Form of Commercial Security Agreement


    Exhibit
      10.3

     

    

       

        
          	
                  DEBTOR
                    NAME AND ADDRESS

                	
                  SECURED
                    PARTY NAME AND ADDRESS

                
	
                  MISCOR
                    GROUP, LTD.

                	
                  MFB
                    Financial

                
	
                  1125
                    S. WALNUT STREET

                	
                  4199
                    EDISON LAKES PARKWAY, SUITE 300

                
	
                  SOUTH
                    BEND, IN 46819

                	
                  MISHAWAKA,
                    IN 46545

                
	 	 
	
                  Type: ̈ individual
                     ̈
                    partnership  ̈
                    corporation  ̈________________

                  State
                    of organization/registration (if applicable) IN   

                   ̈
                    If
                    checked, refer to addendum fro additional Debtors and
                    signatures.

                


        

      

      


      COMMERCIAL
        SECURITY AGREEMENT

       

      The
        date
        of this Commercial Security Agreement (Agreement) is 3-9-07       

      SECURED
        DEBTS.
        This
        Agreement will secure all sums advanced by Secured Party under the terms
        of this
        Agreement and the payment performance of the following described Secured
        Debts
        that (check one) £
        Debtor
x MISCOR
        GROUP, LTD., HK ENGINE COMPONENTS, LLC. MAGNETECH INDUSTRIAL SERVICES, INC.,
        MAGNETECH POWER SERVICES, LLC. MARTELL ELECTRIC, LLC
        (Borrower) owes to Secured Party: 

      £ Specific
        Debts.
        The
        following debts and all extensions, renewals, refinancings, modifications,
        and
        replacements (describe):

      


      


      x All
        Debts.
        All
        present and future debts, even if this Agreement is not referenced, the debts
        are also secured by other collateral, or the future debt is unrelated to
        or of a
        different type than the current debt. Nothing in this Agreement is a commitment
        to make future loans or advances.

      SECURITY
        INTEREST.
        To
        secure the payment and performance of the Secured Debts, Debtor gives Secured
        Party a security interest in all of the Property described in this Agreement
        that Debtor owns or has sufficient rights in which to transfer an interest,
        now
        or in the future, wherever the Property is or will be located, and all proceeds
        and products of the Property. “Property” includes all parts, accessories,
        repairs, replacements, improvements, and accessions to the Property; any
        original evidence of title or ownership; and all obligations that support
        the
        payment or performance of the Property. “Proceeds” includes anything acquired
        upon the sale, lease, license, exchange, or other disposition of the Property;
        any rights and claims arising from the Property; and any collections and
        distributions on account of the Property. This Agreement remains in effect
        until
        terminated in writing, even if the Secured Debts are paid and Secured Party
        is
        no longer obligated to advance funds to Debtor or Borrower.

      PROPERTY
        DESCRIPTION.
        The
        Property is described as follows:

      x
        Accounts
        and Other Rights to Payment: All rights to payment, whether or not earned
        by
        performance, including, but not limited to, payment for property or services
        sold, leased, rented, licensed, or assigned. This includes any rights and
        interests (including all liens) which Debtor may have by law or agreement
        against any account debtor or obligor of Debtor.

      £ Inventory:
        All
        inventory held for ultimate sale or lease, or which has been or will be supplied
        under contracts of service, or which are raw materials, work in process,
        or
        materials used or consumed in Debtor’s business.

      £ Equipment:
        All
        equipment including, but not limited to, machinery, vehicles, furniture,
        fixtures, manufacturing equipment, farm machinery and equipment, shop equipment,
        office and record keeping equipment, parts, and tools. The Property includes
        any
        equipment described in a list or schedule Debtor gives to Secured Party,
        but
        such a list is not necessary to create a valid security interest in all of
        Debtor’s equipment.

      £ Instruments
        and Chattel Paper:
        All
        instruments, including negotiable instuunents and promissory notes and any
        other
        writings or records that evidence the right to payment of a monetary obligation,
        and tangible and electronic chattel paper.

      £ General
        Intangibles:
        All
        general intangibles including, but not limited to, tax refunds, patents and
        applications for patents, copyrights, trademarks, trade secrets, goodwill,
        trade
        names, customer lists, permits and franchises, payment intangibles, computer
        programs and all supporting information provided in connection with a
        transaction relating to computer programs, and the right to use Debtor’s
        name.

      £ Documents:
        All
        documents of titre including, but not limited to, bills of lading, dock warrants
        and receipts, and warehouse receipts.

      £ Farm
        Products and Supplies:
        All farm
        products including, but not limited to, all poultry and livestock and their
        young, along with their produce, products, and replacements; all crops, annual
        or perennial, and all products of the crops; and all feed, seed, fertilizer,
        medicines, and other supplies used or produced in Debtor’s farming
        operations,

      £ Government
        Payments and Programs:
        All
        payments, accounts, general intangibles, and benefits including, but not
        limited
        to, payments in kind, deficiency payments, letters of entitlement, warehouse
        receipts, storage payments, emergency assistance and diversion payments,
        production flexibility contracts, and conservation reserve payments under
        any
        preexisting, current, or future federal or state government
        program.

      £ Investment
        Property:
        All
        investment property including, but not limited to, certificated securities,
        uncertificated securities, securities entitlements, securities accounts,
        commodity contracts, commodity accounts, and financial assets.

      £ Deposit
        Accounts: All
        deposit accounts including, but not limited to, demand, time, savings, passbook,
        and similar accounts.

      £ Specific
        Property Description:
        The
        Property includes, but is not limited by, the following (if required, provide
        real estate description):

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      GENERAL
        PROVISIONS.
        Each
        Debtor’s obligations under this Agreement are independent of the obligations of
        any other Debtor, Secured Patty may sue each Debtor individually or together
        with any other Debtor. Secured Party may release any part of the Property
        and
        Debtor will remain obligated under this Agreement. The duties and benefits
        of
        this Agreement will bind the successors and assigns of Debtor and Secured
        Party.
        No modification of this Agreement is effective unless made in writing and
        signed
        by Debtor and Secured Party. Whenever used, the plural includes the singular
        and
        the singular includes the plural. Time is of the essence,

      


      APPLICABLE
        LAW.
        This
        Agreement is governed by the laws of the state in which Secured Party is
        located. In the event of a dispute, the exclusive forum, venue, and place
        of
        jurisdiction will be the state in which Secured Party is located, unless
        otherwise required by law. If any provision of this Agreement is unenforceable
        by law, the unenforceable provision will be severed and the remaining provisions
        will still be enforceable.

      


      NAME
        AND LOCATION.
        Debtor’s name indicated on page 1 is Debtor’s exact legal name. If Debtor is an
        individual, Debtor’s address is Debtor’s principal residence. If Debtor is not
        an individual, Debtor’s address is the location of Debtor’s chief executive
        offices or sole place of business. If Debtor is an entity organized and
        registered under state law, Debtor has provided Debtor’s state of registration
        on page 1. Debtor will provide verification of registration and location
        upon
        Secured Party’s request. Debtor will provide Secured Party with at least 30 days
        notice prior to any change in Debtor’s name, address, or state of organization
        or registration..

      


      WARRANTIES
        AND REPRESENTATIONS.
        Debtor
        has the right, authority, and power to enter into this Agreement. The execution
        and delivery of this Agreement will not violate any agreement governing Debtor
        or Debtor’s property, or to which Debtor is a party. Debtor makes the following
        warranties and representations which continue as long as this Agreement is
        in
        effect:

      	(1)  	
              Debtor
                is duly organized and validly existing in all jurisdictions in which
                Debtor does business;

            


      	(2)  	
              the
                execution and performance of the terms of this Agreement have been
                duly
                authorized, have received all necessary governmental approval, and
                will
                not violate any provision of law or
                order;

            


      	(3)  	
              other
                than previously disclosed to Secured Party, Debtor has not changed
                Debtor’s name or principal place of business within the last 10 years and
                has not used any other trade or fictitious name;
                and

            


      	(4)  	
              Debtor
                does not and will not use any other name without Secured Party’s prior
                written consent.

            


      Debtor
        owns all of the Property, and Secured Party’s claim to the Property is ahead of
        the claims of any other creditor, except as otherwise agreed and disclosed
        to
        Secured Party prior to any advance on the Secured Debts. The Property has
        not
        been used for any purpose that would violate any laws or subject the Property
        to
        forfeiture or seizure. 

      


      DUTIES
        TOWARD PROPERTY.
        Debtor
        will protect the Property and Secured Party’s interest against any competing
        claim. Except as otherwise agreed, Debtor will keep the Property in Debtor’s
        possession at the address indicated on page 1 of this Agreement. Debtor will
        keep the Property in good repair and use the Property only for purposes
        specified on page 1. Debtor will not use the Property in violation of any
        law
        and will pay all taxes and assessments levied or assessed against the Property.
        Secured Party has the right of reasonable access to inspect the Property,
        including the right to require Debtor to assemble and make the Property
        available to Secured Party. Debtor will immediately notify Secured Party
        of any
        loss or damage to the Property. Debtor will prepare and keep books, records,
        and
        accounts about the Property and Debtor’s business, to which Debtor will allow
        Secured Party reasonable access. Debtor will not sell, offer to sell, license,
        lease, or otherwise transfer or encumber the Property without Secured Party’s
        prior written consent. Any disposition of the Property will violate Secured
        Party’s rights, unless the Property is inventory sold in the ordinary course of
        business at fair market value. If the Property includes chattel paper or
        instruments, either as original collateral or as proceeds of the Property,
        Debtor will record Secured Party’s interest on the face of the chattel paper or
        instruments. If the Property includ accounts, Debtor will not settle any
        account
        for less than the full valu d` ispose of the accounts by assignment, or make
        any
        material change in the terms of any account without Secured Party’s prior
        written consent. Debtor will collect all accounts in the ordinary course
        of
        business, unless otherwise required by Secured Party. Debtor will keep the
        proceeds of the accounts, and any goads returned to Debtor, in trust for
        Secured
        Party and will not commingle the proceeds or returned goods with any of Debtor’s
        other property. Secured Party has the right to require Debtor to pay Secured
        Party the full price on any returned items. Secured Party may require account
        debtors to make payments under the accounts directly to Secured Party, Debtor
        will deliver the accounts to Secured Party at Secured Party’s request. Debtor
        will give Secured Party all statements, reports, certificates, lists of account
        debtors (showing names, addresses, and amounts owing), invoices applicable
        to
        each account, and any other data pertaining to the accounts as Secured Party
        requests.

      If
        the
        Property includes farm products, Debtor will provide Secured Party [text
        cut
        off]

      


      INSURANCE.
        Debtor
        agrees to keep the Property insured against the risks reasonably associated
        with
        the Property until the Property is released from this Agreement. Debtor will
        maintain this insurance in the amounts Secured Party requires. Debtor may
        choose
        the insurance company, subject to Secured Party’s approval, which will not be
        unreasonably withheld. Debtor will have the insurance provider name Secured
        Party as loss payee on die insurance policy. Debtor will give Secured Party
        and
        the insurance provider immediate notice of any loss. Secured Party may apply
        the
        insurance proceeds toward the Secured Debts. Secured Party may require
        additional security as a condition of permitting any insurance proceeds to
        be
        used to repair or replace the Property. If Secured Party acquires the Property
        in damaged condition, Debtor’s rights to any insurance policies and proceeds
        will pass to Scoured Parry to the extent of the Secured Debts. Debtor will
        immediately notify Secured Parry of the cancellation or termination of
        insurance. If Debtor fails to keep the Property insured, or fails to provide
        Secured Party with proof of insurance, Secured Party may obtain insurance
        


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      to
        protect Secured Party’s interest in the Property. The insurance may include
        coverages not originally required of Debtor, may be written by a company
        other
        than one Debtor would choose, and may be written at a higher rate than Debtor
        could obtain if Debtor purchased the insurance. 

      


      AUTHORITY
        TO PERFORM.
        Debtor
        authorizes Secured Party to do anything Secured Party deems reasonably necessary
        to protect the Property and Secured Party’s interest in the Property. If Debtor
        fails to perform any of Debtor’s duties under this Agreement, Secured Party is
        authorized, without notice to Debtor, to perform the duties or cause them
        to be
        performed. These authorizations include, but are not limited to, permission
        to
        pay for the repair, maintenance, and preservation of the Property and take
        any
        action to realize the value of the Property. Secured Party’s authority to
        perform for Debtor does not create an obligation to perform, and Secured
        Party’s
        failure to perform will not preclude Secured Party from exercising any other
        rights under the law or this Agreement. If Secured Party performs for Debtor,
        Secured Party will use reasonable care. Reasonable care will not include
        any
        steps necessary to preserve rights against prior parties or any duty to take
        action in connection with the management of the Property.

      If
        Secured Party comes into possession of the Property, Secured Party will preserve
        and protect the Property to the extent required by law. Secured Party’s duty of
        care with respect to the Property will be satisfied if Secured Party exercises
        reasonable care in the safekeeping of the Property or in the selection of
        a
        third party in possession of the Property. Secured Party may enforce the
        obligations of an account debtor or other person obligated on the Property.
        Secured Party may exercise Debtor’s rights with respect to the account debtor’s
        or other person’s obligations to make payment or otherwise render performance to
        Debtor, and enforce any security interest that secures such obligations.
        

      


      PURCHASE
        MONEY SECURITY INTEREST.
        If the
        Property includes items purchased with the Secured Debts, the Property purchased
        with the Secured Debts will remain subject to Secured Party’s security interest
        until the Secured Debts are paid in full. Payments on any non-purchase money
        loan also secured by this Agreement will not be applied to the purchase money
        loan. Payments on the purchase money loan will be applied first to the
        non-purchase money portion of the loan, if any, and then to the purchase
        money
        portion in the order in which the purchase money Property was acquired. If
        the
        purchase money Property was acquired at the same time, payments will be applied
        in the order Secured Party selects. No security interest will be terminated
        by
        application of this formula.

      


      DEFAULT.
        Debtor
        will be in default if:

      	(1)  	
              Debtor
                (or Borrower, if not the same) fails to make a payment in full when
                due;

            


      	(2)  	
              Debtor
                fails to perform any condition or keep any covenant on this or any
                debt or
                agreement Debtor has with Secured Party;

            


      	(3)  	
              a
                default occurs under the terms of any instrument or agreement evidencing
                or pertaining to the Secured Debts;

            


      	(4)  	
              anything
                else happens that either causes Secured Party to reasonably believe
                that
                Secured Party will have difficulty in collecting the Secured Debts
                or
                significantly impairs the value of the Property.
                

            


      


      REMEDIES.
        After
        Debtor defaults, and after Secured Party gives any legally required notice
        and
        opportunity to cure the default, Secured Party may at Secured Party’s option do
        any one or more of the following: 

      	(1)  	
              make
                all or any part of the Secured Debts immediately due and accrue interest
                at the highest post-maturity interest
                rate;

            


      	(2)  	
              require
                Debtor to gather the Property and make it available to Secured Party
                in a
                reasonable fashion;

            


      	(3)  	
              enter
                upon Debtor’s premises and take possession of all or any part of Debtor s
                property for purposes of preserving the Property or its value and
                use and
                operate Debtor’s property to protect Secured Party’s interest, all without
                payment or compensation to Debtor;

            


      	(4)  	
              use
                any remedy allowed by state or federal law, or provided in any agreement
                evidencing or pertaining to the Secured
                Debts.

            


      If
        Secured Party repossesses the Property or enforces the obligations of an
        account
        debtor, Secured. Party may keep or dispose of the Property as [text cut
        off]

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      Schedule
        of Additional Commercial Security Agreements

      


      In
        reliance on Instruction 2 to Regulation S-K, Item 601, MISCOR is not filing
        additional Commercial Security Agreements that are identical to the one filed
        herewith, except for the parties. The following Debtor’s entered into identical
        Commercial Security Agreements with MFB Financial:

      


      1.
        HK
        Engine Components, LLC

      


      2.
        Magnetech Industrial Services, Inc.

      


      3.
        Magnetech Power Services, LLC

      


      4.
        Martell Electric, LLC