outstanding, Borrowers covenant
that, unless otherwise consented to by Majority Lenders, in writing, it shall not:
8.2.1 Mergers; Consolidations; Acquisitions; Structural Changes. Merge or consolidate, or permit any Subsidiary of any Borrower to merge or consolidate, with any
Person; nor change its or any of its Subsidiaries state of incorporation or organization, Type
of Organization or Organizational I.D. Number; nor change its or any of its Subsidiaries legal
name; nor acquire, nor permit any of its Subsidiaries to acquire, all or any substantial part of
the Properties of any Person, except for:
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| | (i) mergers of any Subsidiary of any Borrower into another Borrower or another wholly-owned Subsidiary
  of another Borrower; and               
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                 
| | (ii) acquisitions of assets consisting of fixed assets or real property that constitute Capital Expenditures
  permitted under subsection 8.2.8.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8.2.2 Loans. Make, or permit any Subsidiary of any Borrower to make, any loans or other advances of money to any
Person, other than (i) for salary, travel advances, advances against commissions and other similar
advances to employees in the ordinary course of business, (ii) extensions of trade credit in
the ordinary course of business, (iii) deposits with financial institutions permitted under
this Agreement, (iv) intercompany advances (and repayments thereof) in the ordinary course of business
by MFRI to its Subsidiaries for such Subsidiaries working capital needs and (v) prepaid
expenses.
8.2.3 Total Indebtedness. Create, incur, assume, or suffer to exist, or permit any Subsidiary of any Borrower to create, incur
or suffer to exist, any Indebtedness, except:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| | (i) Obligations owing to Agent or any Lender under this Agreement or any of the other Loan Documents;
| | -----------------------------------------------------------------------------------------------------

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| | (ii) Indebtedness, including without limitation Subordinated Debt, existing on the date of this Agreement
and listed on Exhibit 8.2.3;                                                                                                                     
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                            
| | (iii) Permitted Purchase Money Indebtedness;                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                            
| | (iv) contingent liabilities arising out of endorsements of checks and other negotiable instruments for
  deposit or collection in the ordinary course of business;                                                                                         
| |                                                                                                                                                                                                                                                            
| | (v) Guaranties of any Indebtedness permitted hereunder;                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                            
| | (vi) Indebtedness in respect of intercompany advances permitted by Section 8.2.2(iv);                                                                                                                                                                      
| |                                                                                                                                                                                                                                                            
| | (vii) obligations to pay Rentals permitted by subsection 8.2.18;                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                            
| | (viii) Indebtedness outstanding pursuant to the Term Loan Documents;                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                            
| | (ix) IRB Indebtedness;                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                            
| | (x) Existing Mortgage Indebtedness;                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                            
| | (xi) Money Borrowed (either as an operating loan or a real estate mortgage loan) in a principal amount
  not to exceed Seven Hundred Fifty Thousand Dollars ($750,000) invested by Midwescos Danish
  Subsidiaries and guaranteed by Midwesco and/or MFRI;
| |                                                                                                                                                                                                                                                            
| | (xii) Indebtedness incurred in connection with the Lebanon Refinancing;                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                            
| | (xiii) to the extent not included above, trade payables, accruals and accounts payable in the ordinary course
  of business (in each case to the extent not overdue) not for Money Borrowed; and                                                           
| |                                                                                                                                                                                                                                                            
| | (xiv) Indebtedness not included in paragraphs (i) through (xiii) above which does not exceed at any
  time, in the aggregate, the sum of One Million Dollars ($1,000,000).                                                                                 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8.2.4 Affiliate Transactions. Enter into, or be a party to, or permit any Subsidiary of any Borrower to enter into or be a party
to, any transaction with any Affiliate of any Borrower or any holder of any Securities of any Borrower
or any Subsidiary of any Borrower, including without limitation any management, consulting or similar
fees, except in the ordinary course of and pursuant to the reasonable requirements of the applicable
Borrowers or such Subsidiarys business and upon fair and reasonable terms which are fully
disclosed to Agent and are no less favorable to such Borrower or such Subsidiary than would be obtained
in a comparable arms-length transaction with a Person not an Affiliate or Security holder of Borrower.
Agent acknowledges the Management Services Agreement dated December 30, 1996 between MFRI, Inc.
and Midwesco Illinois, Inc., as amended prior to the Closing Date, meets the requirements of, and
is permissible under, this Section 8.2.4. Borrowers covenant that true and

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|--



|correct copies of such Services Agreement and all amendments thereto have been delivered to Agent.
8.2.5 Limitation on Liens. Create or suffer to exist, or permit any Subsidiary of any Borrower to create or suffer to exist,
any Lien upon any of its Property, income or profits, whether now owned or hereafter acquired, except:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                      

| | (i) Liens at any time granted in favor of Agent for the benefit of Lenders;                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (ii) Liens for taxes, assessments or governmental charges (excluding any Lien imposed pursuant to any of
  the provisions of ERISA) not yet due, or being contested in the manner described in subsection 7.1.14
  hereto, but only if in Agents judgment such Lien would not reasonably be expected to adversely
  effect Agents rights or the priority of Agents lien on any Collateral;                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (iii) Liens arising in the ordinary course of the business of any Borrower or any of its Subsidiaries by
  operation of law or regulation, but only if payment in respect of any such Lien is not at the time
  required and such Liens do not, in the aggregate, materially detract from the value of the Property
  of any Borrower or any of its Subsidiaries or materially impair the use thereof in the operation
  of the business of any Borrower or any of its Subsidiaries;
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (iv) Purchase Money Liens securing Permitted Purchase Money Indebtedness;                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (v) such other Liens as appear on Exhibit 8.2.5 hereto;                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (vi) Liens incurred or deposits made in the ordinary course of business in connection with (1) workers
  compensation, social security, unemployment insurance and other like laws or (2) sales contracts,
  leases, statutory obligations, work in progress advances and other similar obligations not incurred
  in connection with the borrowing of money or the payment of the deferred purchase price of property;                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (vii) reservations, covenants, zoning and other land use regulations, title exceptions or encumbrances granted
  in the ordinary course of business, affecting real Property owned or leased by any Borrower or one
  of its Subsidiaries; provided that such exceptions do not in the aggregate materially interfere with the use of such Property in
  the ordinary course of such Borrowers or such Subsidiarys business;                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (viii) judgment Liens that do not give rise to an Event of Default under subsection 10.1.15;                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (ix) Liens securing Indebtedness outstanding under the Term Loan Documents;                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (x) Liens securing the IRB Indebtedness;                                                                                                                                                                                                                                                                                                                                                                                                                                            

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|--



| | (xi) Liens on a Borrowers or Guarantors real Property, improvements, and Fixtures securing
  the Existing Mortgage Indebtedness;
| | ----------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                   
| | (xii) Liens on the real Property of Midwescos Danish Subsidiaries securing Money Borrowed of such
  Danish Subsidiaries;         
| |                                                                                                                                   
| | (xiii) Liens securing the Lebanon Refinancing;                                                                                    
| |                                                                                                                                   
| | (xiv) Liens incurred in connection with the Computer Sale and Leaseback; and                                                      
| |                                                                                                                                   
| | (xv) such other Liens as Majority Lenders may hereafter approve in writing.                                                       

|                                              
|----------------------------------------------
|8.2.6 Payments and Amendments of Certain Debt.
|                                              

| | (i) Except as otherwise provided for in subsection 8.2.6(ii) below, (a) make or permit any Subsidiary
  of any Borrower to prepay or repurchase, directly or indirectly, any portion of (x) the Indebtedness
  evidenced by the Term Loan Documents, (y) the Existing Mortgage Indebtedness, (z) any Indebtedness
  incurred in connection with the Lebanon Refinancing, or (aa) the IRB Indebtedness or (b) amend or
  modify (x) any agreement, instrument, or document evidencing or relating to Existing Mortgage Indebtedness,
  (y) the provisions of the Term Loan Documents relating to interest rates, principal amortizations
  and financial covenants, (z) any agreement, instrument or document evidencing or relating to the
  Lebanon Refinancing, or (aa) any agreement, instrument or document relating to the IRB Indebtedness,
  in any case in a manner materially adverse to Borrowers or Agent and Lenders.                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (ii) The foregoing notwithstanding, (x) upon the closing of the Lebanon Refinancing, Borrowers may prepay
  the Indebtedness outstanding under the Term Loan Documents in an amount equal to the excess, if any,
  of the proceeds from the Lebanon Refinancing over One Million Dollars ($1,000,000); (y) after the
  closing of the Lebanon Refinancing, Borrowers may prepay the Indebtedness outstanding under the Term
  Loan Documents in an amount not to exceed the excess, if any, of the principal amount of Indebtedness
  outstanding under the Term Loan Documents over Five Million Dollars ($5,000,000) if, after giving
  effect to any such prepayment, Availability equals or exceeds Two Million Five Hundred Thousand Dollars
  ($2,500,000) and no Event of Default exists and is continuing; and (z) Borrowers may make any other
  mandatory payment required under the terms and conditions of the Note Purchase Agreements (as such
  terms and conditions exist as of the Closing Date).

|                                                                                                                                                                                    
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8.2.7 Distributions. Except as otherwise provided for in Section 8.2.6, declare or make, or permit any Subsidiary of any
Borrower to declare or make, any Distributions, except for:
|                                                                                                                                                                                    

| | (i) Distributions by any Subsidiary of a Borrower to another Borrower;
| | ----------------------------------------------------------------------

|36
|--



| | (ii) Distributions paid solely in Securities of a Borrower or any of its Subsidiaries;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (iii) Distributions by MFRI in amounts necessary to permit MFRI to repurchase Securities of MFRI from employees
  of MFRI or any of its Subsidiaries upon the termination of their employment, so long as no Default
  or Event of Default exists at the time of or would be caused by the making of such Distributions
  and the aggregate cash amount of such Distributions, measured at the time when made, does not exceed
  Fifty Thousand Dollars ($50,000) in any fiscal year of MFRI;                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (iv) (x) Upon the closing of the Lebanon Refinancing, Borrowers may prepay the Indebtedness outstanding
  under the Term Loan Documents in an amount equal to the excess, if any, of the proceeds from the
  Lebanon Refinancing over One Million Dollars ($1,000,000); (y) after the closing of the Lebanon
  Refinancing, Borrowers may prepay the Indebtedness outstanding under the Term Loan Documents, in
  an amount not to exceed the excess, if any, of the principal amount of the Indebtedness outstanding
  under the Term Loan Documents over Five Million Dollars ($5,000,000) if, after giving effect to any
  such prepayment, Availability equals or exceeds Two Million Five Hundred Thousand Dollars ($2,500,000)
  and no Event of Default exists and is continuing; and
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (v) Repurchases by MFRI of outstanding shares of its publicly owned common stock provided that after giving effect to any such repurchase, each of the following conditions precedent is satisfied: (1) no
  Default of Event of Default has occurred and is continuing; (2) Availability equals or exceeds
  Five Million Dollars ($5,000,000); and (3) such repurchase is made after the first anniversary date
  of the Closing Date.                                                                                                                                                                                                                                                                                                                                                    

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8.2.8 Capital Expenditures. Make Capital Expenditures (including, without limitation, by way of capitalized leases) which, in
the aggregate, as to MFRI and all of its Subsidiaries, exceed during any fiscal year of Borrowers
the amount of Four Million Dollars ($4,000,000).
8.2.9 Disposition of Assets. Sell, lease or otherwise dispose of any of, or permit any Subsidiary of any Borrower to sell, lease
or otherwise dispose of any of, its Properties, including any disposition of Property as part of
a sale and leaseback transaction, to or in favor of any Person, except for:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| | (i) sales of Inventory in the ordinary course of business;                                                                                      
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                 
| | (ii) transfers of Property to a Borrower by a Subsidiary of a Borrower;                                                                         
| |                                                                                                                                                 
| | (iii) dispositions of Property that is substantially worn, damaged, uneconomic or obsolete (subject to subsection 6.4.2
  hereof);              
| |                                                                                                                                                 
| | (iv) dispositions of investments described in paragraphs (iv), (v), (vi) and (vii) of the definition
  of the term Restricted Investments; and
| |                                                                                                                                                 
| | (v) other dispositions expressly authorized by this Agreement.                                                                                  

|37
|--



|8.2.10 Securities of Subsidiaries. Permit any Subsidiaries of any Borrower to issue any additional Securities except to a Borrower and
except for directors qualifying Securities.
8.2.11 Bill-and-Hold Sales, Etc. Make, or permit any Subsidiary of any Borrower to make, a sale to any customer on a bill-and-hold,
guaranteed sale, sale and return, sale on approval, repurchase or return or consignment basis; provided, that Borrowers shall be permitted to make bill and hold sales if so requested by a customer in writing
which writing shall contain an acknowledgement that such customer is obligated to pay for the Inventory
subject to the bill and hold sale. Borrowers, upon request by Agent, shall deliver to Agent copies
of any such written requests and acknowledgements.
8.2.12 Restricted Investment. Make or have, or permit any Subsidiary of any Borrower to make or have, any Restricted Investment.
8.2.13 Subsidiaries and Joint Ventures. Create, acquire or otherwise suffer to exist, or permit any Subsidiary of any Borrower to create,
acquire or otherwise suffer to exist, any Subsidiary or joint venture arrangement not in existence
as of the date hereof.
8.2.14 Tax Consolidation. File or consent to the filing of any consolidated income tax return with any Person other than Borrowers
Subsidiaries.
8.2.15 Organizational Documents. Agree to, or suffer to occur, any amendment, supplement or addition to its or any of its Subsidiaries
charter, articles or certificate of incorporation, certificate of formation, limited partnership
agreement, bylaws, limited liability agreement, operating agreement or other organizational documents
(as the case may be), that would reasonably be expected to have a Material Adverse Effect.
8.2.16 Fiscal Year End. Change, or permit any Subsidiary of any Borrower to change, its fiscal year end.
8.2.17 Negative Pledges. Enter into any agreement limiting the ability of any Borrower or any of its Subsidiaries to voluntarily
create Liens upon any of its Property.
8.2.18 Leases. Become, or permit any of its Subsidiaries to become, a lessee under any operating lease (other than
a lease under which any Borrower or any of its Subsidiaries is lessor) of Property if the aggregate
Rentals payable during any current or future period of twelve (12) consecutive months under the lease
in question and all other leases under which Borrowers or any of their Subsidiaries is then lessee
would exceed Two Million Two Hundred Thousand Dollars ($2,200,000). The term Rentals
means, as of the date of determination, all payments which the lessee is required to make by the
terms of any lease.
8.3 Specific Financial Covenants.
During the Term, and thereafter for so long as there are any Obligations outstanding, Borrowers covenant
that, unless otherwise consented to by Majority Lenders, in writing, they shall comply with all of
the financial covenants set forth in Exhibit 8.3 hereto. If at any time MFRI shall, in its reasonable judgment and after consulting with its independent
certified
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|38
|--



|accountants, determine that a change in GAAP shall have occurred after the Closing Date and that such
change will have a Material Adverse Effect on the ability of Borrowers to comply with any one or
more of the financial covenants in this Agreement, Agent will, upon the written request of MFRI,
negotiate in good faith with Borrowers, to attempt to reach agreement within a reasonable period
of time as to the terms of one or more mutually agreeable amendments, in accordance with Section
11.10, with respect to such financial covenants (or the definitions utilized therein) such that the
Material Adverse Effect of such change in GAAP on the ability of Borrowers to comply with such financial
covenants is fairly and equitably adjustment for, taking into account the nature of such change and
the original purpose of such financial covenants (or the definitions utilized therein). Each written
request by MFRI pursuant to the second sentence of this Section 8.3 shall be accompanied by (i) a
statement from the independent certified public accountants of MFRI describing the applicable change
in GAAP and demonstrating, on a pro forma basis and in reasonable detail, the effect that such change
would have in respect of the computations or statements, as the case may be, required by the applicable
covenants herein if such change had been effective throughout the financial year of MFRI then most
recently ended and (ii) a statement of one or more specific amendment provisions then proposed by
MFRI in connection with such change in GAAP. Unless and until such mutually agreeable amendments
shall have become effective in accordance with Section 11.10, such financial covenants (and the definitions
used therein) shall remain unchanged and in full force and effect.
SECTION 9.  CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other Loan Documents, and without
affecting in any manner the rights of Agent or any Lender under the other sections of this Agreement,
no Lender shall be required to make any Loan, nor shall Agent be required to or issue or procure
any Letter of Credit or LC Guaranty unless and until each of the following conditions has been and
continues to be satisfied:
9.1 Documentation.
Agent shall have received, in form and substance satisfactory to Agent and its counsel, a duly executed
copy of this Agreement and the other Loan Documents, together with such additional documents, instruments,
opinions and certificates as Agent and its counsel shall require in connection therewith from time
to time, all in form and substance satisfactory to Agent and its counsel.
9.2 No Default.
No Default or Event of Default shall exist.
9.3 Other Conditions.
Each of the conditions precedent set forth in the Loan Documents shall have been satisfied.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|39
|--



|9.4 Availability.
Agent shall have determined that immediately after Lenders have made the initial Loans and after Agent
has issued or procured the initial Letters of Credit and LC Guaranties contemplated hereby, and Borrowers
have paid (or, if accrued, treated as paid), all closing costs incurred in connection with the transactions
contemplated hereby and have reserved an appropriate amount necessary to pay all trade payables greater
than 60 days past due, Availability shall not be less than Two Million Five Hundred Thousand Dollars
($2,500,000).
9.5 No Litigation.
No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to enjoin, restrain or prohibit,
or to obtain damages in respect of, or which is related to or arises out of this Agreement or the
consummation of the transactions contemplated hereby.
9.6 Material Adverse Effect.
As of the Closing Date, except as disclosed herein, since February 28, 2002, there has not been any
material adverse change in its business, assets, financial condition, income or prospects and no
event or condition exists which would be reasonably likely to result in any Material Adverse Effect.
9.7 Term Loan. Borrowers and the holders of the Indebtedness outstanding under the Term Loan Documents shall have
entered into such amendments and modifications to the Term Loan Documents as are acceptable to Agent
in its sole discretion and the holders of the Indebtedness outstanding under the Term Loan Documents
shall have entered into the Intercreditor Agreement, which Intercreditor Agreement shall be in form
and substance acceptable to Agent.
9.8 Consultant. Agent shall have reviewed the work performed for Borrowers by Silverman Consulting and shall have
been satisfied with the scope and content of such work.
SECTION 10.  EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 Events of Default.
The occurrence of one or more of the following events shall constitute an Event of Default:
10.1.1 Payment of Obligations. Borrowers shall fail to pay any of the Obligations hereunder or under any Note on the due date thereof
(whether due at stated maturity, on demand, upon acceleration or otherwise).
10.1.2 Misrepresentations. Any representation, warranty or other statement made or furnished to Agent or any Lender by or on
behalf of any Borrower, any Subsidiary of any Borrower or any Guarantor in this Agreement, any of
the other Loan Documents or any instrument, certificate or financial statement furnished in compliance
with or in reference thereto
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|40
|--



|proves to have been false or misleading in any material respect when made, furnished or reaffirmed
pursuant to Section 7.2 hereof.
10.1.3 Breach of Specific Covenants. Any Borrower shall fail or neglect to perform, keep or observe any covenant contained in Section or
subsection 5.2, 5.3, 6.1.2, 6.2.4, 6.2.5, 8.1.1, 8.1.2, 8.1.4, 8.1.8, 8.2 or 8.3 hereof on the
date that any Borrower is required to perform, keep or observe such covenant or shall fail or neglect
to perform, keep or observe any covenant contained in Section 6.1.1, 8.1.3 or 8.1.7 hereof within
5 days following the date on which such Borrower is required to perform, keep or observe such covenant.
10.1.4 Breach of Other Covenants. Any Borrower shall fail or neglect to perform, keep or observe any covenant contained in this Agreement
(other than a covenant which is dealt with specifically elsewhere in Section 10.1 hereof) and
the breach of such other covenant is not cured to Agents satisfaction within 30 days after
the sooner to occur of such Borrowers receipt of notice of such breach from Agent or the date
on which such failure or neglect first becomes known to any officer of any Borrower.
10.1.5 Default Under Security Documents or Other Agreements. Any event of default shall occur under, or any Borrower, any of its Subsidiaries or any other Guarantor
shall default in the performance or observance of any term, covenant, condition or agreement contained
in, any of the Security Documents or the Other Agreements and such default shall continue beyond
any applicable grace period.
10.1.6 Other Defaults. There shall occur any default or event of default on the part of any Borrower, any Subsidiary of
any Borrower or any other Guarantor under any agreement, document or instrument to which any Borrower,
such Subsidiary of any Borrower or such Guarantor is a party or by which any Borrower, such Subsidiary
of any Borrower or such Guarantor or any of its Property is bound, evidencing or relating to any
Indebtedness (other than the Obligations) with an outstanding principal balance in excess of One
Million Dollars ($1,000,000), if the payment or maturity of such Indebtedness is or could be accelerated
in consequence of such event of default or demand for payment of such Indebtedness is made or could
be made in accordance with the terms thereof.
10.1.7 Uninsured Losses. Any material loss, theft, damage or destruction of any portion of the Collateral having a fair market
value of One Hundred Thousand ($100,000), in the aggregate, if not fully covered (subject to such
deductibles and self-insurance retentions as Agent shall have permitted) by insurance.
10.1.8 Insolvency and Related Proceedings. Any Borrower, any Subsidiary of any Borrower or any other Guarantor shall cease to be Solvent or
shall suffer the appointment of a receiver, trustee, custodian or similar fiduciary, or shall make
an assignment for the benefit of creditors, or any petition for an order for relief shall be filed
by or against any Borrower, any Subsidiary of any Borrower or any other Guarantor under U.S. federal
bankruptcy laws (if against Borrower, any Subsidiary of any Borrower or any other Guarantor the continuation
of such proceeding for more than 60 days), or any Borrower, any Subsidiary of any Borrower or any
other Guarantor shall make any offer of settlement, extension or composition to their respective
unsecured creditors generally.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|41
|--



|10.1.9 Business Disruption; Condemnation. There shall occur a cessation of a substantial part of the business of any Borrower, any Subsidiary
of any Borrower or any other Guarantor which could reasonably be expected to have a Material Adverse
Effect, or any Borrower, any Subsidiary of any Borrower or any other Guarantor shall suffer the loss
or revocation of any material license or permit now held or hereafter acquired by such Borrower,
any Subsidiary of any Borrower or any other Guarantor which is necessary to the continued or lawful
operation of its business; or any Borrower, any Subsidiary of any Borrower or any other Guarantor
shall be enjoined, restrained or in any way prevented by court, governmental or administrative order
from conducting all or any material part of its business affairs; or any material lease or agreement
pursuant to which any Borrower, any Subsidiary of any Borrower or any other Guarantor leases, uses
or occupies any Property shall be canceled or terminated prior to the expiration of its stated term,
except any such lease or agreement the cancellation or termination of which could not reasonably
be expected to have a Material Adverse Effect; or any material portion of the Collateral shall be
taken through condemnation or the value of such Property shall be impaired through condemnation.
10.1.10 Change of Ownership. (a) A Change of Control shall have occurred or (b) MFRI shall cease to own and control,
beneficially and of record (directly or indirectly), one hundred percent (100%) of the issued and
outstanding Securities and Voting Stock of each other Borrower and each of their other Subsidiaries.
10.1.11 ERISA.  A Reportable Event shall occur which, in Agents determination, constitutes grounds for
the termination by the Pension Benefit Guaranty Corporation of any Plan or for the appointment by
the appropriate United States district court of a trustee for any Plan, or any Plan shall be terminated
or any such trustee shall be requested or appointed, or if any Borrower, any Subsidiary of any Borrower
or any other Guarantor is in default (as defined in Section 4219(c)(5) of ERISA)
with respect to payments to a Multiemployer Plan resulting from any such Borrowers, such Subsidiarys
or such Guarantors complete or partial withdrawal from such Plan and any such event could reasonably
be expected to have a Material Adverse Effect.
10.1.12 Challenge to Agreement. Any Borrower, any Subsidiary of any Borrower or any other Guarantor, or any Affiliate of any of them,
shall challenge or contest in any action, suit or proceeding the validity or enforceability of this
Agreement or any of the other Loan Documents, the legality or enforceability of any of the Obligations
or the perfection or priority of any Lien granted to Agent.
10.1.13 Repudiation of or Default Under Guaranty Agreement. Any Guarantor shall revoke or attempt to revoke the Guaranty Agreement signed by such Guarantor,
or shall repudiate such Guarantors liability thereunder or shall be in default under the terms
thereof.
10.1.14 Criminal Forfeiture. Any Borrower, any Subsidiary of any Borrower or any other Guarantor shall be criminally indicted
or convicted under any law that could lead to a forfeiture of any Property of any Borrower, any Subsidiary
of any Borrower or any other Guarantor.
10.1.15 Judgments. Any money judgments, writ of attachment or similar processes (collectively, Judgments)
are issued or rendered against any Borrower, any
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|42
|--



|Subsidiary of any Borrower or any other Guarantor, or any of their respective Property (i) in
the case of money judgments, in an amount of One Hundred Thousand Dollars ($100,000) or more for
any single judgment, attachment or process or Three Hundred Thousand Dollars ($300,000) or more for
all such judgments, attachments or processes in the aggregate, in each case in excess of any applicable
insurance with respect to which the insurer has admitted liability, and (ii) in the case of
non-monetary Judgments, such Judgment or Judgments (in the aggregate) could reasonably be expected
to have a Material Adverse Effect, in each case which Judgment is not stayed, released or discharged
within 30 days.
10.1.16 Material Adverse Effect. Any event occurs which would reasonably be expected to have a Material Adverse Effect.
10.2 Acceleration of the Obligations.
Upon or at any time after the occurrence and during the continuance of an Event of Default, (i) the
Revolving Loan Commitments shall, at the option of Agent or Majority Lenders be terminated and/or
(ii) Agent or Majority Lenders may declare all or any portion of the Obligations at once due
and payable without presentment, demand protest or further notice by Agent or any Lender, and Borrowers
shall forthwith pay to Agent, the full amount of such Obligations, provided, that upon the occurrence of an Event of Default specified in subsection 10.1.8 hereof, the Revolving
Loan Commitments shall automatically be terminated and all of the Obligations shall become automatically
due and payable, in each case without declaration, notice or demand by Agent or any Lender.
10.3 Other Remedies.
Upon the occurrence and during the continuance of an Event of Default, Agent shall have and may exercise
from time to time the following other rights and remedies:
10.3.1 All of the rights and remedies of a secured party under the UCC or under other applicable law, and
all other legal and equitable rights to which Agent or Lenders may be entitled, all of which rights
and remedies shall be cumulative and shall be in addition to any other rights or remedies contained
in this Agreement or any of the other Loan Documents, and none of which shall be exclusive.
10.3.2 The right to take immediate possession of the Collateral, and to (i) require each Borrower and
each of its Subsidiaries to assemble the Collateral, at Borrowers expense, and make it available
to Agent at a place designated by Agent which is reasonably convenient to both parties, and (ii) enter
any premises where any of the Collateral shall be located and to keep and store the Collateral on
said premises until sold (and if said premises be the Property of a Borrower or any Subsidiary of
a Borrower, such Borrower agrees not to charge, or permit any of its Subsidiaries to charge, Agent
for storage thereof).
10.3.3 The right to sell or otherwise dispose of all or any Collateral in its then condition, or after any
further manufacturing or processing thereof, at public or private sale or sales, with such notice
as may be required by law, in lots or in bulk, for cash or on credit, all as Agent, in its sole discretion,
may deem advisable. Agent may, at Agents option, disclaim any and all warranties regarding
the Collateral in connection with any such sale. Each Borrower
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|agrees that 10 days written notice to Borrowers or any of their Subsidiaries of any public or
private sale or other disposition of Collateral shall be reasonable notice thereof, and such sale
shall be at such locations as Agent may designate in said notice. Agent shall have the right to conduct
such sales on any Borrowers or any of their Subsidiaries premises, without charge therefor,
and such sales may be adjourned from time to time in accordance with applicable law. Agent shall
have the right to sell, lease or otherwise dispose of the Collateral, or any part thereof, for cash,
credit or any combination thereof, and Agent, on behalf of Lenders, may purchase all or any part
of the Collateral at public or, if permitted by law, private sale and, in lieu of actual payment
of such purchase price, may set off the amount of such price against the Obligations. The proceeds
realized from the sale of any Collateral may be applied, after allowing two (2) Business Days for
collection, first to the costs, expenses and attorneys fees incurred by Agent in collecting
the Obligations, in enforcing the rights of Agent and Lenders under the Loan Documents and in collecting,
retaking, completing, protecting, removing, storing, advertising for sale, selling and delivering
any Collateral, second to the interest due upon any of the Obligations; and third, to the principal
of the Obligations. If any deficiency shall arise, each Borrower and each Guarantor shall remain
jointly and severally liable to Agent and Lenders therefor.
10.3.4 Agent is hereby granted a license or other right to use, without charge, each Borrowers and
each of its Subsidiarys labels, patents, copyrights, licenses, rights of use of any name, trade
secrets, trade names, trademarks and advertising matter, or any Property of a similar nature, as
it pertains to the Collateral, in completing, advertising for sale and selling any Collateral and
each Borrowers and each of its Subsidiarys rights under all licenses and all franchise
agreements shall inure to Agents benefit.
10.3.5 Agent may, at its option, require Borrowers to deposit with Agent funds equal to the LC Amount and,
if Borrowers fail to promptly make such deposit, Agent may advance such amount as a Revolving Credit
Loan (whether or not an Overadvance is created thereby). Each such Revolving Credit Loan shall be
secured by all of the Collateral and shall constitute a Base Rate Portion. Any such deposit or advance
shall be held by Agent as a reserve to fund future payments on such LC Guaranties and future drawings
against such Letters of Credit. At such time as all LC Guaranties have been paid or terminated and
all Letters of Credit have been drawn upon or expired, any amounts remaining in such reserve shall
be applied against any outstanding Obligations, or, if all Obligations have been indefeasibly paid
in full, returned to Borrowers.
10.4 Set Off and Sharing of Payments.
In addition to any rights now or hereafter granted under applicable law and not by way of limitation
of any such rights, during the continuance of any Event of Default, each Lender is hereby authorized
by Borrowers at any time or from time to time, with prior written consent of Agent and with reasonably
prompt subsequent notice to Borrowers (any prior or contemporaneous notice to Borrowers being hereby
expressly waived) to set off and to appropriate and to apply any and all (i) balances held by
such Lender at any of its offices for the account of any Borrower or any of its Subsidiaries (regardless
of whether such balances are then due to such Borrowers or its Subsidiaries), and (ii) other
property at any time held or owing by such Lender to or for the credit or for the account of any
Borrower or any of its Subsidiaries, against and on account of any of the Obligations. Any Lender
exercising a right to set off shall,
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|to the extent the amount of any such set off exceeds its Revolving Loan Percentage of the amount set
off, purchase for cash (and the other Lenders shall sell) interests in each such other Lenders
pro rata share of the Obligations as would be necessary to cause such Lender to share such excess
with each other Lender in accordance with their respective Revolving Loan Percentages. Borrowers
agree, to the fullest extent permitted by law, that any Lender may exercise its right to set off
with respect to amounts in excess of its pro rata share of the Obligations and upon doing so shall
deliver such excess to Agent for the benefit of all Lenders in accordance with the Revolving Loan
Percentages.
10.5 Remedies Cumulative; No Waiver.
All covenants, conditions, provisions, warranties, guaranties, indemnities, and other undertakings
of Borrowers contained in this Agreement and the other Loan Documents, or in any document referred
to herein or contained in any agreement supplementary hereto or in any schedule or in any Guaranty
Agreement given to Agent or any Lender or contained in any other agreement between any Lender and
any Borrower or between Agent and any Borrower heretofore, concurrently, or hereafter entered into,
shall be deemed cumulative to and not in derogation or substitution of any of the terms, covenants,
conditions, or agreements of Borrowers herein contained. The failure or delay of Agent or any Lender
to require strict performance by Borrowers of any provision of this Agreement or to exercise or enforce
any rights, Liens, powers, or remedies hereunder or under any of the aforesaid agreements or other
documents or security or Collateral shall not operate as a waiver of such performance, Liens, rights,
powers and remedies, but all such requirements, Liens, rights, powers, and remedies shall continue
in full force and effect until all Loans and other Obligations owing or to become owing from Borrowers
to Agent and each Lender have been fully satisfied. None of the undertakings, agreements, warranties,
covenants and representations of Borrowers contained in this Agreement or any of the other Loan Documents
and no Default or Event of Default by Borrowers under this Agreement or any other Loan Documents
shall be deemed to have been suspended or waived by Lenders, unless such suspension or waiver is
by an instrument in writing specifying such suspension or waiver and is signed by a duly authorized
representative of Agent and directed to Borrowers.
SECTION 11.  AGENT
11.1 Authorization and Action.
Each Lender hereby appoints and authorizes Agent to take such action on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are delegated to Agent by the terms
hereof and thereof, together with such powers as are reasonably incidental thereto. Each Lender hereby
acknowledges that Agent shall not have by reason of this Agreement assumed a fiduciary relationship
in respect of any Lender. In performing its functions and duties under this Agreement, Agent shall
act solely as agent of Lenders and shall not assume, or be deemed to have assumed, any obligation
toward, or relationship of agency or trust with or for, any Borrower. As to any matters not expressly
provided for by this Agreement and the other Loan Documents (including without limitation enforcement
and collection of the Notes), Agent may, but shall not be required to, exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and shall be fully protected
in so acting or
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|refraining from acting) upon the instructions of the Majority Lenders, whenever such instruction shall
be requested by Agent or required hereunder, or a greater or lesser number of Lenders if so required
hereunder, and such instructions shall be binding upon all Lenders; provided, that Agent shall be fully justified in failing or refusing to take any action which exposes Agent
to any liability or which is contrary to this Agreement, the other Loan Documents or applicable law,
unless Agent is indemnified to its satisfaction by the other Lenders against any and all liability
and expense which it may incur by reason of taking or continuing to take any such action. If Agent
seeks the consent or approval of the Majority Lenders (or a greater or lesser number of Lenders as
required in this Agreement), with respect to any action hereunder, Agent shall send notice thereof
to each Lender and shall notify each Lender at any time that the Majority Lenders (or such greater
or lesser number of Lenders) have instructed Agent to act or refrain from acting pursuant hereto.
11.2 Agents Reliance, Etc.
Neither Agent, any Affiliate of Agent, nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under or in connection
with this Agreement or the other Loan Documents, except for its or their own gross negligence or
willful misconduct. Without limitation of the generality of the foregoing, Agent: (i) may
treat each Lender party hereto as the holder of Obligations until Agent receives written notice of
the assignment or transfer or such lenders portion of the Obligations signed by such Lender
and in form reasonably satisfactory to Agent; (ii) may consult with legal counsel, independent
public accountants and other experts selected by it and shall not be liable for any action taken
or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants
or experts, (iii) makes no warranties or representations to any Lender and shall not be responsible
to any Lender for any recitals, statements, warranties or representations made in or in connection
with this Agreement or any other Loan Documents; (iv) shall not have any duty beyond Agents
customary practices in respect of loans in which Agent is the only lender, to ascertain or to inquire
as to the performance or observance of any of the terms, covenants or conditions of this Agreement
or the other Loan Documents on the part of Borrower, to inspect the property (including the books
and records) of any Borrower, to monitor the financial condition of Borrowers or to ascertain the
existence or possible existence or continuation of any Default or Event of Default; (v) shall
not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; (vi) shall not be liable to any Lender for any action
taken, or inaction, by Agent upon the instructions of Majority Lenders pursuant to Section 11.1
hereof or refraining to take any action pending such instructions; (vii) shall not be liable
for any apportionment or distributions of payments made by it in good faith pursuant to Section 3
hereof; (viii) shall incur no liability under or in respect of this Agreement or the other Loan
Documents by acting upon any notice, consent, certificate, message or other instrument or writing
(which may be by telephone, facsimile, telegram, cable or telex) believed in good faith by it to
be genuine and signed or sent by the proper party or parties; and (ix) may assume that no Event
of Default has occurred and is continuing, unless Agent has actual knowledge of the Event of Default,
has received notice from any Borrower or Borrowers independent certified public accounts stating
the nature of the Event of Default, or has received notice from a Lender stating the nature of the
Event of Default and that such Lender considers the Event of Default to have occurred and to be
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|continuing.  In the event any apportionment or distribution described in clause (vii) above
is determined to have been made in error, the sole recourse of any Person to whom payment was due
but not made shall be to recover from the recipients of such payments any payment in excess of the
amount to which they are determined to have been entitled.
11.3 Fleet and Affiliates.
With respect to its commitment hereunder to make Loans, Fleet shall have the same rights and powers
under this Agreement and the other Loan Documents as any other Lender and may exercise the same as
though it were not Agent; and the terms Lender, Lenders or Majority
Lenders shall, unless otherwise expressly indicated, include Fleet in its individual capacity
as a Lender. Fleet and its Affiliates may lend money to, and generally engage in any kind of business
with, Borrowers, and any Person who may do business with or own Securities of any Borrower all as
if Fleet were not Agent and without any duty to account therefor to any other Lender.
11.4 Lender Credit Decision.
Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender
and based on the financial statements referred to herein and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.
Each Lender also acknowledges that it will, independently and without reliance upon Agent or any
other Lender and based on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under this Agreement. Agent
shall not have any duty or responsibility, either initially or on an ongoing basis, to provide any
Lender with any credit or other similar information regarding Borrowers.
11.5 Indemnification.
Lenders agree to indemnify Agent (to the extent not reimbursed by any Borrower), in accordance with
their respective Aggregate Percentages, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Agent in any way relating to
or arising out of this Agreement or any other Loan Document or any action taken or omitted by Agent
under this Agreement; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agents
gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share, as set forth above, of any out-of-pocket
expenses (including attorneys fees) incurred by Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether through negotiation, legal
proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this
Agreement and each other Loan Document, to the extent that Agent is not reimbursed for such expenses
by Borrowers. The obligations of Lenders under this Section 11.5 shall survive the payment in
full of all Obligations and the termination of this Agreement. If after payment and distribution
of any amount by Agent to Lenders, any Lender or
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|any other Person, including any Borrower, any creditor of any Borrower, a liquidator, administrator
or trustee in bankruptcy, recovers from Agent any amount found to have been wrongfully paid to Agent
or disbursed by Agent to Lenders, then Lenders, in accordance with their respective Aggregate Percentages,
shall reimburse Agent for all such amounts.
11.6 Rights and Remedies to be Exercised by Agent Only.
Each Lender agrees that, except as set forth in Section 10.4, no Lender shall have any right individually
(i) to realize upon the security created by this Agreement or any other Loan Document, (ii) to
enforce any provision of this Agreement or any other Loan Document, or (iii) to make demand
under this Agreement or any other Loan Document.
11.7 Agency Provisions Relating to Collateral.
Each Lender authorizes and ratifies Agents entry into this Agreement and the Security Documents
for the benefit of Lenders. Each Lender agrees that any action taken by Agent with respect to the
Collateral in accordance with the provisions of this Agreement or the Security Documents, and the
exercise by Agent of the powers set forth herein or therein, together with such other powers as are
reasonably incidental thereto, shall be authorized and binding upon all Lenders. Agent is hereby
authorized on behalf of all Lenders, without the necessity of any notice to or further consent from
any Lender to take any action with respect to any Collateral or the Loan Documents which may be necessary
to perfect and maintain perfected Agents Liens upon the Collateral, for its benefit and the
ratable benefit of Lenders. Lenders hereby irrevocably authorize Agent, at its option and in its
discretion, to release any Lien granted to or held by Agent upon any Collateral (i) upon termination
of the Agreement and payment and satisfaction of all Obligations; or (ii) constituting property
being sold or disposed of if Borrowers certify to Agent that the sale or disposition is made in compliance
with subsection 8.2.9 hereof (and Agent may rely conclusively on any such certificate, without
further inquiry); or (iii) constituting property in which any Borrower owned no interest at
the time the Lien was granted or at any time thereafter; or (iv) in connection with any foreclosure
sale or other disposition of Collateral after the occurrence and during the continuation of an Event
of Default or (v) if approved, authorized or ratified in writing by Agent at the direction of
all Lenders. Upon request by Agent at any time, Lenders will confirm in writing Agents authority
to release particular types or items of Collateral pursuant hereto. Agent shall have no obligation
whatsoever to any Lender or to any other Person to assure that the Collateral exists or is owned
by any Borrower or is cared for, protected or insured or has been encumbered or that the Liens granted
to Agent herein or pursuant to the Security Documents have been properly or sufficiently or lawfully
created, perfected, protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of its rights, authorities and powers granted or available to Agent in this Section 11.7
or in any of the Loan Documents, it being understood and agreed that in respect of the Collateral,
or any act, omission or event related thereto, Agent may act in any manner it may deem appropriate,
in its sole discretion, but consistent with the provisions of this Agreement, including given Agents
own interest in the Collateral as a Lender and that Agent shall have no duty or liability whatsoever to any Lender.
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|11.8 Agents Right to Purchase Commitments.
Agent shall have the right, but shall not be obligated, at any time upon written notice to any Lender
and with the consent of such Lender, which may be granted or withheld in such Lenders sole
discretion, to purchase for Agents own account all of such Lenders interests in this
Agreement, the other Loan Documents and the Obligations, for the face amount of the outstanding Obligations
owed to such Lender, including without limitation all accrued and unpaid interest and fees.
11.9 Right of Sale, Assignment, Participations.
Borrowers hereby consent to any Lenders participation, sale, assignment, transfer or other disposition,
at any time or times hereafter, of this Agreement and any of the other Loan Documents, or of any
portion hereof or thereof, including, without limitation, such Lenders rights, title, interests,
remedies, powers, and duties hereunder or thereunder subject to the terms and conditions set forth
below:
11.9.1 Sales, Assignments. Each Lender hereby agrees that, with respect to any sale or assignment (i) no such sale or assignment
shall be for an amount of less than $5,000,000, (ii) each such sale or assignment shall be made
on terms and conditions which are customary in the industry at the time of the transaction, (iii) Agent
and, in the absence of a Default or Event of Default, MFRI, must consent, such consent not to be
unreasonably withheld, to each such assignment to a Person that is not an original signatory to this
Agreement, (iv) the assigning Lender shall pay to Agent a processing and recordation fee of
$3,500 and any out-of-pocket attorneys fees and expenses incurred by Agent in connection with
any such sale or assignment and (v) Agent, the assigning Lender and the assignee Lender shall
each have executed and delivered an Assignment and Acceptance Agreement. After such sale or assignment
has been consummated (x) the assignee Lender thereupon shall become a Lender for
all purposes of this Agreement and (y) the assigning Lender shall have no further liability
for funding the portion of Revolving Loan Commitments assumed by such other Lender.
11.9.2 Participations. Any Lender may grant participations in its extensions of credit hereunder to any other Lender or
other lending institution (a Participant), provided that (i) no such participation shall be for an amount of less than $5,000,000, (ii) no Participant
shall thereby acquire any direct rights under this Agreement, (iii) no Participant shall be
granted any right to consent to any amendment, except to the extent any of the same pertain to (1) reducing
the aggregate principal amount of, or interest rate on, or fees applicable to, any Loan or (2) extending
the final stated maturity of any Loan or the stated maturity of any portion of any payment of principal
of, or interest or fees applicable to, any of the Loans; provided, that the rights described in this subclause (2) shall not be deemed to include the right to
consent to any amendment with respect to or which has the effect of requiring any mandatory prepayment
of any portion of any Loan or any amendment or waiver of any Default or Event of Default, (iv) no
sale of a participation in extensions of credit shall in any manner relieve the originating Lender
of its obligations hereunder, (v) the originating Lender shall remain solely responsible for
the performance of such obligations, (vi) Borrowers and Agent shall continue to deal solely
and directly with the originating Lender in connection with the originating Lenders rights
and obligations under this Agreement and the other Loan Documents, (vii) in no event shall any
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|financial institution purchasing the participation grant a participation in its participation interest
in the Loans without the prior written consent of Agent, and, in the absence of a Default or an Event
of Default, MFRI, which consents shall not unreasonably be withheld and (viii) all amounts payable
by Borrowers hereunder shall be determined as if the originating Lender had not sold any such participation.
11.9.3 Certain Agreements of Borrowers. Borrowers agree that (i) each of them will use its best efforts to assist and cooperate with
each Lender in any manner reasonably requested by such Lender to effect the sale of participation
in or assignments of any of the Loan Documents or any portion thereof or interest therein, including,
without limitation, assisting in the preparation of appropriate disclosure documents and making members
of management available at reasonable times to meet with and answer questions of potential assignees
and Participants; and (ii) subject to the provisions of Section 12.14 hereof, such Lender
may disclose credit information regarding Borrowers to any potential Participant or assignee.
11.9.4 Non U.S. Resident Transferees. If, pursuant to this Section 11.9, any interest in this Agreement or any Loans is transferred
to any transferee which is organized under the laws of any jurisdiction other than the United States
or any state thereof, the transferor Lender shall cause such transferee (other than any Participant),
and may cause any Participant, concurrently with and as a condition precedent to the effectiveness
of such transfer, to (i) represent to the transferor Lender (for the benefit of the transferor
Lender, Agent, and Borrowers) that under applicable law and treaties no taxes will be required to
be withheld by Agent, Borrowers or the transferor Lender with respect to any payments to be made
to such transferee in respect of the interest so transferred, (ii) furnish to the transferor
Lender, Agent and MFRI either United States Internal Revenue Service Form W-8BEN or United States
Internal Revenue Service Form W-8ECI (wherein such transferee claims entitlement to complete exemption
from United States federal withholding tax on all interest payments hereunder), and (iii) agree
(for the benefit of the transferor Lender, Agent and Borrowers) to provide the transferor Lender,
Agent and MFRI a new Form W-8BEN or Form W-8ECI upon the obsolescence of any previously delivered
form and comparable statements in accordance with applicable United States laws and regulations and
amendments duly executed and completed by such transferee, and to comply from time to time with all
applicable United States laws and regulations with regard to such withholding tax exemption.
11.10 Amendment.
No amendment or waiver of any provision of this Agreement or any other Loan Document (including without
limitation any Note), nor consent to any departure by Borrowers therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Majority Lenders and Borrowers, and
then such waiver or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, that no amendment, waiver or consent shall be effective, unless (i) in writing and signed by
each Lender, do any of the following: (1) increase or decrease the aggregate Loan Commitments,
or any Lenders Revolving Loan Commitment, (2) reduce the principal of, or interest on,
any amount payable hereunder or under any Note, other than those payable only to Fleet in its capacity
as Agent, which may be reduced by Fleet unilaterally, (3) increase or decrease any interest
rate payable hereunder, (4) postpone any date fixed for any payment of principal of, or interest
on, any
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|amounts payable hereunder or under any Note, other than those payable only to Fleet in its capacity
as Agent, which may be postponed by Fleet unilaterally, (5) increase any advance percentage
contained in the definition of the term Borrowing Base, (6) reduce the number of Lenders that shall be required for Lenders or any of them to take any
action hereunder, (7) release or discharge any Person liable for the performance of any obligations
of Borrowers hereunder or under any of the Loan Documents, (8) amend any provision of this Agreement
that requires the consent of all Lenders or consent to or waive any breach thereof, (9) amend
the definition of the term Majority Lenders, (10) amend this Section 11.10
or (11) release any substantial portion of the Collateral, unless otherwise permitted pursuant
to Section 11.7 hereof; or (ii) in writing and signed by Agent in addition to the Lenders
required above to affect the rights or duties of Agent under this Agreement, any Note or any other
Loan Document.
11.11 Resignation of Agent; Appointment of Successor.
Agent may resign as Agent by giving not less than thirty (30) days prior written notice to Lenders
and Borrowers. If Agent shall resign under this Agreement, then, (i) subject to the consent
of MFRI (which consent shall not be unreasonably withheld and which consent shall not be required
during any period in which a Default or an Event of Default exists), Majority Lenders shall appoint
from among Lenders a successor agent for Lenders or (ii) if a successor agent shall not be so
appointed and approved within the thirty (30) day period following Agents notice to Lenders
and Borrowers of its resignation, then Agent shall appoint a successor agent who shall serve as Agent
until such time as Majority Lenders appoint a successor agent, subject to MFRIs consent as
set forth above. Upon its appointment, such successor agent shall succeed to the rights, powers and
duties of Agent and the term Agent shall mean such successor effective upon its appointment,
and the former Agents rights, powers and duties as Agent shall be terminated without any other
or further act or deed on the part of such former Agent or any of the parties to this Agreement.
After the resignation of any Agent hereunder, the provisions of this Section 11 shall inure
to the benefit of such former Agent and such former Agent shall not by reason of such resignation
be deemed to be released from liability for any actions taken or not taken by it while it was an
Agent under this Agreement.
11.12 Audit and Examination Reports; Disclaimer by Lenders.
By signing this Agreement, each Lender:
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| | (a) is deemed to have requested that Agent furnish such Lender, promptly after it becomes available, a
  copy of each audit or examination report (each a Report and collectively, Reports)
  prepared by or on behalf of Agent;           
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| |                                                                                                                                                                                                                                                
| | (b) expressly agrees and acknowledges that Agent (i) does not make any representation or warranty
  as to the accuracy of any Report, and (ii) shall not be liable for any information contained
  in any Report;                              
| |                                                                                                                                                                                                                                                
| | (c) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that
  Agent or other party performing any audit or examination will inspect only specific information regarding
  Borrowers and will rely

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| | significantly upon Borrowers books and records, as well as on representations of Borrowers personnel;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (d) agrees to keep all Reports confidential and strictly for its internal use, and not to distribute except
  to its participants, or use any Report in any other manner, in accordance with the provisions of
  Section 12.14; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (e) without limiting the generality of any other indemnification provision contained in this Agreement,
  agrees: (i) to hold Agent and any such other Lender preparing a Report harmless from any
  action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from
  any Report in connection with any loans or other credit accommodations that the indemnifying Lender
  has made or may make to Borrowers, or the indemnifying Lenders participation in, or the indemnifying
  Lenders purchase of, a loan or loans of Borrowers; and (ii) to pay and protect, and indemnify,
  defend and hold Agent and any such other Lender preparing a Report harmless from and against, the
  claims, actions, proceedings, damages, costs, expenses and other amounts (including attorneys
  fees and expenses) incurred by Agent and any such other Lender preparing a Report as the direct or
  indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|SECTION 12.  MISCELLANEOUS
12.1 Power of Attorney.
Each Borrower hereby irrevocably designates, makes, constitutes and appoints Agent (and all Persons
designated by Agent) as each such Borrowers true and lawful attorney (and agent-in-fact), solely
with respect to the matters set forth in this Section 12.1, and Agent, or Agents agent,
may, without notice to any Borrower and in any Borrowers or Agents name, but at the cost
and expense of Borrowers:
12.1.1 At such time or times as Agent or said agent, in its sole discretion, may determine, endorse any Borrowers
name on any checks, notes, acceptances, drafts, money orders or any other evidence of payment or
proceeds of the Collateral which come into the possession of Agent or under Agents control.
12.1.2 At such time or times upon or after the occurrence and during the continuance of an Event of Default
(provided that the occurrence of an Event of Default shall not be required with respect to clauses (iv),
(vi), (viii) and (ix) below), as Agent or its agent in its sole discretion may determine: (i) demand
payment of the Accounts from the Account Debtors, enforce payment of the Accounts by legal proceedings
or otherwise, and generally exercise all of any Borrowers rights and remedies with respect
to the collection of the Accounts; (ii) settle, adjust, compromise, discharge or release any
of the Accounts or other Collateral or any legal proceedings brought to collect any of the Accounts
or other Collateral; (iii) sell or assign any of the Accounts and other Collateral upon such
terms, for such amounts and at such time or times as Agent deems advisable, and at Agents option,
with all warranties regarding the Collateral disclaimed; (iv) take control, in any manner, of
any item of payment or proceeds relating to any Collateral; (v) prepare, file and sign any Borrowers
name to a proof of claim in bankruptcy or

|52
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|similar document against any Account Debtor or to any notice of lien, assignment or satisfaction of
lien or similar document in connection with any of the Collateral; (vi) receive, open and dispose
of all mail addressed to any Borrower and notify postal authorities to change the address for delivery
thereof to such address as Agent may designate; (vii) endorse the name of any Borrower upon
any of the items of payment or proceeds relating to any Collateral and deposit the same to the account
of Agent on account of the Obligations; (viii) endorse the name of any Borrower upon any chattel
paper, document, instrument, invoice, freight bill, bill of lading or similar document or agreement
relating to the Accounts, Inventory and any other Collateral; (ix) use any Borrowers stationery
and sign the name of any Borrower to verifications of the Accounts and notices thereof to Account
Debtors; (x) use the information recorded on or contained in any data processing equipment and
Computer Hardware and Software relating to the Accounts, Inventory, Equipment and any other Collateral;
(xi) make and adjust claims under policies of insurance; and (xii) do all other acts and
things necessary, in Agents determination, to fulfill any Borrowers obligations under this Agreement.
The power of attorney granted hereby shall constitute a power coupled with an interest and shall be
irrevocable.
12.2 Indemnity.
Each Borrower hereby agrees to indemnify Agent and each Lender (and each of their Affiliates) and hold
Agent and each Lender (and each of their Affiliates) harmless from and against any liability, loss,
damage, suit, action or proceeding ever suffered or incurred by any such Person (including reasonable
attorneys fees and legal expenses) as the result of any Borrowers failure to observe, perform
or discharge any Borrowers duties hereunder. In addition, Borrowers shall defend Agent and
each Lender (and each of their Affiliates) against and save it harmless from all claims of any Person
with respect to the Collateral (except those resulting from the gross negligence or intentional misconduct
of any such Person). Without limiting the generality of the foregoing, these indemnities shall extend
to any claims asserted against Agent or any Lender (and each of their Affiliates) by any Person under
any Environmental Laws by reason of any Borrowers or any other Persons failure to comply
with laws applicable to solid or hazardous waste materials or other toxic substances. Notwithstanding
any contrary provision in this Agreement, the obligation of any Borrower under this Section 12.2
shall survive the payment in full of the Obligations and the termination of this Agreement.
12.3 Sale of Interest.
No Borrower may sell, assign or transfer any interest in this Agreement, any of the other Loan Documents,
or any of the Obligations, or any portion thereof, including, without limitation, any Borrowers
rights, title, interests, remedies, powers, and duties hereunder or thereunder.
12.4 Severability.
Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|53
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|extent of such prohibition or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
12.5 Successors and Assigns.
This Agreement, the Other Agreements and the Security Documents shall be binding upon and inure to
the benefit of the successors and assigns of each Borrower, Agent and each Lender permitted under
Section 11.9 hereof.
12.6 Cumulative Effect; Conflict of Terms.
The provisions of the Other Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in any of the other Loan Documents by
specific reference to the applicable provision of this Agreement, if any provision contained in this
Agreement is in direct conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.
12.7 Execution in Counterparts.
This Agreement may be executed in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the same instrument.
12.8 Notice.
Except as otherwise provided herein, all notices, requests and demands to or upon a party hereto, to
be effective, shall be in writing, and shall be sent by certified or registered mail, return receipt
requested, by personal delivery against receipt, by overnight courier or by facsimile and, unless
otherwise expressly provided herein, shall be deemed to have been validly served, given, delivered
or received immediately when delivered against receipt, three (3) Business Days after deposit in
the mail, postage prepaid, one (1) Business Day after deposit with an overnight courier or, in the
case of facsimile notice, when sent, with receipt confirmed, addressed as follows:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

|If to Agent: | Fleet Capital Corporation
      One South Wacker Drive
      Suite 1400
      Chicago, Illinois 60606
      Attention: Loan Administration Manager
    Facsimile No.: (312) 827-4222
|------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|54
|--



|With a copy to: | Vedder, Price, Kaufman & Kammholz
    222 North LaSalle Street
    Suite 2600
    Chicago, Illinois  60601
    Attention:  John T. McEnroe
    Facsimile No.:  (312) 609-5005
|--------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                |                                                                                                                                                                              
|If to Borrowers | c/o MFRI, Inc.
      7720 North Lehigh Avenue
      Niles, Illinois 60714
      Attention: David Unger
    Facsimile No.: (847) 929-1310                                     
|                |                                                                                                                                                                              
|With a copy to: | Piper Rudnick 
      203 N. LaSalle Street
      Suite 1800
      Chicago, Illinois 60601
      Attention: Hal M. Brown
    Facsimile No.: (312) 236-7516                    

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|or to such other address as each party may designate for itself by notice given in accordance with
this Section 12.8; provided, however, that any notice, request or demand to or upon Agent or a Lender pursuant to subsection 3.1.1
or 4.2.2 hereof shall not be effective until received by Agent or such Lender.
12.9 Consent.
Whenever Agents, Majority Lenders or all Lenders consent is required to be obtained
under this Agreement, any of the Other Agreements or any of the Security Documents as a condition
to any action, inaction, condition or event, except as otherwise specifically provided herein, Agent,
Majority Lenders or all Lenders, as applicable, shall be authorized to give or withhold such consent
in their sole and absolute discretion and to condition its consent upon the giving of additional
Collateral security for the Obligations, the payment of money or any other matter.
12.10 Credit Inquiries.
Borrowers hereby authorize and permit Agent and each Lender to respond to usual and customary credit
inquiries from third parties concerning any Borrower or any of its Subsidiaries.
12.11 Time of Essence.
Time is of the essence of this Agreement, the Other Agreements and the Security Documents.

|55
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|12.12 Entire Agreement.
This Agreement and the other Loan Documents, together with all other instruments, agreements and certificates
executed by the parties in connection therewith or with reference thereto, embody the entire understanding
and agreement between the parties hereto and thereto with respect to the subject matter hereof and
thereof and supersede all prior agreements, understandings and inducements, whether express or implied,
oral or written.
12.13 Interpretation.
No provision of this Agreement or any of the other Loan Documents shall be construed against or interpreted
to the disadvantage of any party hereto by any court or other governmental or judicial authority
by reason of such party having or being deemed to have structured or dictated such provision.
12.14 Confidentiality.
Agent and each Lender shall hold all nonpublic information obtained pursuant to the requirements of
this Agreement in accordance with Agents and such Lenders customary procedures for handling
confidential information of this nature and in accordance with safe and sound banking practices and
in any event may make disclosure reasonably required by a prospective participant or assignee in
connection with the contemplated participation or assignment or as required or requested by any governmental
authority or representative thereof or pursuant to legal process and shall require any such participant
or assignee to agree to comply with this Section 12.14.
12.15 GOVERNING LAW; CONSENT TO FORUM .
THIS AGREEMENT HAS BEEN NEGOTIATED, EXECUTED AND DELIVERED IN AND SHALL BE DEEMED TO HAVE BEEN MADE
IN CHICAGO, ILLINOIS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF ILLINOIS; PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN ILLINOIS, THE LAWS
OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF AGENTS
LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF AGENTS OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL
TO THE EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS
OF ILLINOIS. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR
FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF ANY BORROWER, AGENT OR ANY LENDER, EACH BORROWER
HEREBY CONSENTS AND AGREES THAT THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS, OR, AT AGENTS OPTION,
THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION, SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY BORROWER ON THE ONE
HAND AND AGENT OR
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|56
|--



|ANY LENDER ON THE OTHER HAND PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED
TO THIS AGREEMENT. EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH BORROWER HEREBY WAIVES ANY OBJECTION WHICH
SUCH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY
SUCH COURT. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS
ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS
MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER AT THE ADDRESS SET FORTH
IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWERS
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF AGENT OR ANY LENDER TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY AGENT
OR ANY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
12.16 WAIVERS BY BORROWERS .
EACH BORROWER WAIVES (i) THE RIGHT TO TRIAL BY JURY (WHICH AGENT AND EACH LENDER HEREBY ALSO WAIVE)
IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE
LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (ii) PRESENTMENT, DEMAND AND PROTEST AND
NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT,
EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS
, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY AGENT OR ANY LENDER ON WHICH SUCH BORROWER MAY IN
ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER AGENT OR ANY LENDER MAY DO IN THIS
REGARD; (iii) NOTICE PRIOR TO AGENTS TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR
ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING AGENT TO EXERCISE ANY
OF AGENTS REMEDIES; (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS;
(v) NOTICE OF ACCEPTANCE HEREOF AND (vi) EXCEPT AS PROHIBITED BY LAW, ANY RIGHT TO CLAIM
OR RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR
IN ADDITION TO, ACTUAL DAMAGES. EACH BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL
INDUCEMENT TO AGENTS AND
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|57
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|EACH LENDERS ENTERING INTO THIS AGREEMENT AND THAT AGENT AND EACH LENDER IS RELYING UPON THE
FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWERS. EACH BORROWER WARRANTS AND REPRESENTS THAT
IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED
ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
12.17 Advertisement.
Each Borrower hereby authorizes Agent to publish the name of any Borrower and the amount of the credit
facility provided hereunder in any tombstone or comparable advertisement which Agent
elects to publish.
12.18 Reimbursement.
The undertaking by Borrowers to repay the Obligations and each representation, warranty or covenant
of each Borrower are and shall be joint and several. To the extent that any Borrower shall be required
to pay a portion of the Obligations which shall exceed the amount of loans, advances or other extensions
of credit received by such Borrower and all interest, costs, fees and expenses attributable to such
loans, advances or other extensions of credit, then such Borrower shall be reimbursed by the other
Borrowers for the amount of such excess. This Section 12.18 is intended only to define the relative
rights of Borrowers, and nothing set forth in Section 12.18 is intended or shall impair the
obligations of each Borrower, jointly and severally, to pay to Agent and Lenders the Obligations
as and when the same shall become due and payable in accordance with the terms hereof.
(Signature Page Follows)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|58
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|(Signature Page to Loan and Security Agreement)
        IN WITNESS WHEREOF, this Agreement has been duly executed on the day and year specified at the beginning of this Agreement.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                   

| |                                           
| | ------------------------------------------
| | MFRI, INC.                                
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | MIDWESCO FILTER RESOURCES, INC.           
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | PERMA-PIPE, INC.                          
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | THERMAL CARE, INC.                        
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | TDC FILTER MANUFACTURING, INC.            
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           

|59
|--



| | FLEET CAPITAL CORPORATION, as Agent and as a Lender
| | ---------------------------------------------------
| |                                                    
| |                                                    
| | By: ______________________________________         
| |                                                    
| |                                                    
| |                                                    
| | Revolving Loan Commitment: $28,000,000             

|60
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|APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of July 11, 2002, by and among Fleet Capital
Corporation, individually and as Agent, the other financial institutions which are or become parties
thereto and MFRI, INC., MIDWESCO FILTER RESOURCES, INC., PERMA-PIPE, INC., THERMAL CARE, INC., and
TDC FILTER MANUFACTURING, INC., (a) the terms Account, Certificated Security, Chattel Paper, Commercial Tort Claims, Deposit Account, Document, Electronic Chattel Paper, Equipment, Financial Asset, Fixture, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter-of-Credit Rights, Payment Intangibles, Proceeds, Security, Security Entitlement, Software, Supporting Obligations, Tangible Chattel Paper and Uncertificated Security have the respective meanings assigned thereto under the UCC; (b) all terms reflecting Collateral
having the meanings assigned thereto under the UCC shall be deemed to mean such Property, whether
now owned or hereafter created or acquired by any Borrower or in which any Borrower now has or hereafter
acquires any interest; (c) capitalized terms which are not otherwise defined have the respective
meanings assigned thereto in said Loan and Security Agreement; and (d) the following terms shall
have the following meanings (terms defined in the singular to have the same meaning when used in
the plural and vice versa):
Account Debtor   any Person who is or may become obligated under or on account of any Account, Contract
Right, Chattel Paper or General Intangible.
Affiliate   a Person (other than a Subsidiary): (i) which directly or indirectly through one
or more intermediaries controls, or is controlled by, or is under common control with, a Person;
(ii) which beneficially owns or holds 5% or more of any class of the Voting Stock of a Person;
or (iii) 5% or more of the Voting Stock (or in the case of a Person which is not a corporation,
5% or more of the equity interest) of which is beneficially owned or held by a Person or a Subsidiary
of a Person.
Agent   Fleet Capital Corporation in its capacity as agent for the Lenders under the Agreement
and any successor in that capacity appointed pursuant to subsection 11.11 of the Agreement.
Agent Loans as defined in subsection 1.1.4 of the Agreement.
Aggregate Percentage   with respect to each Lender, the percentage equal to the quotient of (i) such Lenders
Loan Commitment divided by (ii) the aggregate of all Loan Commitments.
Agreement   the Loan and Security Agreement referred to in the first sentence of this Appendix A,
all Exhibits and Schedules thereto and this Appendix A, as each of the same may be amended from
time to time.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|A-1
|---



|Applicable Margin (Current Asset)   from the Closing Date to, but not including, the first Adjustment Date (as hereinafter
defined) the percentages set forth below with respect to the Base Rate Current Asset Revolving Portion,
the LIBOR Current Asset Revolving Portion and the Unused Line Fee:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                           |       
| | ----------------------------------------- | ------
| | Base Rate Current Asset Revolving Portion | 1.0%  
| | LIBOR Current Asset Revolving Portion     | 3.0%  
| | Unused Line Fee                           | 0.375%

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The percentages set forth above will be adjusted on the first day of the month following delivery by
Borrowers to Agent of the financial statements required to be delivered pursuant to subsection 8.1.3(ii) of
the Agreement for each April 30, July 31, October 31 and January 31 during the
Term, commencing with the month ending July 31, 2003 (each such date an Adjustment Date),
effective prospectively, by reference to the applicable Financial Measurement (as defined
below) for the four quarters most recently ending in accordance with the following:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

|Financial Measurement        |  | Base Rate Current
      Asset Revolving
    Portion |  | LIBOR Current Asset
    Revolving Portion |       | Unused Line 
    Fee | 
|---------------------------- |  | --------------------------------------------------- |  | ----------------------------------------- | ----- | -------------------- | 
|
|< 2.25 to 1                  |  | 1.25%                                               |  |                                           | 3.25% |                      | 
|> 2.25 to 1, but < 2.75 to 1 |  | 1.00%                                               |  |                                           | 3.00% |                      | 
|> 2.75 to 1, but < 3.25 to 1 |  | 0.75%                                               |  |                                           | 2.75% |                      | 
|> 3.25 to 1, but < 3.75 to 1 |  | 0.50%                                               |  |                                           | 2.50% |                      | 
|>3.75 to 1                   |  | 0.00%                                               |  |                                           | 2.00% |                      | 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|provided  that, (i) if MFRIs audited financial statements for any fiscal year delivered pursuant
to subsection 8.1.3(i) of the Agreement reflect a Financial Measurement that yields a higher
Applicable Margin (Current Asset) than that yielded by the monthly financial statements previously
delivered pursuant to subsection 8.1.3(ii) of the Agreement for the last month of such fiscal
year, the Applicable Margin (Current Asset) shall be readjusted retroactively for the period that
was incorrectly calculated and (ii) if Borrowers fail to deliver the financial statements required
to be delivered pursuant to subsection 8.1.3(i) or subsection 8.1.3(ii) of the Agreement
on or before the due date thereof, including any applicable grace period, the interest rate shall
automatically adjust to the highest interest rate set forth above, effective prospectively from such
due date until the next Adjustment Date. For purposes hereof, Financial Measurement shall
mean the Interest Coverage Ratio (as such term is defined in Exhibit 8.3 to the Agreement).

|A-2
|---



|Applicable Margin (Real Estate)   for any period within the Term hereof, the percentage set forth opposite such period
in the following schedule:
|--------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                  

|Period                                    | Base Rate Real Estate
      Portion |       | LIBOR Real Estate
      Portion | 
|----------------------------------------- | ----------------------------------- | ----- | ------------------------------- | 
|
|                                          |                                     |       |                                 | 
|Closing Date to October 31, 2002          |                                     | 1.50% |                                 | 
|                                          |                                     |       |                                 | 
|November 1, 2002 to January 31, 2002      |                                     | 1.75% |                                 | 
|                                          |                                     |       |                                 | 
|February 1, 2003 to April 30, 2003        |                                     | 2.00% |                                 | 
|                                          |                                     |       |                                 | 
|May 1, 2003 to July 31, 2003              |                                     | 2.25% |                                 | 
|                                          |                                     |       |                                 | 
|August 1, 2003 to October 31, 2003        |                                     | 2.50% |                                 | 
|                                          |                                     |       |                                 | 
|November 1, 2003 to January 31, 2003      |                                     | 2.75% |                                 | 
|                                          |                                     |       |                                 | 
|February 1, 2004 and each date thereafter |                                     | 3.00% |                                 | 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Assignment and Acceptance Agreement an assignment and acceptance agreement in form and content reasonably acceptable to Agent pursuant
to which a Lender assigns to another Lender all or any portion of any of such Lenders Revolving
Loan Commitment, as permitted pursuant to the terms of this Agreement.
Availability   the amount of additional money which Borrowers are entitled to borrow from time to time
as Revolving Credit Loans, such amount being the difference derived when the sum of the principal
amount of Revolving Credit Loans then outstanding (including any amounts which Agent or any Lender
may have paid for the account of any Borrower pursuant to any of the Loan Documents and which have
not been reimbursed by any Borrower), the LC Amount and any reserves is subtracted from the Borrowing
Base. If the amount outstanding is equal to or greater than the Borrowing Base, Availability is 0.
Bank   Fleet National Bank.
Base Rate   the rate of interest announced or quoted by Bank from time to time as its prime rate
for commercial loans, whether or not such rate is the lowest rate charged by Bank to its most preferred
borrowers; and, if such prime rate for commercial loans is discontinued by Bank as a standard, a
comparable reference rate designated by Bank as a substitute therefor shall be the Base Rate.
Base Rate Current Asset Revolving Portion   as of any date, the excess, if any, of (x) the amount of the Base Rate Portion over (y)
the Base Rate Real Estate Portion.

|A-3
|---



|Base Rate Portion   that portion of the Revolving Credit Loans not subject to a LIBOR Option, including the
Base Rate Current Asset Portion and the Base Rate Real Estate Portion.
Base Rate Real Estate Portion   as of any date, that part of the Base Rate Portion in an amount equal to the excess,
if any, of (x) the amount of the Real Estate Component as of such date over (y) the amount of the
LIBOR Real Estate Portion.
Borrowing Base   as at any date of determination thereof, an amount equal to the lesser of:
(i) the Revolving Credit Maximum Amount; or
(ii) an amount equal to the sum of
(a) eighty-five percent (85%) of the net amount of Eligible Accounts (other than Eligible Accounts arising
from Short Term Projects) outstanding at such date; plus
(b) the lesser of One Million Five Hundred Thousand Dollars ($1,500,000) or eighty-five percent (85%)
of the next amount of Eligible Accounts arising from Short Term Projects outstanding at such date;
plus
(c) the lesser of (1) Eleven Million Dollars ($11,000,000) or (2) fifty-five percent (55%) of
the value of Eligible Inventory at such date; plus
(d) the Real Estate Component.
The limitations set forth in the immediately preceding sentence and each of the advance rates set forth
above may be adjusted downward by Agent, as Agent shall deem necessary or appropriate in its reasonable
credit judgment. For purposes hereof, (1) the net amount of Eligible Accounts at any time shall
be the face amount of such Eligible Accounts less any and all returns, rebates, discounts (which
may, at Agents option, be calculated on shortest terms), credits, allowances or excise taxes
of any nature at any time issued, owing, claimed by Account Debtors, granted, outstanding or payable
in connection with such Accounts at such time and (2) the amount of Eligible Inventory shall
be determined on a first-in, first-out, lower of cost or market basis in accordance with GAAP.
Borrowing Base Certificate   a certificate by a responsible officer of MFRI, substantially in the form of Exhibit 8.1.4 (or another form acceptable to Agent) setting forth the calculation of the Borrowing Base, including
a calculation of each component thereof, all in such detail as shall be satisfactory to Agent. All
calculations of the Borrowing Base in connection with the preparation of any Borrowing Base Certificate
shall originally be made by MFRI and certified to Agent; provided, that Agent shall have the right to review and adjust, in the exercise of its sole judgment, any such
calculation after giving notice thereof to MFRI, (1) to reflect its reasonable estimate of declines
in value of any of the Collateral described therein, and (2) to the extent that Agent determines
that such calculation is not in accordance with this Agreement.
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|A-4
|---



|Business Day   any day excluding Saturday, Sunday and any day which is a legal holiday under the laws
of the State of Wisconsin or the State of Illinois or is a day on which banking institutions located
in either of such states are closed.
Capital Expenditures   expenditures made or liabilities incurred for the acquisition of any fixed assets or
improvements, replacements, substitutions or additions thereto which have a useful life of more than
one year, including the total principal portion of Capitalized Lease Obligations.
Capitalized Lease Obligation   any Indebtedness represented by obligations under a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.
Change of Control  - means the occurrence of any of the following events: (i) any person (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders,
is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except
that a person shall be deemed to have beneficial ownership of all shares that any such
person has the right to acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than thirty percent (30%) of the total voting power
of the Voting Stock of MFRI (or its successor by merger, consolidated or purchase of all or substantially
all of its assets); and the Permitted Holders beneficially own (as defined in Rules 13d-3
and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of
the total voting power of the Voting Stock of MFRI (or its successor by merger, consolidated or purchase
of all or substantially all of its assets) than such other person and do not have the right or ability
by voting power, contract or otherwise to elect or designate for election a majority; of the board
of directors of MFRI or such successor; or (ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors of MFRI (together with any
new directors whose election by such Board of Directors or whose nomination for election by the shareholders
of MFRI was approved by a vote of at least a majority of the directors of MFRI then still in office
who were either directors at the beginning of such period or whose election or nomination for election
was previously so approved or is a designee of the Permitted Holders or was nominated or elected
by such Permitted Holders or any of their designees) cease for any reason to constitute a majority
of the Board of Directors of MFRI then in office; or (iii) the sale, lease, transfer, conveyance
or other disposition (other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of MFRI and the other Borrowers taken as
a whole; or (iv) the adoption by the stockholders of MFRI of a plan for the liquidation or dissolution of MFRI.
Closing Date   the date on which all of the conditions precedent in Section 9 of the Agreement
are satisfied or waived and the initial Loan is made or the initial Letter of Credit or LC Guaranty
is issued under the Agreement.
Collateral   all of the Property and interests in Property described in Section 5 of the Agreement,
and all other Property and interests in Property that now or hereafter secure the payment and performance
of any of the Obligations.
Compliance Certificate   as defined in subsection 8.1.3 of the Agreement.
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|A-5
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|Computer Hardware and Software all of any Borrowers rights (including rights as licensee and lessee) with respect to
(i) computer and other electronic data processing hardware, including all integrated computer
systems, central processing units, memory units, display terminals, printers, computer elements,
card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators,
power equalizers, accessories, peripheral devices and other related computer hardware; (ii) all
Software and all software programs designed for use on the computers and electronic data processing
hardware described in clause (i) above, including all operating system software, utilities and
application programs in any form (source code and object code in magnetic tape, disk or hard copy
format or any other listings whatsoever); (iii) any firmware associated with any of the foregoing;
and (iv) any documentation for hardware, Software and firmware described in clauses (i),
(ii) and (iii) above, including flow charts, logic diagrams, manuals, specifications, training materials,
charts and pseudo codes.
Computer Sale and Leaseback   a sale and leaseback transaction pursuant to which Borrowers shall sell and lease back
certain of their computer Equipment; provided that the terms and conditions of such sale and leaseback
transaction, including without limitation, the computer Equipment subject thereto and rental rates
thereon, are acceptable to Agent in its discretion.
Consolidated   the consolidation in accordance with GAAP of the accounts or other items as to which
such term applies.
Contract Right   any right of any Borrower to payment under a contract for the sale or lease of goods
or the rendering of services, which right is at the time not yet earned by performance.

Current Assets   at any date means the amount at which all of the current assets of a Person would be
properly classified as current assets shown on a balance sheet at such date in accordance with GAAP.
Current Asset Borrowing Base   as of any date, the remainder of (x) the Borrowing Base minus (y) the Real Estate Component.
Default   an event or condition the occurrence of which would, with the lapse of time or the giving
of notice, or both, become an Event of Default.
Default Rate   as defined in subsection 2.1.2 of the Agreement.
Derivative Obligations   every obligation of a Person under any forward contract, futures contract, exchange contract,
swap, option or other financing agreement or arrangement (including, without limitation, caps, floors,
collars and similar agreement), the value of which is dependent upon interest rates, currency exchange
rates, commodities or other indices.
Distribution   in respect of any Person means and includes: (i) the payment of any dividends or
other distributions on Securities (except distributions in such Securities) and (ii) the redemption
or acquisition of Securities of such Person, as the case may be, unless made contemporaneously from
the net proceeds of the sale of Securities.
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|A-6
|---



|Dominion Account   a special bank account or accounts of Agent established by Borrowers or any one of them
pursuant to subsection 6.2.4 of the Agreement at banks selected by MFRI, but acceptable to Agent
in its sole discretion, and over which Agent shall have sole and exclusive access and control for
withdrawal purposes.
Eligible Account   an Account arising in the ordinary course of the business of any Borrower from the sale
of goods or rendition of services which Agent, in its sole judgment, exercised in a commercially
reasonable manner, deems to be an Eligible Account. Without limiting the generality of the foregoing,
no Account shall be an Eligible Account if:
(i)it arises out of a sale made or services rendered by a Borrower to a Subsidiary of any Borrower or
an Affiliate of any Borrower or to a Person controlled by an Affiliate of any Borrower; or
(ii) it remains unpaid more than 90 days after the original invoice date shown on the invoice; or
(iii) the total unpaid Accounts of the Account Debtor exceed 20% of the net amount of all Eligible Accounts,
but only to the extent of such excess; or
(iv) any covenant, representation or warranty contained in the Agreement with respect to such Account has
been breached; or
(v) the Account Debtor is also a creditor or supplier of a Borrower or any Subsidiary of any Borrower,
or the Account Debtor has disputed liability with respect to such Account, or the Account Debtor
has made any claim with respect to any other Account due from such Account Debtor to any Borrower
or any Subsidiary of any Borrower, or the Account otherwise is or may become subject to right of
setoff by the Account Debtor, provided, that any such Account shall be eligible to the extent such amount thereof exceeds such contract,
dispute, claim, setoff or similar right; or
(vi) the Account Debtor has commenced a voluntary case under the federal bankruptcy laws, as now constituted
or hereafter amended, or made an assignment for the benefit of creditors, or a decree or order for
relief has been entered by a court having jurisdiction in the premises in respect of the Account
Debtor in an involuntary case under the federal bankruptcy laws, as now constituted or hereafter
amended, or any other petition or other application for relief under the federal bankruptcy laws,
as now constituted or hereafter amended, has been filed against the Account Debtor, or if the Account
Debtor has failed, suspended business, ceased to be Solvent, or consented to or suffered a receiver,
trustee, liquidator or custodian to be appointed for it or for all or a significant portion of its
assets or affairs; or
(vii) it arises from a sale made or services rendered to an Account Debtor outside the United States, unless the sale is either (1) to an Account Debtor located in Ontario or any other province of Canada in which the Personal Property Security Act has been adopted in substantially the same form as currently in effect in Ontario or (2) on letter of credit, foreign credit insurance (assigned to Agent), guaranty or acceptance terms, in each case acceptable to Agent in its sole judgment, exercised in a commercially reasonable manner; or
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|A-7
|---



|(viii)(1) it arises from a sale to the Account Debtor on a guaranteed sale, sale-or-return, sale-on-approval,
consignment, or any other repurchase or return basis; (2) it is subject to a reserve established
by any Borrower for potential returns or refunds, to the extent of such reserve; or (3) it arises
from a sale to the Account Debtor on a bill-and-hold basis unless (x) such Account Debtor has requested
in writing that such sale be on a bill-and-hold basis, which writing shall contain an acknowledgement
by such Account Debtor that it is obligated to pay for the subject Inventory, (y) such Inventory
is delivered to the Account Debtor not later than 30 days after the original invoice date and (z)
the aggregate of all such Accounts arising from bill-and-hold sales by all Borrowers, at any point
in time, does not exceed One Million Five Hundred Thousand Dollars ($1,500,000); or
(ix) the Account Debtor is the United States of America or any department, agency or instrumentality thereof,
unless Borrower assigns its right to payment of such Account to Agent, in a manner satisfactory to
Agent, in its sole judgment, so as to comply with the Assignment of Claims Act of 1940 (31 U.S.C.
§203 et  seq., as amended); or
(x) it is not at all times subject to Agents duly perfected, first priority security interest or

is subject to a Lien that is not a Permitted Lien; or
(xi) the goods giving rise to such Account have not been delivered to and accepted by the Account Debtor
or the services giving rise to such Account have not been performed by the applicable Borrower and
accepted by the Account Debtor or the Account otherwise does not represent a final sale; or
(xii) the Account is evidenced by chattel paper or an instrument of any kind, or has been reduced to judgment;
or
(xiii) any Borrower or a Subsidiary of any Borrower has made any agreement with the Account Debtor for any
extension, compromise, settlement or modification of the Account or deduction therefrom, except for
discounts or allowances which are made in the ordinary course of business for prompt payment and
which discounts or allowances are reflected in the calculation of the face value of each invoice
related to such Account; or
(xiv)25% or more of the Accounts owing from the Account Debtor are not Eligible Accounts hereunder; or
(xv) any Borrower has made an agreement with the Account Debtor to extend the time of payment thereof;
or
(xvi) it represents service charges, late fees or similar charges; or
(xvii) it is an Account of Perma-Pipe and such Account is not a Final Billings Account or an Account arising
out of a Short-Term Project; or
(xviii) Accounts which represent retention payments; or
(xix) it is not otherwise acceptable to Agent in its sole judgment, exercised in a commercially reasonable

manner.
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|A-8
|---



|Eligible Inventory   Inventory of any Borrower (other than work-in-process, packaging materials and supplies,
tooling, samples and literature) which Agent, in its sole judgment, exercised in a commercially reasonable
manner, deems to be Eligible Inventory. Without limiting the generality of the foregoing, no Inventory
shall be Eligible Inventory if:
(i) it is not raw materials or finished goods which meet the specifications of the purchase order or contract
for such Inventory, if any; or
(ii) it is not in good, new and saleable condition; or
(iii) it is slow-moving, obsolete or unmerchantable; or
(iv) it does not meet all standards imposed by any governmental agency or authority; or
(v) it does not conform in all respects to any covenants, warranties and representations set forth in
the Agreement; or
(vi) it is not at all times subject to Agents duly perfected, first priority security interest or

is subject to a Lien that is not a Permitted Lien; or
(vii) it is not situated at a location in compliance with the Agreement, provided that Inventory situated at a location not owned by a Borrower will be Eligible Inventory only if Agent
has received a satisfactory landlords agreement or bailee letter, as applicable, with respect
to such location; or
(viii) it is in transit; or
(ix) it is not otherwise acceptable to Agent in its sole judgment, exercised in a commercially reasonable

manner.
Environmental Laws   all federal, state and local laws, rules, regulations, ordinances, orders and consent
decrees relating to health, safety and environmental matters.
ERISA   the Employee Retirement Income Security Act of 1974, as amended, and any successor statute,
and all rules and regulations from time to time promulgated thereunder.
Event of Default   as defined in Section 10.1 of the Agreement.
Existing Mortgage Indebtedness   money borrowed owed by Borrowers in the aggregate principal amount of Seven Million One
Hundred Six Thousand Dollars ($7,106,000) as of the Closing Date.
Fee Letter   as defined in Section 2.3 of the Agreement.
Final Billings Accounts   Accounts owed to Perma-Pipe if arising out of projects for which ninety-five percent
(95%) or more of billings to be made on such project have occurred.
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|A-9
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|GAAP   generally accepted accounting principles in the United States of America in effect from
time to time.
Indebtedness   as applied to a Person means, without duplication:
(i) all items which in accordance with GAAP would be included in determining total liabilities as shown
on the liability side of a balance sheet of such Person as at the date as of which Indebtedness is
to be determined, including, without limitation, Capitalized Lease Obligations;
(ii) all obligations of other Persons which such Person has guaranteed;
(iii) all reimbursement obligations in connection with letters of credit or letter of credit guaranties
issued for the account of such Person;
(iv) Derivative Obligations; and
(v) in the case of Borrowers (without duplication), the Obligations.
Intellectual Property  - means: all past, present and future: trade secrets, know-how and other proprietary
information; trademarks, internet domain names, service marks, trade dress, trade names, business
names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of
the foregoing) indicia and other source and/or business identifiers, and the goodwill of the business
relating thereto and all registrations or applications for registrations which have heretofore been
or may hereafter be issued thereon throughout the world; copyrights (including copyrights for computer
programs) and copyright registrations or applications for registrations which have heretofore been
or may hereafter be issued throughout the world and all tangible property embodying the copyrights,
unpatented inventions (whether or not patentable); patent applications and patents; industrial design
applications and registered industrial designs; license agreements related to any of the foregoing
and income therefrom; books, records, writings, computer tapes or disks, flow diagrams, specification
sheets, computer software, source codes, object codes, executable code, data, databases and other
physical manifestations, embodiments or incorporations of any of the foregoing; the right to sue
for all past, present and future infringements of any of the foregoing; all other intellectual property;
and all common law and other rights throughout the world in and to all of the foregoing.
Intercreditor Agreement   that certain Intercreditor Agreement of even date hereof by and between Agent and the
holders of the Term Notes, as the same may be amended or modified from time to time.
Interest Period   as applicable to any LIBOR Portion, a period commencing on the date such LIBOR Portion
is advanced, continued or converted, and ending on the date which is one (1) month, two (2) months,
three (3) months, or six (6) months later, as may then be requested by MFRI, on its own behalf and
on behalf of all other Borrowers; provided that (i) any Interest Period which would otherwise end on a day which is not a Business Day shall
end in the next preceding or succeeding Business Day as is Agents custom in the market to which
such LIBOR Portion relates; (ii) there remains a minimum of one (1) month, two (2) months, three
(3) months or six (6) months (depending upon which Interest Period MFRI selects) in the Term, unless
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|A-10
|----



|Borrowers and Lenders have agreed to an extension of the Term beyond the expiration of the Interest
Period in question; and (iii) all Interest Periods of the same duration which commence on the
same date shall end on the same date.
IRB Indebtedness   shall mean all Indebtedness outstanding with respect to (x) (i) those certain
Industrial Revenue Bonds Series 1995 (Perma-Pipe) issued by the Industrial Board of Wilson County,
Tennessee in the initial amount of Three Million One Hundred Fifty Thousand Dollars ($3,150,000)
(ii) that certain Trust Indenture dated September 1, 1995 by and between The Industrial
Board of Wilson County, Tennessee and Perma-Pipe and (iii) all indentures, mortgages, security
agreements, notes, loan agreements, schedules, exhibits, amendments, modifications and other documents
related thereto (collectively, the Tennessee IRB Indebtedness) and (y) (i) those
certain Industrial Revenue Bonds issued by the Industrial Development Authority for the City of Winchester,
Virginia in the initial principal amount of Three Million One Hundred Fifty Thousand Dollars ($3,150,000),
(ii) that certain Trust Indenture dated September 1, 1995 by and between the Industrial Development
Authority for the City of Winchester, Virginia and Midwesco and (iii) all indentures, mortgages,
security agreements, notes, loan agreements, schedules, exhibits, amendments, modifications and documents
those related thereto (collectively the Virginia IRB Indebtedness).
Lebanon Refinancing   any Money Borrowed incurred by Borrowers secured by a Lien on Perma-Pipes real
property located at 1310 Quarles Drive, Lebanon, Tennessee; provided that the terms and conditions of such Money Borrowed, including without limitation, interest rates,
amortization schedules, and collateral therefor are acceptable to Agent in its sole discretion and
if the proceeds of any such Money Borrowed are used to repay outstanding Revolving Credit Loans (subject
to Borrowers rights to reborrow such amounts in accordance with the terms of this Agreement)
and the Indebtedness outstanding under the Term Loan Documents (as permitted by Section 8.2.7 of
the Agreement).
LC Amount   at any time, the aggregate undrawn face amount of all Letters of Credit and LC Guaranties
then outstanding.
LC Guaranty   any guaranty pursuant to which Agent or any Affiliate of Agent shall guaranty the payment
or performance by Borrowers of their reimbursement obligation under any letter of credit.
LC Obligations   Any Obligations that arise from any draw against any Letter of Credit or against any
Letter of Credit supported by an LC Guaranty.
Letter of Credit   any standby or documentary letter of credit issued by Agent or any Affiliate of Agent
for the account of any Borrower.
LIBOR   as applicable to any LIBOR Portion, for the applicable Interest Period, the rate per
annum (rounded upward, if necessary, to the nearest 1/8 of one percent) as determined on the basis
of the offered rates for deposits in U.S. dollars, for a period of time comparable to such Interest
Period which appears on the Telerate page 3750 as of 11:00 a.m. (London time) on the day
that is two (2) London Banking Days preceding the first day of such Interest Period; provided, however, if the rate described above does not appear on the Telerate System on any
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|A-11
|----



|applicable interest determination date, the LIBOR shall be the rate (rounded upwards as described above,
if necessary) for deposits in U.S. dollars for a period substantially equal to the Interest Period
on the Reuters Page LIBO (or such other page as may replace the LIBO Page on that
service for the purpose of displaying such rates), as of 11:00 a.m. (London Time), on the day
that is two (2) London Banking Days prior to the first day of such Interest Period. If both the Telerate
and Reuters systems are unavailable, then the rate for that date will be determined on the basis
of the offered rates for deposits in U.S. dollars for a period of time comparable to such Interest
Period which are offered by four (4) major banks in the London interbank market at approximately
11:00 a.m. (London time), on the day that is two (2) London Banking Days preceding the first
day of such Interest Period as selected by Agent. The principal London office of each of the major
London banks so selected will be requested to provide a quotation of its U.S. dollar deposit offered
rate. If at least two (2) such quotations are provided, the rate for that date will be the arithmetic
mean of the quotations. If fewer than two quotations are provided as requested, the rate for that
date will be determined on the basis of the rates quoted for loans in U.S. dollars to leading European
banks for a period of time comparable to such Interest Period offered by major banks in New York
City at approximately 11:00 a.m. (New York City time), on the day that is two (2) London Banking
Days preceding the first day of such Interest Period. In the event that Agent is unable to obtain
any such quotation as provided above, it will be determined that LIBOR pursuant to a Interest Period
cannot be determined. In the event that the Board of Governors of the Federal Reserve System shall
impose a Reserve Percentage with respect to LIBOR deposits of Bank then for any period during which
such Reserve Percentage shall apply, LIBOR shall be equal to the amount determined above divided
by an amount equal to 1 minus the Reserve Percentage.
LIBOR Current Asset Portion   as of any date, the excess, if any, of (x) the aggregate amount of all outstanding LIBOR
Portions over (y) the LIBOR Real Estate Portion.
LIBOR Interest Payment Date   the first day of each calendar month during and immediately following the applicable
Interest Period.
LIBOR Option   the option granted pursuant to Section 3.1 of the Agreement to have the interest
on all or any portion of the principal amount of the Revolving Credit Loans based on the LIBOR.
LIBOR Portion   that portion of the Revolving Credit Loans specified in a LIBOR Request (including any
portion of Revolving Credit Loans which is being borrowed by Borrower concurrently with such LIBOR
Request) which, as of the date of the LIBOR Request specifying such LIBOR Revolving Portion, has
met the conditions for basing interest on the LIBOR in Section 3.1 of the Agreement and the
Interest Period of which has not terminated.
LIBOR Real Estate Portion   as of any date, the aggregate amount of all outstanding LIBOR Portions up to the amount
of the Real Estate Component as of such date.
LIBOR Request   a notice in writing (or by telephone confirmed electronically or by telecopy or other
facsimile transmission on the same day as the telephone request) from MFRI, on its own behalf and
on behalf of all other Borrowers, to Agent requesting that interest on a Revolving Credit Loan be
based on the LIBOR, specifying: (i) the first day of the Interest Period
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|A-12
|----



|(which shall be a Business Day); (ii) the length of the Interest Period; (iii) whether the
LIBOR Portion is a new Loan, a conversion of a Base Rate Portion, or a continuation of a LIBOR Portion,
and (iv) the dollar amount of the LIBOR Revolving Portion, which shall be in an amount not less
than One Million Dollars ($1,000,000) or an integral multiple of One Hundred Thousand Dollars ($100,000)
in excess thereof.
Lien   any interest in Property securing an obligation owed to, or a claim by, a Person other
than the owner of the Property, whether such interest is based on common law, statute or contract.
The term Lien shall also include rights of seller under conditional sales contracts or
title retention agreements, reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances affecting Property.
For the purpose of the Agreement, a Borrower shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement or other arrangement pursuant to
which title to the Property has been retained by or vested in some other Person for security purposes.
Loan Account   the loan account established on the books of Agent pursuant to Section 3.6 of the
Agreement.
Loan Commitment   with respect to any Lender, the amount of such Lenders Revolving Loan Commitment.
Loan Documents   the Agreement, the Other Agreements and the Security Documents.
Loans   all loans and advances of any kind made by Agent, any Lender, or any Affiliate of Agent
or any Lender, pursuant to the Agreement.
London Banking Day   any date on which commercial banks are open for business in London, England.
Majority Lenders   as of any date, Lenders holding 51% of Revolving Loan Commitments determined on a combined
basis and following the termination of the Revolving Loan Commitments, Lenders holding 51% or more
of the outstanding Loans, LC Amounts and LC Obligations not yet reimbursed by Borrowers or funded
with a Revolving Credit Loan; provided, that (i) in each case, if there are 2 or more Lenders with outstanding Loans, LC Amounts, unfunded
and unreimbursed LC Obligations or Revolving Loan Commitments, at least 2 Lenders shall be required
to constitute Majority Lenders; and (ii) prior to termination of the Revolving Loan Commitments,
if any Lender breaches its obligation to fund any requested Revolving Credit Loan, for so long as
such breach exists, its voting rights hereunder shall be calculated with reference to its outstanding
Loans, LC Amounts and unfunded and unreimbursed LC Obligations, rather than its Revolving Loan Commitment.
Material Adverse Effect   (i) a material adverse effect on the business, financial condition, operation, performance
or properties of Borrowers and their Subsidiaries taken as a whole, (ii) a material adverse
effect on the rights and remedies of Agent or Lenders under the Loan Documents, or (iii) the
material impairment of the ability of Borrowers or any of their Subsidiaries to perform their obligations
hereunder or under any Loan Document.
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|A-13
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|Money Borrowed   means, (i) Indebtedness arising from the lending of money by any Person to any Borrower
or any of its Subsidiaries; (ii) Indebtedness, whether or not in any such case arising from
the lending by any Person of money to any Borrower or any of its Subsidiaries, (1) which is
represented by notes payable or drafts accepted that evidence extensions of credit, (2) which
constitutes obligations evidenced by bonds, debentures, notes or similar instruments, or (3) upon
which interest charges are customarily paid (other than accounts payable) or that was issued or assumed
as full or partial payment for Property; (iii) Indebtedness that constitutes a Capitalized Lease
Obligation; (iv) reimbursement obligations with respect to letters of credit or guaranties of
letters of credit and (v) Indebtedness of any Borrower or any of its Subsidiaries under any
guaranty of obligations that would constitute Indebtedness for Money Borrowed under clauses (i)
through (iii) hereof, if owed directly by such Borrower or any of its Subsidiaries. Money Borrowed
shall not include trade payables or accrued expenses.
Mortgage   the deed of trust executed by Perma-Pipe on or about the Closing Date in favor of Agent,
for the benefit of itself and Lenders, by which Perma-Pipe has granted to Agent, as security for
the Obligations, a Lien upon the real Property of Perma-Pipe located at 1310 Quarles Drive, Lebanon,
Tennessee, together with all mortgages, deeds of trust and comparable documents now or at any time
hereafter securing the whole or any part of the Obligations.
Multiemployer Plan   has the meaning set forth in Section 4001(a)(3) of ERISA.
New Mortgages   as defined in Section 5.4 of the Agreement.
Note Purchase Agreements   those certain Note Purchase Agreements, each dated as of even date herewith and as may
be amended from time to time, pursuant to which MFRI issued and sold Six Million Dollars ($6,000,000)
in aggregate principal amount of Reset Rate Senior Secured Notes due June 30, 2007 to the purchasers
named in Schedule A thereto which Note Purchase Agreements provide for, inter alia: (i) an initial
principal amount of such Notes of at least Six Million Dollars ($6,000,000); (ii) quarterly amortization
principal payments of not more than One Hundred Eighty-Seven Thousand Five Hundred Dollars ($187,500);
(iii) a per annum interest rate of not more than twelve percent (12%) if either (a) the principal
amount of the Term Notes outstanding is greater than Five Million Dollars ($5,000,000) or (b) any
amount due under the Term Notes remains outstanding as of July 10, 2006 (including but not limited
to principal, interest or Make-Whole Amount (as defined in the Note Purchase Agreements)); (iv) a
non-default interest rate of ten percent (10%) per annum if the outstanding principal amount of the
Term Notes outstanding is Five Million Dollars ($5,000,000) or less and such interest rate is being
determined for any period prior to July 10, 2006; and (v) additional principal payments based on
an excess cash flow formula, which formula shall provide that no such principal payments otherwise
due by application of any such excess cash flow formula shall be required if, after giving effect
to any such principal payment, Availability (computed on a basis consistent with the manner in which
Availability is computed on the Closing Date) would be less than One Million Five Hundred Thousand Dollars ($1,500,000).
Notes   the Revolving Notes.
Obligations   all Loans, all LC Obligations and all other advances, debts, liabilities, obligations,
covenants and duties, together with all interest, fees and other charges thereon,
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|A-14
|----



|owing, arising, due or payable from any Borrower to Agent, for its own benefit, from any Borrower to
Agent for the benefit of any Lender, from any Borrower to any Lender or from any Borrower to Bank
or any other Affiliate of Agent, of any kind or nature, present or future, whether or not evidenced
by any note, guaranty or other instrument, whether arising under the Agreement or any of the other
Loan Documents or otherwise, whether direct or indirect (including those acquired by assignment),
absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising
and however acquired, including without limitation any Product Obligations owing to Agent, any Lender,
Bank or any Affiliate of Bank or Agent.
Organizational I.D. Number   with respect to any Person, the organizational identification number assigned to such
Person by the applicable governmental unit or agency of the jurisdiction of organization of such
Person.
Other Agreements   any and all agreements, instruments and documents (other than the Agreement and the Security
Documents), heretofore, now or hereafter executed by any Borrower, any Subsidiary of any Borrower
or any other third party and delivered to Agent or any Lender in respect of the transactions contemplated
by the Agreement.
Overadvance   as defined in subsection 1.1.2 of the Agreement.
Patent Security Agreement   the Patent and Security Agreement executed by Borrowers on or about the Closing Date
in favor of Agent for its benefit and the ratable benefit of Lenders, as such Patent and License
Agreement has been or will be amended from time to time.
Permitted Holders   any Person, who as of the Closing Date, beneficially owns five percent (5%) or more (on
a fully diluted basis) of the outstanding common stock of MFRI.
Permitted Liens   any Lien of a kind specified in subsection 8.2.5 of the Agreement.
Permitted Purchase Money Indebtedness   Purchase Money Indebtedness of Borrowers incurred after the date hereof which is secured
by a Purchase Money Lien and the principal amount of which, when aggregated with the principal amount
of all other such Indebtedness and Capitalized Lease Obligations of Borrowers and their Subsidiaries
at the time outstanding, does not exceed One Million Five Hundred Thousand Dollars ($1,500,000).
For the purposes of this definition, the principal amount of any Purchase Money Indebtedness consisting
of capitalized leases (as opposed to operating leases) shall be computed as a Capitalized Lease Obligation.
Person   an individual, partnership, corporation, limited liability company, joint stock company,
land trust, business trust, or unincorporated organization, or a government or agency or political
subdivision thereof.
Plan   an employee benefit plan now or hereafter maintained for employees of any Borrower or
any of its Subsidiaries that is covered by Title IV of ERISA.
Pledge Agreement   the Stock Pledge Agreement executed by MFRI on or about the Closing Date in favor of
Agent for its benefit and the ratable benefit of Lenders, as such Stock Pledge Agreement has or will
be amended from time to time.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|A-15
|----



|Pledge Agreement (Subsidiaries)   the Stock Pledge Agreement executed by Midwesco on or about the Closing Date in favor
of Agent for its benefit and the ratable benefit of Lenders, as such Stock Pledge Agreement has been
or will be amended from time to time.
Product Obligations   every obligation of any Borrower under and in respect of any one or more of the following
types of services or facilities extended to any Borrower by Bank, Agent, any Lender or any Affiliate
of Bank or Agent: (i) credit cards, (ii) cash management or related services including
the automatic clearing house transfer of funds for the account of any Borrower pursuant to agreement
or overdraft, (iii) cash management, including controlled disbursement services and (iv) Derivative
Obligations.
Projections  MFRIs projected Consolidated and consolidating (i) balance sheets, (ii) profit
and loss statements, (iii) cash flow statements, and (iv) capitalization statements, all
prepared on a consistent basis with the historical financial statements of MFRI and its Subsidiaries,
together with appropriate supporting details and a statement of underlying assumptions.
Property   any interest in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible.
Purchase Money Indebtedness   means and includes (i) Indebtedness (other than the Obligations) for the payment
of all or any part of the purchase price of any fixed assets, (ii) any Indebtedness (other than
the Obligations) incurred at the time of or within 10 days prior to or after the acquisition of any
fixed assets for the purpose of financing all or any part of the purchase price thereof, and (iii) any
renewals, extensions or refinancings thereof, but not any increases in the principal amounts thereof
outstanding at the time.
Purchase Money Lien   a Lien upon fixed assets which secures Purchase Money Indebtedness, but only if such
Lien shall at all times be confined solely to the fixed assets the purchase price of which was financed
through the incurrence of the Purchase Money Indebtedness secured by such Lien.
Real Estate Component   as of any date of the lesser of (1) One Million Dollars ($1,000,000) multiplied by the
Real Estate Percentage or (2) the product of fifty percent (50%) of the fair market value of Perma-Pipes
Real Property located at 1310 Quarles Drive, Lebanon, Tennessee, less liquidation expenses (as estimated
by Agent) multiplied by the Real Estate Percentage. For purposes of this definition, the fair market
value of Perma-Pipes Real Property located at 1310 Quarles Drive, Lebanon, Tennessee shall
be established by Agent in the reasonable exercise of its discretion on the Closing Date. After the
Closing Date, Agent, in the reasonable exercise of its discretion, may adjust the fair market value
of Perma-Pipes Real Property located at 1310 Quarles Drive, Lebanon, Tennessee, to reflect
increases or decreases in either such value. To that end, Borrowers agree that Agent, in the reasonable
exercise of its discretion, may, on an annual basis, or more frequently as requested by Agent, if
an Event of Default exists, obtain or require Borrowers to obtain appraisals of such Real Property
to evidence the fair market value of such Real Property. If no Default or Event of Default exists,
Agent shall notify Borrowers prior to obtaining or authorizing any such appraisal. The cost of any
such appraisal shall be paid by Borrowers pursuant to Section 2.6 of the Agreement. The foregoing
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|A-16
|----



|notwithstanding, upon and after the consummation of the Lebanon Refinancing, the Real Estate Component
will equal Zero Dollars ($0).
Real Estate Percentage   one hundred percent (100%) until October 31, 2002. On and after November 1,
2002, the Real Estate Percentage shall mean as of any such date, the percentage equal to (x) one
hundred percent (100%) minus (y) the percentage obtained by dividing the number of full calendar months elapsed since September 30,
2002 by sixty (60).
Rentals   as defined in subsection 8.2.18 of the Agreement.
Reportable Event   any of the events set forth in Section 4043(c) of ERISA.
Reserve Percentage   the maximum aggregate reserve requirement (including all basic, supplemental, marginal
and other reserves) which is imposed on member banks of the Federal Reserve System against Euro-currency
Liabilities as defined in Regulation D.
Restricted Investment   any investment made in cash or by delivery of Property to any Person, whether by acquisition
of stock, Indebtedness or other obligation or Security, or by loan, advance or capital contribution,
or otherwise, or in any Property except the following:
(i) investments by any Borrower, to the extent existing on the Closing Date, in one or more Subsidiaries
of such Borrower;
(ii) Property to be used in the ordinary course of business;
(iii) Current Assets arising from the sale of goods and services in the ordinary course of business of any
Borrower or any of its Subsidiaries;
(iv) investments in direct obligations of the United States of America, or any agency thereof or obligations
guaranteed by the United States of America, provided that such obligations mature within one year from the date of acquisition thereof;
(v) investments in certificates of deposit maturing within one year from the date of acquisition and fully
insured by the Federal Deposit Insurance Corporation;
(vi) investments in commercial paper given the highest rating by a national credit rating agency and maturing
not more than 270 days from the date of creation thereof;
(vii) investments in money market, mutual or similar funds having assets in excess of $100,000,000 and the
investments of which are limited to investment grade securities;
(viii) intercompany advances permitted under Section 8.2.2(v) of the Agreement;
(ix) investments existing on the date hereof and listed on Exhibit 8.2.12 hereto; and
(x) investments otherwise expressly permitted pursuant to the Agreement.
Revolving Credit Loan   a Loan made by any Lender pursuant to Section 1.1 of the Agreement.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|A-17
|----



|Revolving Credit Maximum Amount   Twenty-Eight Million Dollars ($28,000,000); provided, that upon the closing of the Lebanon Refinancing, the Revolving Credit Maximum Amount shall be reduced
to Twenty-Seven Million Dollars ($27,000,000); and provided, further, that upon three (3) Business Days notice, Borrowers may reduce the Revolving Credit Maximum
Amount by amounts not exceeding Two Million Dollars ($2,000,000) within any calendar year. Any such
reduction shall be in a minimum amount of One Million Dollars ($1,000,000) and shall be an integral
multiple of One Million Dollars ($1,000,000). The Maximum Revolving Loan Maximum Amount may not,
however, be reduced below Twenty-Three Million Dollars ($23,000,000). Once the Maximum Revolving
Loan has been so reduced, it may not be subsequently increased.
Revolving Loan Commitment   with respect to any Lender, the amount of such Lenders Revolving Loan Commitment
pursuant to subsection 1.1.1 of the Agreement, as set forth below such Lenders name on
the signature page hereof or any Assignment and Acceptance Agreement executed by such Lender.
Revolving Loan Percentage   with respect to each Lender, the percentage equal to the quotient of such Lenders
Revolving Loan Commitment divided by the aggregate of all Revolving Loan Commitments.
Revolving Notes   the Secured Promissory Notes to be executed by Borrowers on or about the Closing Date
in favor of each Lender to evidence the Revolving Credit Loans, which shall be in the form of Exhibit 1.1 to the Agreement, together with any replacement or successor notes therefor.
Security   all shares of stock, partnership interests, membership interests, membership units or
other ownership interests in any other Person and all warrants, options or other rights to acquire
the same.
Security Documents  the Guaranty Agreements, the Mortgages, any New Mortgage, the Patent Security Agreement,
the Pledge Agreement, the Pledge Agreement (Subsidiaries), the Trademark Security Agreement, instruments
and agreements now or at any time hereafter securing the whole or any part of the Obligations.
Short Term Projects   projects of Perma-Pipe which are estimated by Borrower in good faith to be one month
or less from ninety-five percent (95%) completion, which estimates shall be consistent with the purchase
orders evidencing such projects.
Solvent   as to any Person, that such Person (i) owns Property whose fair saleable value is
greater than the amount required to pay all of such Persons Indebtedness (including contingent
debts), (ii) is able to pay all of its Indebtedness as such Indebtedness matures and (iii) has
capital sufficient to carry on its business and transactions and all business and transactions in
which it is about to engage.
Subordinated Debt   Indebtedness of any Borrower or any Subsidiary of any Borrower that is subordinated to
the Obligations in a manner satisfactory to Agent, and contains terms, including without limitation,
payment terms, satisfactory to Agent.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|A-18
|----



|Subsidiary   any Person of which another Person owns, directly or indirectly through one or more intermediaries,
more than 50% of the Voting Stock at the time of determination.
Tennessee IRB Indebtedness   as defined in the definition of IRB Indebtedness.
Term   as defined in Section 4.1 of the Agreement.
Term Loan Documents   the Term Notes, the Note Purchase Agreements and all other documents, agreements and
exhibits and schedules executed and delivered in connection therewith.
Term Notes   those certain notes issued by MFRI pursuant to the Note Purchase Agreements.
Term Noteholders   the holders of the Term Notes.
Total Credit Facility   Twenty-Eight Million Dollars ($28,000,000), as reduced from time to time pursuant to
the terms of the Agreement.
Trademark Security Agreement   the Trademark and License Security Agreement executed by Borrowers on or about the Closing
Date in favor of Agent of its benefit and the ratable benefit of Lenders, as such Trademark and License
Security Agreement has been or will be amended from time to time.
Type of Organization   with respect to any Person, the kind or type of entity by which such Person is organized,
such as a corporation or limited liability company.
UCC   the Uniform Commercial Code as in effect in the State of Illinois on the date of this
Agreement, as it may be amended or otherwise modified.
Unused Line Fee   as defined in Section 2.5 of the Agreement.
Virginia IRB Indebtedness   as defined in the definition of IRB Indebtedness.
Voting Stock   Securities of any class or classes of a corporation, limited partnership or limited liability
company or any other entity the holders of which are ordinarily, in the absence of contingencies,
entitled to vote with respect to the election of corporate directors (or Persons performing similar
functions).
Other Terms.  All other terms contained in the Agreement shall have, when the context so indicates, the meanings
provided for by the UCC to the extent the same are used or defined therein.
Certain Matters of Construction. The terms herein, hereof and hereunder and other words of similar
import refer to the Agreement as a whole and not to any particular section, paragraph or subdivision.
Any pronoun used shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the interpretation of
the Agreement. All references to statutes and related regulations shall
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|A-19
|----



|include any amendments of same and any successor statutes and regulations. All references to any of
the Loan Documents shall include any and all modifications thereto and any and all extensions or
renewals thereof.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|A-20
|----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.21.02                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|FIRST AMENDMENT TOLOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (First Amendment) is made as of the
___ day of October, 2002 by and among MFRI, Inc., a Delaware corporation (MFRI), Midwesco
Filter Resources, Inc., a Delaware corporation (Midwesco), Perma-Pipe, Inc., a Delaware
corporation (Perma-Pipe), Thermal Care, Inc., a Delaware corporation (Thermal Care)
and TDC Filer Manufacturing, Inc., a Delaware corporation (TDC), the lenders who are
signatories hereto (Lenders), and Fleet Capital Corporation, a Rhode Island corporation
(FCC), as agent for Lenders hereunder (FCC, in such capacity, being Agent).
MFRI, Midwesco, Perma-Pipe, Thermal Care and TDC are sometimes hereinafter referred to individually
as a Borrower and collectively as Borrowers.
WITNESSETH:
WHEREAS, Borrowers, Agent and Lenders entered into a certain Loan and Security Agreement dated as of
July 11, 2002 (said Loan and Security Agreement is hereinafter referred to as the Loan Agreement);
and
WHEREAS, Borrowers desire to amend and modify certain provisions of the Loan Agreement and, subject
to the terms hereof, Agent and Lenders are willing to agree to such amendments and modifications;
NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained,
and any extension of credit heretofore, now or hereafter made by Agent and Lenders to Borrowers,
the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms used herein without definition shall have the meaning given to them in the
Loan Agreement.
2. Total Indebtedness. Clause (xi) of Section 8.2.3 of the Loan Agreement is hereby deleted and the following is inserted
in its stead:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| | 8.2.3  Total Indebtedness. Create, incur, assume, or suffer to exist, or permit any Subsidiary of any Borrower to create, incur
  or suffer to exist, any Indebtedness, except:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|               
|---------------
|*      *      *
|               

| | (xi)           Money Borrowed (either as an
  operating loan or a real estate mortgage loan) in a principal amount not to exceed One Million Seven
  Hundred Fifty Thousand Dollars ($1,750,000) incurred by Midwescos Danish Subsidiaries and guaranteed
  by Midwesco and/or MFRI;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|               
|---------------
|*      *      *

|
|



|10.21.02
3. Definition of Cash Flow. The definition of Cash Flow contained in Exhibit 8.3 to the Loan Agreement is hereby
deleted and the following is inserted in its stead:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                               

| | Cash Flow  with respect to any fiscal period, EBITDA for such period minus (i) Capital Expenditures (excluding, however, only Capital Expenditures that are financed by
  third party financing in connection with the construction by Midwesco Filter Resources Denmark A/S
  of a new facility) made within such period, (ii) income taxes paid in cash in such period, (iii)
  Interest Expense paid in cash within such period and (iv) principal payments on Money Borrowed (other
  than Revolving Credit Loans) made within such period.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4. Execution in Counterparts. This First Amendment may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
5. Continuing Effect. Except as otherwise specifically set out herein, the provisions of the Loan Agreement shall remain
in full force and effect.
(Signature Page Follows)

|
|



|10.21.02
    (Signature Page to First Amendment to Loan Agreement)                                                       
|-------------------------------------------------------------------------------------------------------------------------
|                                                                                                                         
|IN WITNESS WHEREOF, this First Amendment has been duly executed as of the day and year specified at
the beginning hereof.
|                                                                                                                         

| |                                           
| | ------------------------------------------
| | FLEET CAPITAL CORPORATION,                
| | (Agent and a Lender)                  
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | MFRI, INC. (a Borrower)                 
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | MIDWESCO FILTER RESOURCES, INC.           
| | (a Borrower)                            
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | PERMA-PIPE, INC. (a Borrower)           
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | THERMAL CARE, INC. (a Borrower)         
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           

|
|



| | 10.21.02                                  
| | ------------------------------------------
| |                                           
| | TDC FILTER MANUFACTURING, INC.            
| | (a Borrower)                            
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           

|
|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|12.12.02
    SECOND AMENDMENT TOLOAN AND SECURITY AGREEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (Second Amendment) is made as of the
12th day of December, 2002 by and among MFRI, Inc., a Delaware corporation (MFRI), Midwesco
Filter Resources, Inc., a Delaware corporation (Midwesco), Perma-Pipe, Inc., a Delaware
corporation (Perma-Pipe), Thermal Care, Inc., a Delaware corporation (Thermal Care)
and TDC Filer Manufacturing, Inc., a Delaware corporation (TDC), the lenders who are
signatories hereto (Lenders), and Fleet Capital Corporation, a Rhode Island corporation
(FCC), as agent for Lenders hereunder (FCC, in such capacity, being Agent).
MFRI, Midwesco, Perma-Pipe, Thermal Care and TDC are sometimes hereinafter referred to individually
as a Borrower and collectively as Borrowers.
WITNESSETH:
WHEREAS, Borrowers, Agent and Lenders entered into a certain Loan and Security Agreement dated as of
July 11, 2002 as amended by a certain First Amendment to Loan and Security Agreement dated as of
October 31, 2002 by and among Borrowers, Agent and Lenders (said Loan and Security Agreement, as
so amended, is hereinafter referred to as the Loan Agreement); and
WHEREAS, Borrowers desire to amend and modify certain provisions of the Loan Agreement and, subject
to the terms hereof, Agent and Lenders are willing to agree to such amendments and modifications;
NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained,
and any extension of credit heretofore, now or hereafter made by Agent and Lenders to Borrowers,
the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms used herein without definition shall have the meaning given to them in the
Loan Agreement.
2. Financial Covenants. Exhibit 8.3 to the Loan Agreement is hereby deleted and Exhibit 8.3 attached hereto and incorporated herein is inserted in its stead:
3. Waiver. Agent and Lenders hereby agree to waive any Events of Default resulting from Borrowers failing to
comply with the provisions of Section 8.3 and Exhibit 8.3 (Minimum EBITDA) (prior to their amendment by the terms hereof) for the fiscal period ended October
31, 2002. Such waiver shall not apply to any provision of the Loan Agreement other than Section 8.3 and Exhibit 8.3 (Minimum EBITDA) or any fiscal period other than the period ended October 31, 2002.
4. Fee. In order to induce Agent and Lenders to enter into this Second Amendment, Borrowers agree to pay
to Agent for the ratable benefit of Lenders a fee in the amount of Thirty-Three Thousand Seven Hundred
Fifty Dollars ($33,750). Said fee shall be due and payable and fully earned by the date hereof.

|
|



|5. Execution in Counterparts. This Second Amendment may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
6. Continuing Effect. Except as otherwise specifically set out herein, the provisions of the Loan Agreement shall remain
in full force and effect.
(Signature Page Follows)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|



|(Signature Page to Second Amendment to Loan Agreement)                                                                        
|------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                              
|IN WITNESS WHEREOF, this Second Amendment has been duly executed as of the day and year specified at
    the beginning hereof.
|                                                                                                                              

| |                                           
| | ------------------------------------------
| | FLEET CAPITAL CORPORATION,                
| | (Agent and a Lender)                  
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | MFRI, INC. (a Borrower)                 
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | MIDWESCO FILTER RESOURCES, INC.           
| | (a Borrower)                            
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | PERMA-PIPE, INC. (a Borrower)           
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | THERMAL CARE, INC. (a Borrower)         
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           

|
|



| | TDC FILTER MANUFACTURING, INC.            
| | ------------------------------------------
| | (a Borrower)                            
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           

|
|



|                                 
|---------------------------------
|EXHIBIT 8.3
  FINANCIAL COVENANTS
|                                 

|DEFINITIONS
Cash Flow   with respect to any fiscal period, EBITDA for such period minus (i) Capital Expenditures made within such period, (ii) income taxes paid in cash in such period,
(iii) Interest Expense paid in cash within such period and (iv) principal payments on Money Borrowed
(other than Revolving Credit Loans) made within such period.
Consolidated Net Income (Loss)  - with respect to any fiscal period, the net income (or loss) of MFRI determined in accordance
with GAAP on a Consolidated basis; provided, however, Consolidated Net Income shall not include: (a)
the income (or loss) of any Person (other than a Subsidiary of any Borrower) in which a Borrower
or any of its wholly-owned subsidiaries has an ownership interest unless received in a cash distribution
or requiring the payment of cash; (b) the income (or loss) of any Person accrued prior to the date
it became a Subsidiary of a Borrower or is merged into or consolidated with a Borrower; (c) all amounts
included in determining net income (or loss) in respect of the write-up of assets on or after the
Closing Date, including the subsequent amortization or expensing of the written-up portion of the
assets; (d) extraordinary gains as defined under GAAP; and (e) gains from asset dispositions (other
than sales of inventory); and any increase or decrease in expenses resulting from the implementation of FASB 146.
EBITDA   with respect to any period, the sum of Consolidated Net Income (Loss) before Interest
Expense, income taxes, depreciation and amortization for such period (but excluding any extraordinary
gains for such period), all as determined for Borrowers and their Subsidiaries on a Consolidated
basis and in accordance with GAAP.
Interest Coverage Ratio   with respect to any period, the ratio of (i) EBITDA for such period to (ii) Interest
Expense paid in cash in such period, all as defined for MFRI and its subsidiaries on a consolidated
basis in accordance with GAAP.
Interest Expense  - with respect to any period, interest expense paid or accrued for such period, including without
limitation the interest portion of Capitalized Lease Obligations, plus the Letter of Credit and LC
Guaranty fees owing for such period, all as determined for MFRI and its Subsidiaries on a Consolidated
basis and in accordance with GAAP.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 8.3  Page 1
|--------------------



|COVENANTS
Minimum EBITDA.  Borrowers shall not permit EBITDA for any period set forth below to be less than the amount
set forth below opposite such period:
|------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                            

| | Period                                                             | Amount |            | 
| | ------------------------------------------------------------------ | ------ | ---------- | 
| |                                                                    |        |            | 
| |                                                                    |        |            | 
| | 3 Months Ended 8/31/02                                             | $      | 2,100,000  | 
| | 4 Months Ended 9/30/02                                             | $      | 2,550,000  | 
| | 5 Months Ended 10/31/02                                            | $      | 3,500,000  | 
| | 6 Months Ended 11/30/02                                            | $      | 3,800,000  | 
| | 7 Months Ended 12/31/02                                            | $      | 4,100,000  | 
| | 8 Months Ended 1/31/03                                             | $      | 4,500,000  | 
| | 9 Months Ended 2/28/03                                             | $      | 5,000,000  | 
| | 10 Months Ended 3/31/03                                            | $      | 5,600,0000 | 
| | 11 Months Ended 4/30/03                                            | $      | 6,000,000  | 
| | 12 Months Ended 5/31/03                                            | $      | 6,400,000  | 
| | 12 Months Ended 6/30/03                                            | $      | 6,475,000  | 
| | 12 Months Ended 7/31/03                                            | $      | 6,550,000  | 
| | 12 Months Ended 8/31/03                                            | $      | 6,700,000  | 
| | 12 Months Ended 9/30/03                                            | $      | 6,800,000  | 
| | 12 Months Ended 10/31/03                                           | $      | 6,900,000  | 
| | 12 Months Ended 11/30/03                                           | $      | 7,000,000  | 
| | 12 Months Ended 12/31/03 and the last day of each month thereafter | $      | 7,100,000  | 

|                                                                                                                                                         
|---------------------------------------------------------------------------------------------------------------------------------------------------------
|Minimum Cash Flow   Borrowers shall not permit Cash Flow for any period set forth below to be less than the
amount set forth below opposite such period:
|                                                                                                                                                         

| | Period                                                            | Amount |   | 
| | ----------------------------------------------------------------- | ------ | - | 
| |                                                                   |        |   | 
| |                                                                   |        |   | 
| | 3 Months Ended 8/31/02                                            | $      | 0 | 
| | 4 Months Ended 9/30/02                                            | $      | 0 | 
| | 5 Months Ended 10/31/02                                           | $      | 0 | 
| | 6 Months Ended 11/30/02                                           | $      | 0 | 
| | 7 Months Ended 12/31/02                                           | $      | 0 | 
| | 8 Months Ended 1/31/03                                            | $      | 0 | 
| | 9 Months Ended 2/28/03                                            | $      | 0 | 
| | 10 Months Ended 3/31/03                                           | $      | 0 | 
| | 11 Months Ended 4/30/03                                           | $      | 0 | 
| | 12 Months Ended 5/31/03 and the last day of each month thereafter | $      | 0 | 

|2
|-

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|THIRD AMENDMENT TOLOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (Third Amendment) is made as of the
30th day of April, 2003 by and among MFRI, Inc., a Delaware corporation (MFRI), Midwesco Filter
Resources, Inc., a Delaware corporation (Midwesco), Perma-Pipe, Inc., a Delaware corporation
(Perma-Pipe), Thermal Care, Inc., a Delaware corporation (Thermal Care) and
TDC Filer Manufacturing, Inc., a Delaware corporation (TDC), the lenders who are signatories
hereto (Lenders), and Fleet Capital Corporation, a Rhode Island corporation (FCC),
as agent for Lenders hereunder (FCC, in such capacity, being Agent). MFRI, Midwesco,
Perma-Pipe, Thermal Care and TDC are sometimes hereinafter referred to individually as a Borrower
and collectively as Borrowers.
WITNESSETH:
WHEREAS, Borrowers, Agent and Lenders entered into a certain Loan and Security Agreement dated as of
July 11, 2002 as amended by a certain First Amendment to Loan and Security Agreement by and among
Borrowers, Agent and Lenders and dated October 31, 2002, and a certain Second Amendment to Loan
and Security Agreement by and among Borrowers, Agent and Lenders dated December 12, 2002 (said Loan
and Security Agreement, as amended, is hereinafter referred to as the Loan Agreement); and
WHEREAS, Borrowers desire to amend and modify certain provisions of the Loan Agreement and, subject
to the terms hereof, Agent and Lenders are willing to agree to such amendments and modifications;
NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained,
and any extension of credit heretofore, now or hereafter made by Agent and Lenders to Borrowers,
the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms used herein without definition shall have the meaning given to them in the
Loan Agreement.
2. Waivers. Upon the Third Amendment Effective Date (as defined below), Agent and Lenders, Agent
and Lenders shall be deemed to have waived any Event of Default resulting from the failure of Borrowers
to comply with the provisions of Section 8.3 regarding (x) Minimum EBITDA for the fiscal period
of seven months ending December 31, 2002 and (y) Minimum EBITDA and Minimum Cash Flow for the
fiscal period of eight months ending January 31, 2003. The waiver contained in this Section 2 of
this Second Amendment does not apply to any Section of the Loan Agreement other than Section 8.3
(Minimum EBITDA and Minimum Cash Flow) or to any other fiscal period other than the fiscal periods
of (x) seven months ending December 31, 2002 with regard to Minimum EBITDA and (y) eight
months ending January 31, 2003 with regard to Minimum EBITDA and Maximum Cash Flow.
3. Financial Covenants. Upon the Third Amendment Effective Date, Exhibit 8.3 to the Loan Agreement shall be hereby deleted
and Exhibit 8.3 attached to this Third Amendment and incorporated herein shall be inserted in its
stead.

|
|



|4. Certain Events of Defaults. From and after the Third Amendment Effective Date, so long as no Event of Default has occurred under
Section 8.3 of the Loan Agreement, Agent and Lenders agree that Agent and Lenders shall not exercise
their rights under Subsection 10.1.16 of the Loan Agreement to declare an Event of Default to have
occurred as a result of the occurrence of a Material Adverse Effect.
5. Silverman & Associates. In order to induce Agent and Lenders to enter into this Third Amendment, Borrowers covenant to Agent
and Lenders that, on or prior to May 23, 2003, Borrowers shall retain Silverman Consulting (SC)
pursuant to an engagement letter reasonably acceptable to Agent to provide consulting services regarding: (i)
review and comment on the viability of the cash flow projections prepared by Borrower; (ii) review
and comment on the viability of the business plan prepared by Borrower with special attention to
the filter and chiller businesses; (iii) suggestions for profitability improvements that result from
items (i) and (ii); (iv) inventory analysis as to optimal levels for TDC and Thermal Care finished
goods and such other portions of the MFRI inventory as SC shall believe constructive; and (v) such
other matters as requested by Agent.
6. Third Amendment Effective Date. This Third Amendment shall become effective upon satisfaction of each of the following conditions:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| | (i) Borrowers, Agent and Lenders shall have executed and delivered to each other this Third Amendment;
  and                                                                                                                                    
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                 
| | (ii) Any and all defaults and/or events of default existing under or with respect to the Term Loan Documents,
  the IRB Indebtedness or the Existing Mortgage Indebtedness shall have been cured or waived to Agents
  reasonable satisfaction.
| |                                                                                                                                                                                                                                                 
| | The date on which each of the foregoing conditions precedent is satisfied shall be referred to as the Third Amendment Effective Date.                                                                                                         

|                                                                                                                                                                                                                                                                                           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|7. Applicable Margin. As of May 1, 2003 through the Adjustment Date occurring after the date on which the financial statements
for the period ended on July 31, 2003 are delivered to Agent pursuant to Section 8.1.3(ii) of the
Agreement, the Applicable Margin (Current Asset) shall be:
|                                                                                                                                                                                                                                                                                           

| | Base Rate Current Asset | 1.25 | % | 
| | ----------------------- | ---- | - | 
| | Revolving Portion       |      |   | 
| |                         |      |   | 
| | LIBOR Current Asset     | 3.25 | % | 
| | Revolving Portion       |      |   | 
| |                         |      |   | 
| | Unused Line Fee         | 0.50 | % | 

|                                                                                                                                                                        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8. Execution in Counterparts. This Third Amendment may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which

|2
|-



|shall be deemed an original but all of which together shall constitute one and the same instrument.
9. Continuing Effect. Except as otherwise specifically set out herein, the provisions of the Loan Agreement shall remain
in full force and effect.
(Signature Page to Third Amendment to Loan Agreement)
IN WITNESS WHEREOF, this Third Amendment has been duly executed as of the day and year specified at
the beginning hereof.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                      

| |                                           
| | ------------------------------------------
| | FLEET CAPITAL CORPORATION,                
| | (Agent and a Lender)                  
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | MFRI, INC. (a Borrower)                 
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | MIDWESCO FILTER RESOURCES, INC.           
| | (a Borrower)                            
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | PERMA-PIPE, INC. (a Borrower)           
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | THERMAL CARE, INC. (a Borrower)         
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           

|3
|-



| | TLC FILTER MANUFACTURING, INC.            
| | ------------------------------------------
| | (a Borrower)                            
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           

|4
|-



|EXHIBIT 8.3
    FINANCIAL COVENANTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|DEFINITIONS
  Cash Flow  with respect to any fiscal period, EBITDA for such period minus(i) Capital Expenditures (excluding, however, Capital Expenditures financed by third party financing)
made within such period, (ii) for fiscal periods ending on or prior to January 31, 2004 the
excess, if any, of income taxes paid in cash in such period over refunds of income taxes received
in such period for tax years ending on or prior to January 31, 2003, (iii) for fiscal periods
ending after January 31, 2004, income taxes paid in cash in such period, (iv) Interest Expense paid
in cash within such period and (v) principal payments of Money Borrowed (other than Revolving Credit
Loans) made within such period.
Consolidated Net Income (Loss)   with respect to any fiscal period, the net income (or loss) of MFRI determined in accordance
with GAAP on a Consolidated basis; provided, however, Consolidated Net Income shall not include: (a)
the income (or loss) of any Person (other than a Subsidiary of any Borrower) in which a Borrower
or any of its wholly-owned subsidiaries has an ownership interest unless received in a cash distribution
or requiring the payment of cash; (b) the income (or loss) of any Person accrued prior to the date
it became a Subsidiary of a Borrower or is merged into or consolidated with a Borrower; (c) all amounts
included in determining net income (or loss) in respect of the write-up of assets on or after the
Closing Date, including the subsequent amortization or expensing of the written-up portion of the
assets; (d) extraordinary gains as defined under GAAP; and (e) gains from asset dispositions (other
than sales of inventory); and any increase or decrease in expenses resulting from the implementation of FASB 146.
EBITDA   with respect to any period, the sum of Consolidated Net Income (Loss) before Interest
Expense, income taxes, depreciation and amortization for such period (but excluding any extraordinary
gains for such period), all as determined for Borrowers and their Subsidiaries on a Consolidated
basis and in accordance with GAAP.
Interest Coverage Ratio  with respect to any period, the ratio of (i) EBITDA for such period to (ii) Interest
Expense paid in cash in such period, all as defined for MFRI and its subsidiaries on a consolidated
basis in accordance with GAAP.
Interest Expense  with respect to any period, interest expense paid or accrued for such period, including
without limitation the interest portion of Capitalized Lease Obligations, plus the Letter of Credit
and LC Guaranty fees owing for such period, all as determined for MFRI and its Subsidiaries on a
Consolidated basis and in accordance with GAAP.

|Exhibit 8.3  Page 1
|--------------------



|COVENANTS
Minimum EBITDA.  Borrowers shall not permit EBITDA for any period set forth below to be less than the amount
set forth below opposite such period:
|------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                            

|Period                                                            | Amount |          
|----------------------------------------------------------------- | ------ | ---------
|                                                                  |        |          
|                                                                  |        |          
|3 Months Ended 4/30/03                                            | $      | 700,000  
|4 Months Ended 5/31/03                                            | $      | 1,600,000
|5 Months Ended 6/30/03                                            | $      | 2,700,000
|6 Months Ended 7/31/03                                            | $      | 3,900,000
|7 Months Ended 8/31/03                                            | $      | 4,900,000
|8 Months Ended 9/30/03                                            | $      | 5,800,000
|9 Months Ended 10/31/03                                           | $      | 6,800,000
|10 Months Ended 11/30/03                                          | $      | 7,100,000
|11 Months Ended 12/31/03                                          | $      | 7,100,000
|12 Months Ended 1/31/04 and the last day of each month thereafter | $      | 7,100,000

|                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------
|Minimum Cash Flow. Borrowers shall not permit Cash Flow for any period set forth below to be less than the amount set
forth below opposite such period:
|                                                                                                                                                       

|Period                                                            | Amount |          
|----------------------------------------------------------------- | ------ | ---------
|                                                                  |        |          
|                                                                  |        |          
|5 Months Ended 6/30/03                                            |        | ($100,000
|6 Months Ended 7/31/03                                            | $      | 0        
|7 Months Ended 8/31/03                                            | $      | 0        
|8 Months Ended 9/30/03                                            | $      | 0        
|9 Months Ended 10/31/03                                           | $      | 0        
|10 Months Ended 11/30/03                                          | $      | 0        
|12 Months ended 1/31/04 and the last day of each month thereafter | $      | 0        

|Exhibit 8.3Page 2
|------------------



|Minimum Availability. Maintain Availability all times during each of the following periods equal to or in excess of the
amount set forth opposite such period in the following schedule:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                        

|Period                                                       |  | Amount |          
|------------------------------------------------------------ |  | ------ | ---------
|                                                             |  |        |          
|                                                             |  |        |          
|May 1, 2003 through the date on which Borrowers receive      |  | $      | 500,000  
|their federal income tax refund for tax year 2002            |  |        |          
|                                                             |  |        |          
|At all times after the date on which Borrowers receive their |  | $      | 1,000,000
|federal income tax refund for tax year 2002                  |  |        |          

|Exhibit 8.3Page 3
|------------------

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.29.03
    FOURTH AMENDMENT TOLOAN AND SECURITY AGREEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (Fourth Amendment) is made as of the
___ day of October, 2003 by and among MFRI, Inc., a Delaware corporation (MFRI), Midwesco
Filter Resources, Inc., a Delaware corporation (Midwesco), Perma-Pipe, Inc., a Delaware
corporation (Perma-Pipe), Thermal Care, Inc., a Delaware corporation (Thermal Care)
and TDC Filter Manufacturing, Inc., a Delaware corporation (TDC), the lenders who are
signatories hereto (Lenders), and Fleet Capital Corporation, a Rhode Island corporation
(FCC), as agent for Lenders hereunder (FCC, in such capacity, being Agent).
MFRI, Midwesco, Perma-Pipe, Thermal Care and TDC are sometimes hereinafter referred to individually
as a Borrower and collectively as Borrowers.
WITNESSETH:
WHEREAS, Borrowers, Agent and Lenders entered into a certain Loan and Security Agreement dated as of
July 11, 2002 as amended by a certain First Amendment to Loan and Security Agreement by and among
Borrowers, Agent and Lenders and dated October 31, 2002 , a certain Second Amendment to Loan
and Security Agreement by and among Borrowers, Agent and Lenders dated December 12, 2002 and a certain
Third Amendment to Loan and Security Agreement by and among Borrowers, Agent and Lenders dated April
30, 2003 (said Loan and Security Agreement, as amended, is hereinafter referred to as the Loan
Agreement); and
WHEREAS, Borrowers desire to amend and modify certain provisions of the Loan Agreement and, subject
to the terms hereof, Agent and Lenders are willing to agree to such amendments and modifications;
NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained,
and any extension of credit heretofore, now or hereafter made by Agent and Lenders to Borrowers,
the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms used herein without definition shall have the meaning given to them in the
Loan Agreement.
2. Waivers. Upon the Fourth Amendment Effective Date (as defined below), Agent and Lenders, Agent
and Lenders shall be deemed to have waived any Event of Default resulting from the failure of Borrowers
to comply with the provisions of Section 8.3 regarding (x) Minimum EBITDA for fiscal periods
ending on or prior to September 30, 2003 and (y) Minimum EBITDA and Minimum Cash Flow for fiscal
periods ending on or prior to September 30, 2003. The waiver contained in this Section 2 of this
Fourth Amendment does not apply to any Section of the Loan Agreement other than Section 8.3 (Minimum
EBITDA and Minimum Cash Flow) or to any other fiscal period other than the fiscal periods ending
on or prior to September 30, 2003.

|
|



|3.Financial Covenants. Upon the Fourth Amendment Effective Date, Exhibit 8.3 to the Loan Agreement shall be hereby deleted
and Exhibit 8.3 attached to this Fourth Amendment and incorporated herein shall be inserted in its
stead.
4. Inventory Appraisals. In order to induce Agent and Lenders to enter into this Fourth Amendment, Borrowers agree that Agent,
at Borrowers expense, may obtain appraisals of Borrowers Inventory (such appraisals shall
be conducted not more often than annually unless a Default or Event of Default has occurred and is
continuing). Agents and Lenders rights under this Section 4 of the Fourth Amendment are
in addition to and not in lieu of Agents and Lenders rights under Section 2.10 of the
Loan Agreement.
5. Capital Expenditures. Section 8.2.8 of the Loan Agreement is hereby deleted and the following is inserted in its stead:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| | 8.2.8      Capital Expenditures. Make Capital Expenditures (including, without limitation, by way of capitalized leases) which, in
  the aggregate, as to MFRI and all of its Subsidiaries, exceed during any fiscal year of Borrowers
  the amount of Three Million Dollars ($3,000,000).
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------
|6. Fourth Amendment Effective Date. This Fourth Amendment shall become effective upon satisfaction of each of the following conditions:
|                                                                                                                                       

| | (i) Borrowers, Agent and Lenders shall have executed and delivered to each other this Fourth Amendment;
  and                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                 
| | (ii) Any and all defaults and/or events of default existing under or with respect to the Term Loan Documents,
  the IRB Indebtedness or the Existing Mortgage Indebtedness shall have been cured or waived to Agents
  reasonable satisfaction.
| |                                                                                                                                                                                                                                                 
| | The date on which each of the foregoing conditions precedent is satisfied shall be referred to as the Fourth Amendment Effective Date.                                                                                                        

|                                                                                                                                                                                                                                                                             
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|7. Execution in Counterparts. This Fourth Amendment may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.

|2
|-



|8. Continuing Effect. Except as otherwise specifically set out herein, the provisions of the Loan Agreement shall remain
in full force and effect.
(Signature Page Follows)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3
|-



|(Signature Page to Fourth Amendment to Loan Agreement)
IN WITNESS WHEREOF, this Fourth Amendment has been duly executed as of the day and year specified at
the beginning hereof.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                 

| |                                           
| | ------------------------------------------
| | FLEET CAPITAL CORPORATION,                
| | (Agent and a Lender)                  
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | MFRI, INC. (a Borrower)                 
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | MIDWESCO FILTER RESOURCES, INC.           
| | (a Borrower)                            
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | PERMA-PIPE, INC. (a Borrower)           
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | THERMAL CARE, INC. (a Borrower)         
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           

|
|



| | TDC FILTER MANUFACTURING, INC.            
| | ------------------------------------------
| | (a Borrower)                            
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           

|5
|-



|EXHIBIT 8.3                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|FINANCIAL COVENANTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|DEFINITIONS
Cash Flow   with respect to any fiscal period, EBITDA for such period minus(i) Capital Expenditures (excluding, however, Capital Expenditures financed by third party financing)
made within such period, (ii) for fiscal periods ending on or prior to January 31, 2004 the
excess, if any, of income taxes paid in cash in such period over refunds of income taxes received
in such period for tax years ending on or prior to January 31, 2003, (iii) for fiscal periods
ending after January 31, 2004, income taxes paid in cash in such period, (iv) Interest Expense paid
in cash within such period and (v) principal payments of Money Borrowed (other than Revolving Credit
Loans) made within such period.
Consolidated Net Income (Loss)   with respect to any fiscal period, the net income (or loss) of MFRI determined in accordance
with GAAP on a Consolidated basis; provided, however, Consolidated Net Income shall not include: (a)
the income (or loss) of any Person (other than a Subsidiary of any Borrower) in which a Borrower
or any of its wholly-owned subsidiaries has an ownership interest unless received in a cash distribution
or requiring the payment of cash; (b) the income (or loss) of any Person accrued prior to the date
it became a Subsidiary of a Borrower or is merged into or consolidated with a Borrower; (c) all amounts
included in determining net income (or loss) in respect of the write-up of assets on or after the
Closing Date, including the subsequent amortization or expensing of the written-up portion of the
assets; (d) extraordinary gains as defined under GAAP; and (e) gains from asset dispositions (other
than sales of inventory); and any increase or decrease in expenses resulting from the implementation of FASB 146.
EBITDA   with respect to any period, the sum of Consolidated Net Income (Loss) before Interest
Expense, income taxes, depreciation and amortization for such period (but excluding any extraordinary
gains for such period), all as determined for Borrowers and their Subsidiaries on a Consolidated
basis and in accordance with GAAP.
Interest Coverage Ratio   with respect to any period, the ratio of (i) EBITDA for such period to (ii) Interest
Expense paid in cash in such period, all as defined for MFRI and its subsidiaries on a consolidated
basis in accordance with GAAP.
Interest Expense   with respect to any period, interest expense paid or accrued for such period, including
without limitation the interest portion of Capitalized Lease Obligations, plus the Letter of Credit
and LC Guaranty fees owing for such period, all as determined for MFRI and its Subsidiaries on a
Consolidated basis and in accordance with GAAP.

|Exhibit 8.3  Page 1
|--------------------



|COVENANTS                                                                                                                                         
|--------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                  
|Minimum EBITDA.  Borrowers shall not permit EBITDA for any period set forth below to be less than the amount
set forth below opposite such period:
|                                                                                                                                                  

|Period                                                                     | Amount |          
|-------------------------------------------------------------------------- | ------ | ---------
|                                                                           |        |          
|                                                                           |        |          
|6 Months Ended 10/31/03                                                    | $      | 4,000,000
|9 Months Ended 1/31/04                                                     | $      | 4,600,000
|12 Months Ended 4/30/04                                                    | $      | 5,700,000
|12 Months Ended 7/31/04 and the last day of each fiscal quarter thereafter | $      | 6,300,000

|                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------
|Minimum Cash Flow. Borrowers shall not permit Cash Flow for any period set forth below to be less than the amount set
forth below opposite such period:
|                                                                                                                                                       

|Period                                                                     | Amount |          
|-------------------------------------------------------------------------- | ------ | ---------
|                                                                           |        |          
|                                                                           |        |          
|6 Months Ended 10/31/03                                                    | $      | 1,000,000
|9 Months Ended 1/31/04                                                     | $      | 0        
|12 Months Ended 4/30/04                                                    | $      | 0        
|12 Months ended 7/31/04 and the last day of each fiscal quarter thereafter | $      | 300,000  

|                                                                                                                                                                                        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Minimum Availability. Maintain Availability all times during each of the following periods equal to or in excess of the
amount set forth opposite such period in the following schedule:
|                                                                                                                                                                                        

|Period                                                  | Amount |        
|------------------------------------------------------- | ------ | -------
|                                                        |        |        
|                                                        |        |        
|May 1, 2003 through the date on which Borrowers receive | $      | 500,000
|their federal income tax refund for tax year 2002       |        |        
|                                                        |        |        
|At all times after the date on which Borrowers receive  | $      | 750,000
|their federal income tax refund for tax year 2002       |        |        

|Exhibit 8.3  Page 2
|--------------------

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXECUTION COPY
FIFTH AMENDMENT TOLOAN AND SECURITY AGREEMENT
THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (Fifth Amendment) is made as of the
1st day July, 2004 of by and among MFRI, Inc., a Delaware corporation (MFRI), Midwesco Filter
Resources, Inc., a Delaware corporation (Midwesco), Perma-Pipe, Inc., a Delaware corporation
(Perma-Pipe), Thermal Care, Inc., a Delaware corporation (Thermal Care) and
TDC Filter Manufacturing, Inc., a Delaware corporation (TDC), the lenders who are signatories
hereto (Lenders), and Fleet Capital Corporation, a Rhode Island corporation (FCC),
as agent for Lenders hereunder (FCC, in such capacity, being Agent). MFRI, Midwesco,
Perma-Pipe, Thermal Care and TDC are sometimes hereinafter referred to individually as a Borrower
and collectively as Borrowers.
WITNESSETH:
WHEREAS, Borrowers, Agent and Lenders entered into a certain Loan and Security Agreement dated as of
July 11, 2002 as amended by a certain First Amendment to Loan and Security Agreement by and among
Borrowers, Agent and Lenders and dated October 31, 2002 , a certain Second Amendment to Loan
and Security Agreement by and among Borrowers, Agent and Lenders dated December 12, 2002, a certain
Third Amendment to Loan and Security Agreement by and among Borrowers, Agent and Lenders dated April
30, 2003 and a certain Fourth Amendment to Loan and Security Agreement by and among Borrowers, Agent
and Lenders dated October 31, 2003 (said Loan and Security Agreement, as amended, is hereinafter
referred to as the Loan Agreement); and
WHEREAS, Borrowers desire to amend and modify certain provisions of the Loan Agreement and, subject
to the terms hereof, Agent and Lenders are willing to agree to such amendments and modifications;
NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained,
and any extension of credit heretofore, now or hereafter made by Agent and Lenders to Borrowers,
the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms used herein without definition shall have the meaning given to them in the
Loan Agreement.
2. Letters of Credit; LC Guaranties. Section 1.2 of the Loan Agreement is hereby deleted and the following is inserted in its stead:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| | 1.2  Letters of Credit: LC Guaranties. Agent agrees, for so long as no Default or Event of Default exists and if requested by MFRI, on its
  own behalf and on behalf of all other Borrowers, to (i) issue its, or cause to be issued by
  Bank or another Affiliate of Agent, on the date requested by MFRI, on its own behalf and on behalf
  of all other Borrowers, Letters of Credit for the account of Borrowers or (ii) execute LC Guaranties
  by which Agent, Bank, or another Affiliate of Agent, on the date so requested by MFRI, shall guaranty
  the payment or performance by
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|



| | Borrowers of their reimbursement obligations with respect to letters of credit; provided that the LC Amount shall not exceed Seven Million Five Hundred Thousand Dollars ($7,500,000) prior
  to the date on which the Virginia IRB Indebtedness is paid in full and Five Million Four Hundred
  Thousand Dollars ($5,400,000) thereafter. No Letter of Credit or LC Guaranty may have an expiration
  date after the last day of the Term. Notwithstanding anything to the contrary contained herein, Borrowers,
  Agent and Lenders hereby agree that all LC Obligations and all obligations of Borrowers relating
  thereto shall be satisfied by the prompt issuance of one or more Revolving Credit Loans that are
  Base Rate Portions, which Borrowers hereby acknowledge are requested and Lenders hereby agree to
  fund. In the event that Revolving Credit Loans are not, for any reason, promptly made to satisfy
  all then existing LC Obligations, each Lender hereby agrees to pay to Agent, on demand, an amount
  equal to such LC Obligations multiplied by such Lenders Revolving Loan Percentage, and until so paid, such amount shall be secured by the
  Collateral and shall bear interest and be payable at the same rate and in the same manner as Base
  Rate Portions. Immediately upon the issuance of a Letter of Credit or an LC Guaranty under this Agreement,
  each Lender shall be deemed to have irrevocably and unconditionally purchased and received from Agent,
  without recourse or warranty, an undivided interest and participation therein equal to such LC Obligations multiplied by such Lenders Revolving Loan Percentage.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                  
|------------------------------------------------------------------------------------------------------------------
|3. Prepayment Fee. Section 2.6 of the Loan Agreement is hereby deleted and the following is inserted in its stead:
|                                                                                                                  

| | 2.6         Prepayment Fee. At the effective date of termination of this Agreement for any reason, Borrowers shall pay to Agent,
  for the ratable benefit of Lenders (in addition to the then outstanding principal, accrued interest
  and other charges owing under the terms of this Agreement and any of the other Loan Documents) and
  any amounts owing pursuant to subsection 3.2.5, as liquidated damages for the loss of the bargain
  and not as a penalty, an amount equal to one percent (1%) of the Total Credit Facility if termination
  occurs during the first twelve-month period of the Term (July 11, 2002 through July 10, 2003); one-half
  of one percent (1⁄2%) of the Total Credit Facility if termination occurs during the second or
  third 12-month period of the Term (July 11, 2003 through July 9, 2005); and one quarter of one percent
  (1⁄4%) if termination occurs between July 10, 2005 and May 10, 2006. If termination occurs on
  or after May 11, 2006, no termination charge shall be payable.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                        
|--------------------------------------------------------------------------------------------------------
|4. Term. Section 4.1 of the Loan Agreement is hereby deleted and the following is inserted in its stead:
|                                                                                                        

| | SECTION 4. TERM AND TERMINATION                                                                                                                                                                                                                                                                            
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                             
| | 4.1           Term of Agreement. Subject to the right of Lenders to cease making Loans to Borrowers during the continuance of any
  Default or Event of Default, this Agreement shall be in effect through and including July 10, 2006
  (the Term), unless terminated as provided in Section 4.2 hereof.

|2
|-



|5. Waivers. Upon the Fifth Amendment Effective Date (as defined below), Agent and Lenders, Agent
and Lenders shall be deemed to have waived any Event of Default resulting from the failure of Borrowers
to comply with the provisions of Section 8.3 regarding (x) Minimum EBITDA for fiscal periods
ending on or prior to April 30, 2004 and (y) Minimum Cash Flow for fiscal periods ending on
or prior to April 30, 2004. The waiver contained in this Section 6 of this Fifth Amendment does not
apply to any Section of the Loan Agreement other than Section 8.3 (Minimum EBITDA and Minimum Cash
Flow) or to any other fiscal period other than the fiscal periods ending on or prior to April 30, 2004.
6. Financial Covenants. Upon the Fifth Amendment Effective Date, Exhibit 8.3 to the Loan Agreement shall be hereby deleted
and Exhibit 8.3 attached to this Fourth Amendment and incorporated herein shall be inserted in its
stead.
7. Fifth Amendment Effective Date. This Fifth Amendment shall become effective upon satisfaction of each of the following conditions:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| | (i) Borrowers, Agent and Lenders shall have executed and delivered to each other this Fifth Amendment;
  and                                                                                                                                                                                                                                                                                                                                                             
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (ii) Any and all defaults and/or events of default existing under or with respect to the Term Loan Documents,
  the IRB Indebtedness or the Existing Mortgage Indebtedness shall have been cured or waived to Agents
  reasonable satisfaction and the financial covenants contained in the Term Loan Documents or the agreements
  evidencing or relating to the Existing Mortgage Indebtedness shall have been amended in a manner
  reasonably satisfactory to Agent.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | The date on which each of the foregoing conditions precedent is satisfied shall be referred to as the Fifth Amendment Effective Date.                                                                                                                                                                                                                                                                                                                                  

|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|8. Execution in Counterparts. This Fifth Amendment may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
9. Continuing Effect. Except as otherwise specifically set out herein, the provisions of the Loan Agreement shall remain
in full force and effect.
(Signature Page Follows)

|3
|-



|(Signature Page to Fifth Amendment to Loan Agreement)
IN WITNESS WHEREOF, this Fifth Amendment has been duly executed as of the day and year specified at
the beginning hereof.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                               

| |                                           
| | ------------------------------------------
| | FLEET CAPITAL CORPORATION,                
| | (Agent and a Lender)                  
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | MFRI, INC. (a Borrower)                 
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | MIDWESCO FILTER RESOURCES, INC.           
| | (a Borrower)                            
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | PERMA-PIPE, INC. (a Borrower)           
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | THERMAL CARE, INC. (a Borrower)         
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           

|
|



| | TDC FILTER MANUFACTURING, INC.            
| | ------------------------------------------
| | (a Borrower)                            
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           

|5
|-



|EXHIBIT 8.3
      FINANCIAL COVENANTS
|-------------------------------------
|                                     

|DEFINITIONS
Cash Flow   with respect to any fiscal period, EBITDA for such period minus(i) Capital Expenditures (excluding, however, Capital Expenditures financed by third party financing)
made within such period, (ii) for fiscal periods ending on or prior to January 31, 2004 the
excess, if any, of income taxes paid in cash in such period over refunds of income taxes received
in such period for tax years ending on or prior to January 31, 2003, (iii) for fiscal periods
ending after January 31, 2004, income taxes paid in cash in such period, (iv) Interest Expense paid
in cash within such period and (v) principal payments of Money Borrowed (other than Revolving Credit
Loans) made within such period.
Consolidated Net Income (Loss)  with respect to any fiscal period, the net income (or loss) of MFRI determined in accordance
with GAAP on a Consolidated basis; provided, however, Consolidated Net Income shall not include: (a)
the income (or loss) of any Person (other than a Subsidiary of any Borrower) in which a Borrower
or any of its wholly-owned subsidiaries has an ownership interest unless received in a cash distribution
or requiring the payment of cash; (b) the income (or loss) of any Person accrued prior to the date
it became a Subsidiary of a Borrower or is merged into or consolidated with a Borrower; (c) all amounts
included in determining net income (or loss) in respect of the write-up of assets on or after the
Closing Date, including the subsequent amortization or expensing of the written-up portion of the
assets; (d) extraordinary gains as defined under GAAP; and (e) gains from asset dispositions (other
than sales of inventory); and any increase or decrease in expenses resulting from the implementation of FASB 146.
EBITDA   with respect to any period, the sum of Consolidated Net Income (Loss) before Interest
Expense, income taxes, depreciation and amortization for such period (but excluding any extraordinary
gains for such period), all as determined for Borrowers and their Subsidiaries on a Consolidated
basis and in accordance with GAAP.
Interest Coverage Ratio  with respect to any period, the ratio of (i) EBITDA for such period to (ii) Interest
Expense paid in cash in such period, all as defined for MFRI and its subsidiaries on a consolidated
basis in accordance with GAAP.
Interest Expense   with respect to any period, interest expense paid or accrued for such period, including
without limitation the interest portion of Capitalized Lease Obligations, plus the Letter of Credit
and LC Guaranty fees owing for such period, all as determined for MFRI and its Subsidiaries on a
Consolidated basis and in accordance with GAAP.
The foregoing notwithstanding, there shall be excluded from the calculations of Cash Flow, Consolidated
Net Income (Loss), EBITDA, Interest Coverage Ratio and Interest Expense, all amounts that would otherwise
be included in such items that are generated or incurred by, or result from the operations of, Midwesco
Filter Resources Denmark A/S, Nordic Air Filtration A/S and Boe-Therm A/S, Borrowers Danish
Subsidiaries.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 8.3Page 1
|------------------



|COVENANTS
    Minimum EBITDA.  Borrowers shall not permit EBITDA for any period set forth below to be less than the amount set forth below opposite such period:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                

|Period                                                                     | Amount
|-------------------------------------------------------------------------- | ------
|                                                                           |       
|                                                                           |       
|6 Months Ended 7/31/04                                                     | $     
|9 Months Ended 10/31/04                                                    | $     
|12 Months Ended 1/31/05 and the last day of each fiscal quarter thereafter | $     

|                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------
|Minimum Cash Flow. Borrowers shall not permit Cash Flow for any period set forth below to be less than the amount set
forth below opposite such period:
|                                                                                                                                                       

|Period                                                                     | Amount |         
|-------------------------------------------------------------------------- | ------ | --------
|                                                                           |        |         
|                                                                           |        |         
|6 Months Ended 7/31/03                                                     | $      | (150,000
|9 Months Ended 10/31/04                                                    | $      | 500,000 
|12 Months ended 1/31/05 and the last day of each fiscal quarter thereafter | $      | 250,000 

|                                                                              
|------------------------------------------------------------------------------
|Minimum Availability. Maintain Availability at all times of at least $750,000.

|Exhibit 8.3Page 2
|------------------

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXECUTION COPY
SIXTH AMENDMENT TOLOAN AND SECURITY AGREEMENT
THIS SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (Sixth Amendment) is made as of the
___ day of March, 2005 by and among MFRI, Inc., a Delaware corporation (MFRI), Midwesco
Filter Resources, Inc., a Delaware corporation (Midwesco), Perma-Pipe, Inc., a Delaware
corporation (Perma-Pipe), Thermal Care, Inc., a Delaware corporation (Thermal Care)
and TDC Filter Manufacturing, Inc., a Delaware corporation (TDC), the lenders who are
signatories hereto (Lenders), and Fleet Capital Corporation, a Rhode Island corporation
(FCC), as agent for Lenders hereunder (FCC, in such capacity, being Agent).
MFRI, Midwesco, Perma-Pipe, Thermal Care and TDC are sometimes hereinafter referred to individually
as a Borrower and collectively as Borrowers.
WITNESSETH:
WHEREAS, Borrowers, Agent and Lenders entered into a certain Loan and Security Agreement dated as of
July 11, 2002 as amended by a certain First Amendment to Loan and Security Agreement by and among
Borrowers, Agent and Lenders and dated October 31, 2002 , a certain Second Amendment to Loan
and Security Agreement by and among Borrowers, Agent and Lenders dated December 12, 2002, a certain
Third Amendment to Loan and Security Agreement by and among Borrowers, Agent and Lenders dated April
30, 2003, a certain Fourth Amendment to Loan and Security Agreement by and among Borrowers, Agent
and Lenders dated October 31, 2003 and a certain Fifth Amendment to Loan and Security Agreement by
and among Borrowers, Agent and Lenders dated July 1, 2004 (said Loan and Security Agreement, as amended,
is hereinafter referred to as the Loan Agreement); and
WHEREAS, Borrowers desire to amend and modify certain provisions of the Loan Agreement and, subject
to the terms hereof, Agent and Lenders are willing to agree to such amendments and modifications;
NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained,
and any extension of credit heretofore, now or hereafter made by Agent and Lenders to Borrowers,
the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms used herein without definition shall have the meaning given to them in the
Loan Agreement.
2. Additional, Amended and Deleted Definitions. The following definitions of Applicable Margin Base Rate Portion, Base Rate
Revolving Portion, Base Rate Term Portion, Fixed Charge Coverage Ratio,
LIBOR Portion, LIBOR Request, LIBOR Revolving Portion, LIBOR
Term Portion, Sixth Amendment, Sixth Amendment Effective Date, Term
Loan, Term Loan Commitment, Term Loan Notes and Term Loan Percentage
are hereinafter inserted into Appendix A to the Loan Agreement. The definition of Borrowing
Base contained in Appendix A to the Loan Agreement is hereby deleted and the following is inserted
in its stead. The definitions of Applicable Margin (Current Asset) and Applicable
Margin (Real Estate) are hereby deleted from the Loan Agreement.

|
|



| | Applicable Margin - from the Sixth Amendment Effective Date to, but not including, the first Adjustment Date (as hereinafter
  defined) the percentages set forth below with respect to the Base Rate Revolving Portion, the Base
  Rate Term Portion, LIBOR Revolving Portions, the LIBOR Term Portion and the Unused Line Fee:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                  

| | Base Rate Revolving Portion | 0%   
| | --------------------------- | -----
| | Base Rate Term Portion      | 1.25%
| | LIBOR Revolving Portions    | 2.00%
| | LIBOR Term Portions         | 3.50%
| | Unused Line Fee             | 0.25%
| |                             |      

| | The percentages set forth above with respect to the Base Rate Revolving Portion, LIBOR Revolving Portions
  and Unused Line Fee will be adjusted on the first day of the month following delivery by Borrowers
  to Agent of the financial statements required to be delivered pursuant to subsection 8.1.3(ii) of
  the Agreement for each April 30, July 31, October 31 and January 31 during the
  Term, commencing with the month ending January 31, 2005 (each such date an Adjustment
  Date), effective prospectively, by reference to the applicable Financial Measurement
  (as defined below) for the four quarters most recently ending in accordance with the following table.
  The percentages set forth above with respect to the Base Rate Term Portion and LIBOR Term Portions
  shall remain fixed until September 15, 2005. On September 16, 2005 such percentages shall be adjusted
  so that the percentages applicable to the Base Rate Term Portion and the LIBOR Term Portion shall
  be at the same Level set forth in the following Table as applicable to the Base Rate Revolving Portion,
  LIBOR Revolving Portions and Unused Line Fee. For example, if on September 16, 2005, the percentages
  applicable to the Base Rate Revolving Portion, the LIBOR Revolving Portions and Unused Line Fee are
  at Level II, then on September 16, 2005, the percentages applicable to Base Rate Term Portion and
  LIBOR Term Portions shall also be set at Level II. Thereafter, the percentages applicable to the
  Base Rate Term Portion and LIBOR Term Portions shall be adjusted on each subsequent Adjustment Date,
  effective prospectively, by reference to the applicable Financial Measurement for the four quarters
  most recently ended in accordance with the following Table:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|          | Financial 
      Measurement |  | Base Rate 
      Revolving 
      Portion |  | Base 
      Rate 
      Term 
      Portion |  | LIBOR 
      Revolving 
      Portions |  | LIBOR 
      Term 
      Portions |  | Unused 
      Line Fee | 
|--------- | ---------------------------- |  | ----------------------------------------- |  | ------------------------------------------- |  | -------------------------------------- |  | --------------------------------- |  | ---------------------- | 
|          |                              |  |                                           |  |                                             |  |                                        |  |                                   |  |                        | 
|          |                              |  |                                           |  |                                             |  |                                        |  |                                   |  |                        | 
|Level I   | < 1.25 to 1                  |  | 0.50%                                     |  | 0.75%                                       |  | 2.50%                                  |  | 2.75%                             |  | 0.50%                  | 
|          |                              |  |                                           |  |                                             |  |                                        |  |                                   |  |                        | 
|Level II  | > 1.25 to 1, but< 1.50 to 1  |  | 0.25%                                     |  | 0.50%                                       |  | 2.25%                                  |  | 2.50%                             |  | 0.375%                 | 
|          |                              |  |                                           |  |                                             |  |                                        |  |                                   |  |                        | 
|Level III | > 1.50 to 1                  |  | 0.00%                                     |  | 0.25%                                       |  | 2.00%                                  |  | 2.25%                             |  | 0.25%                  | 

|2
|-



| | provided  that, (i) if MFRIs audited financial statements for any fiscal year delivered pursuant
  to subsection 8.1.3(i) of the Agreement reflect a Financial Measurement that yields a higher
  Applicable Margin than that yielded by the monthly financial statements previously delivered pursuant
  to subsection 8.1.3(ii) of the Agreement for the last month of such fiscal year, the Applicable
  Margin shall be readjusted retroactively for the period that was incorrectly calculated and (ii) if
  Borrowers fail to deliver the financial statements required to be delivered pursuant to subsection 8.1.3(i)
  or subsection 8.1.3(ii) of the Agreement on or before the due date thereof, including any applicable
  grace period, the interest rate shall automatically adjust to the highest interest rate set forth
  above, effective prospectively from such due date until the next Adjustment Date. For purposes hereof,
Financial Measurement shall mean the Fixed Charge Coverage Ratio (as such term is defined in Exhibit 8.3 to the Agreement).
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|               
|---------------
|*      *      *
|               

| | Base Rate Portion   a Base Rate Term Portion or a Base Rate Revolving Portion.                                 
| | ----------------------------------------------------------------------------------------------------------------
| |                                                                                                                 
| |                                                                                                                 
| | Base Rate Revolving Portion   that portion of the Revolving Credit Loans that is not subject to a LIBOR Option.
| |                                                                                                                 
| |                                                                                                                 
| | Base Rate Term Portion   that portion of the Term Loan that is not subject to a LIBOR Option.                  

|
|
|
|

| | Borrowing Base   as at any date of determination thereof, an amount equal to the lesser of:   
| | -----------------------------------------------------------------------------------------------
| |                                                                                                
| |                                                                                                
| | (i) the Revolving Credit Maximum Amount minus the unpaid principal balance of the Term Loan; or
| |                                                                                                
| |                                                                                                
| | (ii) an amount equal to:                                                                       

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(x)            the sum of:
(a) eighty-five percent (85%) of the net amount of Eligible Accounts (other than Eligible Accounts arising
from Short Term Projects) outstanding at such date; plus
(b) the lesser of One Million Five Hundred Thousand Dollars ($1,500,000) or eighty-five percent (85%)
of the next amount of Eligible Accounts arising from Short Term Projects outstanding at such date;
plus
(c) the lesserof (1) Eleven Million Dollars ($11,000,000) or (2) fifty-five percent (55%) of
the value of Eligible Inventory at such date;
MINUS  (subtract from the sum of (a) plus (b) plus (c)),

|3
|-



|(y)           $1,000,000.
The limitations set forth in the immediately preceding sentence and each of the advance rates set forth
above may be adjusted downward by Agent, as Agent shall deem necessary or appropriate in its reasonable
credit judgment. For purposes hereof, (1) the net amount of Eligible Accounts at any time shall
be the face amount of such Eligible Accounts less any and all returns, rebates, discounts (which
may, at Agents option, be calculated on shortest terms), credits, allowances or excise taxes
of any nature at any time issued, owing, claimed by Account Debtors, granted, outstanding or payable
in connection with such Accounts at such time and (2) the amount of Eligible Inventory shall
be determined on a first-in, first-out, lower of cost or market basis in accordance with GAAP.
*      *      *
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| | Fixed Charge Coverage Ratio  as defined in Exhibit 8.3.
| | --------------------------------------------------------

|               
|---------------
|*      *      *
|               

| | LIBOR Portion   a LIBOR Revolving Portion or a LIBOR Term Portion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | LIBOR Request  a notice in writing (or by telephone confirmed electronically or by telecopy or other facsimile
  transmission on the same day as the telephone request) from MFRI, on its own behalf and on behalf
  of all other Borrowers, to Agent requesting that interest on a Revolving Credit Loan or a portion
  of the Term Loan be based on LIBOR, specifying: (i) the first day of the Interest Period (which shall
  be a Business Day); (ii) the length of the Interest Period; (iii) whether the LIBOR Portion is a
  new Loan, a conversion of a Base Rate Portion, or a continuation of a LIBOR Portion, and (iv) the
  dollar amount of the LIBOR Revolving Portion or LIBOR Term Portion, which shall be in an amount not
  less than One Million Dollars ($1,000,000) or an integral multiple of One Hundred Thousand Dollars
  ($100,000) in excess thereof.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | LIBOR Revolving Portion   that portion of the Revolving Credit Loans specified in a LIBOR Request (including any
  portion of Revolving Credit Loans which is being borrowed by Borrower concurrently with such LIBOR
  Request) which, as of the date of the LIBOR Request specifying such LIBOR Revolving Portion, has
  met the conditions for basing interest on the LIBOR in Section 3.1 of the Agreement and the
  Interest Period of which has not terminated.                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | LIBOR Term Portion   that portion of the Term Loan specified in a LIBOR Request which, as of the date of the
  LIBOR Request specifying such LIBOR Term Portion, has met the conditions for basing interest on the
  LIBOR in Section 3.1 of the Agreement and the Interest Period of which has not terminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|               
|---------------
|*      *      *
|               

| | Sixth Amendment   that certain Sixth Amendment to Loan and Security Agreement dated as of March 28,
2005 by and among Borrowers, Agent and Lenders.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------

|4
|-



| | Sixth Amendment Effective Date   as defined in Section 14 of the Sixth Amendment.
| | ----------------------------------------------------------------------------------

|               
|---------------
|*      *      *
|               

| | Term   as defined in Section 4.1 of the Agreement.                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                    
| | Term Loan   the Loan described in subsection 1.3.1 of the Agreement.                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                    
| | Term Loan Commitment   with respect to any Lender, the amount of such Lenders Term Loan Commitment pursuant
  to subsection 1.3.1 of the Agreement, as set forth below such Lenders name on the signature
  pages hereof or any Assignment and Acceptance Agreement executed by such Lender, minus all Term Loan
  payments paid to such Lender.
| |                                                                                                                                                                                                                                                                                                                                                    
| | Term Loan Notes   the Secured Promissory Notes to be executed by Borrower on or about the Closing Date
  in favor of each applicable Lender to evidence its Term Loan, which shall be in the form of Exhibit 1.3A
  to the Sixth Amendment, together with any replacement or successor notes therefor.                                            
| |                                                                                                                                                                                                                                                                                                                                                    
| | Term Loan Percentage   with respect to each Lender, the percentage equal to the quotient of such Lenders
  Term Loan Commitment divided by the aggregate of all Term Loan Commitment.                                                                                                                                                           

|                                                                               
|-------------------------------------------------------------------------------
|3. Term Loan. The following is inserted into the Loan Agreement as Section 1.3:
|                                                                               

| | 1.3         Term Loan. Each Lender, severally and not jointly, agrees to make a term loan (collectively, the Term
  Loan) to Borrower on the Closing Date, in the aggregate principal amount of such Lenders
  Term Loan Commitment, which shall be repayable in accordance with the terms of the Term Loan Notes
  and shall be secured by all of the Collateral. The proceeds of the Term Loan shall be used solely
  for the repayment of Indebtedness outstanding under the Term Loan Documents and for the purposes
  for which the proceeds of the Revolving Credit Loans are authorized to be used.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                           
|-----------------------------------------------------------------------------------------------------------
|4.Interest. Section 2.1 of the Loan Agreement is hereby deleted and the following is inserted in its stead:
|                                                                                                           

| | 2.1.1      Rates of Interest. Interest shall accrue on the principal amount of the Base Rate Revolving Portion outstanding at the
  end of each day at a fluctuating rate per annum equal to the Applicable Margin then in effect plus the Base Rate. Interest shall accrue on the principal amount of the Base Rate Term Portion outstanding
  at the end of each day at a fluctuating rate per annum equal to the Applicable Margin then in effect
  plus the Base Rate. Said rate of interest shall increase or decrease by an amount equal to any increase
  or decrease in the Base Rate, effective as of the opening of business on the day that any such change
  in the Base Rate occurs. If MFRI, on its own behalf and on behalf of all other Borrowers, exercises
  its LIBOR Option as provided in Section 3.1, (i) interest shall accrue on the principal
  amount of the LIBOR Revolving Portions outstanding at the end of each day at a rate per annum equal
  to the Applicable Margin then in effect plus the
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5
|-



| | LIBOR applicable to each LIBOR Portion for the corresponding Interest Period and (ii) interest
  shall accrue on the principal amount of the LIBOR Term Portions outstanding at the end of each day
  at a per annum rate equal to the Applicable Margin then in effect plus the LIBOR applicable to each LIBOR Portion for the corresponding Interest Period.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                  
|------------------------------------------------------------------------------------------------------------------
|5. Prepayment Fee. Section 2.6 of the Loan Agreement is hereby deleted and the following is inserted in its stead:
|                                                                                                                  

| | 2.6         Prepayment Fee. At the effective date of termination of this Agreement for any reason, Borrowers shall pay to Agent,
  for the ratable benefit of Lenders (in addition to the then outstanding principal, accrued interest
  and other charges owing under the terms of this Agreement and any of the other Loan Documents) and
  any amounts owing pursuant to subsection 3.2.5, as liquidated damages for the loss of the bargain
  and not as a penalty, an amount equal to one percent (1%) of the Total Credit Facility if termination
  occurs prior to November 30, 2005; one-half of one percent (1⁄2%) of the Total Credit Facility
  if termination occurs during the period between December 1, 2005 and November 30, 2006;
  and one quarter of one percent (1⁄4%) if termination occurs between December 1, 2006 and
  August 31, 2007. If termination occurs on or after September 1, 2007 , no termination charge
  shall be payable.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                               
|-----------------------------------------------------------------------------------------------------------------------------------------------
|6. LIBOR Portions. Subsection 3.1.7 of the Loan Agreement is hereby deleted from the Loan Agreement and the following
is inserted in its stead:
|                                                                                                                                               

| | 3.1.7      LIBOR Portions. Provided that as of both the date of the LIBOR Request and the first day of the Interest Period,
  no Default or Event of Default exists, in the event Borrowers desire to obtain a LIBOR Portion, MFRI,
  on its own behalf and on behalf of all other Borrowers, shall give Agent a LIBOR Request no later
  than 11:00 a.m. (Chicago, Illinois time) on the third Business Day prior to the requested borrowing
  date. Each LIBOR Request shall be irrevocable and binding on all Borrowers. In no event shall Borrowers
  be permitted to have outstanding at any one time LIBOR Portions with more than five (5) different
  Interest Periods. LIBOR Portions shall be included within the definition of LIBOR Revolving Credit
  Portion or LIBOR Term Portion as determined by the definitions of such terms.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                            
|--------------------------------------------------------------------------------------------
|7. Optional Prepayments. The following is inserted into the Loan Agreement as Section 3.3.5:
|                                                                                            

| | 3.3.5      Optional Prepayments. Borrowers may, at their option from time to time upon not less than 3 days prior written notice to
  Agent, prepay installments of the Term Notes; provided that the amount of any such prepayment is at least $500,000 and in integral multiples of $100,000
  above $500,000, that such prepayments are made ratably with respect to all Term Notes and that no
  such prepayment shall be made on or prior to September 15, 2005. Each such prepayment shall be applied
  to the installments of principal due under the Term Notes in the inverse order of maturity. Except
  for charges under Section 2.6 applicable to the termination of the Total Credit Facility, such prepayments
  shall be without premium or penalty.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6
|-



|8. Term. Section 4.1 of the Loan Agreement is hereby deleted and the following is inserted in its stead:
|--------------------------------------------------------------------------------------------------------
|                                                                                                        

| | SECTION 4. TERM AND TERMINATION                                                                                                                                                                                                                                                                                
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                 
| | 4.1           Term of Agreement. Subject to the right of Lenders to cease making Loans to Borrowers during the continuance of any
  Default or Event of Default, this Agreement shall be in effect through and including November 30,
  2007 (the Term), unless terminated as provided in Section 4.2 hereof.

|                                                                                                                           
|---------------------------------------------------------------------------------------------------------------------------
|9. Total Indebtedness. Subsection 8.2.3 of the Loan Agreement is hereby deleted and the following is inserted in its stead:
|                                                                                                                           

| | 8.2.3      Total Indebtedness. Create, incur, assume, or suffer to exist, or permit any Subsidiary of any Borrower to create, incur
or suffer to exist, any Indebtedness, except:                                                                                                  
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                     
| | (i)            Obligations owing to Agent
  or any Lender under this Agreement or any of the other Loan Documents;                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                     
| | (ii)           Indebtedness, including without
  limitation Subordinated Debt, existing on the date of this Agreement and listed on Exhibit 8.2.3;                                                                                                                                  
| |                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                     
| | (iii)          Permitted Purchase Money Indebtedness;                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                     
| | (iv)          contingent liabilities arising out
    of endorsements of checks and other negotiable instruments for deposit or collection in the ordinary
    course of business;                                                                                                   
| |                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                     
| | (v)           Guaranties of any Indebtedness
permitted hereunder;                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                     
| | (vi)          Indebtedness in respect of intercompany
advances permitted by Section 8.2.2(iv);                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                     
| | (vii)         obligations to pay Rentals permitted by
subsection 8.2.18;                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                     
| | (viii)         Indebtedness outstanding pursuant to the Term
Loan Documents;                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                     
| | (ix)           IRB Indebtedness;                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                     
| | (x)            Existing Mortgage Indebtedness;                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                     
| | (xi)           Money Borrowed (either as an
  operating loan or a real estate mortgage loan) in a principal amount not to exceed Two Million Four
  Hundred Fifty Thousand Dollars ($2,450,000) invested by Midwescos Danish Subsidiaries and guaranteed
  by Midwesco and/or MFRI;
| |                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                     
| | (xii)          Indebtedness incurred in connection
with the Lebanon Refinancing;                                                                                                                                                                                                    

|7
|-



| | (xiii)         to the extent not included above, trade
  payables, accruals and accounts payable in the ordinary course of business (in each case to the extent
  not overdue) not for Money Borrowed; and
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                           
| | (xiv)        Indebtedness not included in paragraphs (i) through
  (xiii) above which does not exceed at any time, in the aggregate, the sum of One Million Dollars
  ($1,000,000).                      

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10. Repayment of Indebtedness Outstanding Pursuant to the Term Loan Documents. Upon the Sixth Amendment Effective Date, (i) Borrowers shall repay all Indebtedness outstanding under
the Term Loan Documents, (ii) Indebtedness outstanding pursuant to the Term Loan Documents shall
no longer be Permitted Indebtedness under subsection 8.2.3 of the Loan Agreement and (iii) Liens
securing the repayment of the Indebtedness outstanding under the Term Loan Documents shall no longer
be Liens permitted under subsection 8.2.5 of the Loan Agreement.
11. Financial Covenants. Upon the Sixth Amendment Effective Date, Exhibit 8.3 to the Loan Agreement shall be hereby deleted
and Exhibit 8.3 attached to this Sixth Amendment and incorporated herein shall be inserted in
its stead.
12. Events of Default. Section 10.1.16 of the Loan Agreement is hereby deleted.
13. Amendment Fee. In order to induce Agent and Lenders to enter into this Sixth Amendment, Borrowers agree to pay to
Agent, for the ratable benefit of Lenders, an amendment fee in the amount of $25,000. Said amendment
fee shall be payable and deemed fully earned and non-refundable on the Sixth Amendment Effective
Date.
14.Sixth Amendment Effective Date. This Sixth Amendment shall become effective upon satisfaction of each of the following conditions:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| | (i)Borrowers, Agent and Lenders shall have executed and delivered to each other this Sixth Amendment
  and the Term Note;                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (ii) Borrower shall have delivered to Agent a properly executed Certificate of Secretary of Borrower together
  with a true and correct copy of the resolutions of Borrowers Board of Directors authorizing
  or ratifying the execution, delivery and performance of this Sixth Amendment and the Term Note referred
  to in (i) above, the names of the officers authorized to sign this Sixth Amendment and said
  Term Note and a sample of the true signature of each such officer;
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (iii) Borrowers shall have paid to Agent for the ratable benefit of Lenders the amendment fee referred to
  in Section 13 of this Sixth Amendment;                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (iv) Borrowers shall have delivered to Agent a payoff letter from the holders of the Indebtedness outstanding
  under the Term Loan Documents, which payoff letter shall be in form and substance acceptable to Agent;                                                                                                                                                                                                                                                                   

|8
|-



| | (v) Agent shall have received Lien and UCC searches with respect to each Borrower and its assets, the
  results of which shall be satisfactory to Agent; and
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                             
| | (vi) No Default or Event of Default shall have occurred and be continuing.                                                                                  
| |                                                                                                                                                             
| | The date on which each of the foregoing conditions precedent is satisfied shall be referred to as the Sixth Amendment Effective Date.                     

|                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|15. Execution in Counterparts. This Sixth Amendment may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
16. Continuing Effect. Except as otherwise specifically set out herein, the provisions of the Loan Agreement shall remain
in full force and effect.
(Signature Page Follows)

|9
|-



|(Signature Page to Sixth Amendment to Loan Agreement)
IN WITNESS WHEREOF, this Sixth Amendment has been duly executed as of the day and year specified at
the beginning hereof.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                               

| |                                           
| | ------------------------------------------
| | FLEET CAPITAL CORPORATION,                
| | (Agent and a Lender)                  
| |                                           
| | Term Loan Commitment: $4,300,000          
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | MFRI, INC. (a Borrower)                 
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | MIDWESCO FILTER RESOURCES, INC.           
| | (a Borrower)                            
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | PERMA-PIPE, INC. (a Borrower)           
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | THERMAL CARE, INC. (a Borrower)         
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           

|
|



| | TDC FILTER MANUFACTURING, INC.            
| | ------------------------------------------
| | (a Borrower)                            
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           

|
|



|EXHIBIT 8.3
FINANCIAL COVENANTS
DEFINITIONS
Cash Flow   with respect to any fiscal period, EBITDA for such period minus(i) Capital Expenditures (excluding, however, Capital Expenditures financed by third party financing)
made within such period, (ii) income taxes paid in cash in such period, (iii) Interest Expense paid
in cash within such period and (iv) principal payments of Money Borrowed (other than Revolving Credit
Loans) made within such period.
Consolidated Net Income (Loss)   with respect to any fiscal period, the net income (or loss) of MFRI determined in accordance
with GAAP on a Consolidated basis; provided, however, Consolidated Net Income shall not include: (a)
the income (or loss) of any Person (other than a Subsidiary of any Borrower) in which a Borrower
or any of its wholly-owned subsidiaries has an ownership interest unless received in a cash distribution
or requiring the payment of cash; (b) the income (or loss) of any Person accrued prior to the date
it became a Subsidiary of a Borrower or is merged into or consolidated with a Borrower; (c) all amounts
included in determining net income (or loss) in respect of the write-up of assets on or after the
Closing Date, including the subsequent amortization or expensing of the written-up portion of the
assets; (d) extraordinary gains as defined under GAAP; and (e) gains from asset dispositions (other
than sales of inventory); and any increase or decrease in expenses resulting from the implementation of FASB 146.
EBITDA   with respect to any fiscal period, the sum of Consolidated Net Income (Loss) before Interest
Expense, income taxes, depreciation and amortization for such period (but excluding any extraordinary
gains for such period), all as determined for Borrowers and their Subsidiaries on a Consolidated
basis and in accordance with GAAP.
Fixed Charge Coverage Ratio   with respect to any fiscal period, the ratio of (i) EBITDA for such period minus Capital Expenditures (excluding, however, Capital Expenditures financed by third party financing)
made within such period minus income taxes paid in cash in such period to (ii) the sum of Interest Expense paid in cash within such
period plus principal payments of Money Borrowed (other than Revolving Credit Loans) made within such period.
Interest Coverage Ratio   with respect to any fiscal period, the ratio of (i) EBITDA for such period to (ii)
Interest Expense paid in cash in such period, all as defined for MFRI and its subsidiaries on a consolidated
basis in accordance with GAAP.
Interest Expense   with respect to any fiscal period, interest expense paid or accrued for such period,
including without limitation the interest portion of Capitalized Lease Obligations, plus the Letter
of Credit and LC Guaranty fees owing for such period, all as determined for MFRI and its Subsidiaries
on a Consolidated basis and in accordance with GAAP.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit 8.3Page 1
|------------------



|The foregoing notwithstanding, there shall be excluded from the calculations of Cash Flow, Consolidated
Net Income (Loss), EBITDA, Fixed Charges, Interest Coverage Ratio and Interest Expense, all amounts
that would otherwise be included in such items that are generated or incurred by, or result from
the operations of, Midwesco Filter Resources Denmark A/S, Nordic Air Filtration A/S and Boe-Therm
A/S, Borrowers Danish Subsidiaries.
COVENANTS
Minimum EBITDA.  Borrowers shall not permit EBITDA for any period set forth below to be less than the amount
set forth below opposite such period:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

|Period                                                                     | Amount |          
|-------------------------------------------------------------------------- | ------ | ---------
|                                                                           |        |          
|                                                                           |        |          
|6 Months Ended 7/31/04                                                     | $      | 2,500,000
|9 Months Ended 10/31/04                                                    | $      | 4,400,000
|12 Months Ended 1/31/05 and the last day of each fiscal quarter thereafter | $      | 5,450,000

|                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------
|Minimum Cash Flow. Borrowers shall not permit Cash Flow for any period set forth below to be less than the amount set
forth below opposite such period:
|                                                                                                                                                       

|Period                                                                     | Amount |         
|-------------------------------------------------------------------------- | ------ | --------
|                                                                           |        |         
|                                                                           |        |         
|6 Months Ended 7/31/03                                                     | $      | (150,000
|9 Months Ended 10/31/04                                                    | $      | 500,000 
|12 Months ended 1/31/05 and the last day of each fiscal quarter thereafter | $      | 250,000 

|Exhibit 8.3Page 2
|------------------



|EXHIBIT 1.3A
FORM OF TERM LOAN NOTE
(SECURED PROMISSORY NOTE)
|-------------------------------------------------------------
|                                                             

|[Aggregate of $4,300,000] | ______________ __, 20__
|------------------------- | -----------------------
|                          | Chicago, Illinois      

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|FOR VALUE RECEIVED, the undersigned (Borrowers), hereby jointly and severally promises to pay to the order of _______________________, a ________________
corporation (hereinafter Lender), or its registered assigns at the office of Fleet Capital Corporation, as agent for such Lender,
or at such other place in the United States of America as the holder of this Note may designate from
time to time in writing, in lawful money of the United States, in immediately available funds, at
the time of payment, the principal sum of ______________________ Dollars ($_______________), together
with interest from and after the date hereof on the unpaid principal balance outstanding from time
to time.
This Secured Promissory Note (the Note) is one of the Term Loan Notes referred to in, and is issued pursuant to, that certain Loan
and Security Agreement dated as of July 11, 2002, by and among Borrowers, the lender signatories
thereto (including Lender), and Fleet Capital Corporation (FCC) as Agent for said lenders (FCC in such capacity Agent) (hereinafter, as amended from time to time, the Loan Agreement), and is entitled to all of the benefits and security of the Loan Agreement. All of the terms,
covenants and conditions of the Loan Agreement and the Security Documents are hereby made a part
of this Note and are deemed incorporated herein in full. All capitalized terms used herein, unless
otherwise specifically defined in this Note, shall have the meanings ascribed to them in the Loan
Agreement.
For so long as no Event of Default shall have occurred and be continuing, the principal amount and
accrued interest of this Note shall be due and payable on the dates and in the manner hereinafter
set forth:
(a)           interest on the unpaid principal
balance outstanding from time to time shall be paid at such interest rates and at such times as are
specified in the Loan Agreement;
(b)           principal shall be due and payable
quarterly commencing on [June 1, 2005] and continuing on each [September 1, December 1, March 1 and June 1] thereafter in installments equal to $________________ [aggregate amount of quarterly installments to all Lenders equal to $215,000]; and
(c)           the entire remaining principal
amount then outstanding, together with any and all other amounts due hereunder, shall be due and
payable on the last day of the Term.
Notwithstanding the foregoing, the entire unpaid principal balance and accrued interest on this Note
shall be due and payable immediately upon any termination of the Loan Agreement pursuant to Section 4
thereof.

|Exhibit 1.3APage 1
|-------------------



|This Note shall be subject to mandatory prepayment in accordance with the provisions of Section 3.3
of the Loan Agreement. Borrowers may also prepay this Note in the manner provided in subsection 3.3.5
or Section 4 of the Loan Agreement.
Upon the occurrence, and during the continuation, of an Event of Default, this Note shall or may, as
provided in the Loan Agreement, become or be declared immediately due and payable.
The right to receive principal of, and stated interest on, this Note may only be transferred in accordance
with the provisions of the Loan Agreement.
Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrowers.
This Note shall be governed by, and construed and enforced in accordance with, the laws of the State
of Illinois.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| |                                           
| | ------------------------------------------
| | MFRI, INC.                                
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | MIDWESCO FILTER RESOURCES, INC.           
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | PERMA-PIPE, INC.                          
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           
| |                                           
| |                                           
| | THERMAL CARE, INC.                        
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           

|Exhibit 1.3APage 2
|-------------------



| | TDC FILTER MANUFACTURING, INC.            
| | ------------------------------------------
| |                                           
| |                                           
| | By: ______________________________________
| |                                           
| |                                           

|Exhibit 1.3APage 3
|-------------------